Blockchain Could Maximize its Potential in the Industry of Trade Finance

Blockchain Could Maximize its Potential in the Industry of Trade Finance

A large number of companies, banks, financial institutions,

Blockchain consortia and even governments have focused on testing Blockchain technology’s potential in the industry of trade finance. Most notably, the Hong Kong monetary authority introduced the development of a Blockchain-based trade finance platform in March. Additionally, IBM announced its long-term strategy to focus its Blockchain development initiative on trade finance.

What is trade finance and why does it need Blockchain?

Trade finance refers to the financing for trade and it always involves a wide range of intermediaries, banks, and third-party services providers that are contracted to facilitate transactions and finance the trade. The most widely utilized method of payment within the industry of trade finance is an open account, in which business partners have their accounts with correspondent banks open for the processing multiple transactions.

Essentially, the aim of banks and companies that are currently utilizing the Blockchain to optimize trade finance operations is to replace traditional and inefficient financial networks with a smart contract-based protocol which can process, update and broadcast transactions in real-time. With Blockchain technology and its ability to secure transactions on a decentralized and immutable ledger, governments and companies are attempting to replace banks and intermediaries with a trustless financial network. Banks are also attempting to develop trade finance platforms based on the Blockchain to cut operating costs and manual verification time.

Joshua Kroeker, the senior product manager for global trade and receivables finance at HSBC, stated:

“As the largest trade finance bank in the world … we were interested in assisting corporates to track transaction flows, reconcile transactions through invoice or purchase order matching and reducing the risk of duplicate financing for the participating banks. This development puts Hong Kong at the heart of a global effort to digitize trade, making it easier, faster and cheaper for businesses.”

More Blockchain use cases

On February 7, the government of Dubai went as far to launch an actual pilot trade finance platform based on the Blockchain with IBM to streamline operations between banks and optimize various operations involved in the trade finance industry.

At the time, Ali Sajwani, group chief information officer for Emirates NBD Group, said:

“The bank has always had a culture of innovation and several of the bank’s most successful products and features can be attributed to this forward-thinking mindset. We are excited to participate in the ecosystem on streamlining the trade finance process using the futuristic Blockchain technology, which has the potential of transforming the way we conduct business between heterogeneous entities.”

At a recent event covered by Global Trade Review, Zach Piester, chief development officer of the Blockchain consultancy Intrepid Ventures, and Connie Leung, financial services industry director at Microsoft, reaffirmed the progress being made by organizations in implementing Blockchain technology on existing trade finance platforms. Leung of Microsoft further emphasized the increasing demand for Blockchain technology to fight financial fraud within the industry of trade finance.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Blockchain Regulations Likely By 2019, Russian Ministry Says

Blockchain Regulations Likely By 2019, Russian Ministry Says

  

Russia's government is said to be moving ahead

with plans to introduce rules for blockchain use by 2019. According to state-owned news service TASS, the disclosure came from a report from the Ministry of Communications, which at press time was not publicly accessible. TASS reports that the documents touch on "the adoption of legal acts" related to the blockchain, positing 2019 as the time frame for the update. Notably, the Communications Ministry was one of the several public institutions in Russia tasked with researching blockchain by Prime Minister Dmitry Medvedev earlier this year. In March, the former president also instructed the Ministry of Economic Development and the Russian Development Bank to research applications of the tech. Medvedev has struck a somewhat bullish tone toward the technology in recent months.

During an investor event in Sochi in late February, he said:

"I'm not against the use of [blockchain] technologies that have become widely circulated and which may thus decisively change our lives. It's quite an interesting story, but so far we do not see results."

What remains unclear is how the regulation might dovetail with efforts in Russia to regulate cryptocurrencies like bitcoin. Recent statements from senior officials of the Russian Finance Ministry suggested that bitcoin could be recognized as a kind of financial instrument next year, yet other Russian officials – namely one of its central bankers – cautioned that any determination is subject to review.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Blockchain Tech is Disruptor for Telecoms: EncryptoTel CEO

Blockchain Tech is Disruptor
for Telecoms:
EncryptoTel CEO

  

Exploration of Blockchain technology

has gone far beyond financial industry. Today many companies in a variety of industries are testing the potential of this innovation to streamline complex processes and transactions, making them faster, cheaper and more transparent. The telecommunication industry is no exception and industry players are now looking into how Blockchain can impact their businesses. Cointelegraph had a chat with Roman Nekrasov, CEO, and Founder at EncryptoTel, an intriguing project offering privacy-oriented encrypted audio and video calling for individuals and groups through secure Blockchain-based communications infrastructure.

Is Blockchain indeed a disruptor for telecoms?

Until quite recently Blockchain technology has been going hand in hand with Bitcoin, its most successful use-case so far. However, the new generation of programmable Blockchains allows going far beyond cryptocurrencies and financial services. It certainly might be very hard to do any prediction concerning the exact forms of change caused by the Blockchain in a very particular industry of telecommunications, or whether it is to cause any change at all. It has already provided us with at least one key benefit – it allows ensuring transparency of transactions.

Nekrasov shares with Cointelegraph how his team is making use of Blockchain:

“Nowadays Blockchain technology is being explored in a number of industries, it is right about the time for the telecom industry to take a closer look at it. The technology offers huge advantages for building decentralized systems. We are planning to integrate this technology at least for enabling verification of outgoing calls, along with ensuring the integrity of the whole network. I am not even mentioning the benefits of payments in cryptocurrencies (anonymity and transparency for both parties). Besides, we are working on the cryptographic protocol deploying Blockchain technology, which is our killer feature. It is still too early to announce any specific solutions, but our developers already have something in store. I am certain that our investors are going to be satisfied with their investments – everything goes according to what we have outlined in the Roadmap.”

Rethinking the role of intermediaries

Telecom providers are connecting people and things to each other, therefore, essentially they are sort of intermediaries, who need to manage databases, back-office systems, and purchase third parties services. Blockchain allows rethinking the roles of intermediaries in the telecom industry,

Nekrasov says:

“With our project, we are trying to eliminate intermediaries in the telecom industry. Possibility to communicate directly and anonymously implies the absence of third parties. In the beginning we would not be able, however, to eliminate middlemen completely. As our customers would need to have a possibility to register a direct phone number with other mobile operators or use a number they already have, we can’t avoid involving third parties, but we are working on it. Another advantage brought by Blockchain technology is that it plays a role of a guard in a sense that it prevents unauthorized intervention of third parties.”

What telecoms are looking for

All efforts in the telecom industry nowadays are directed towards keeping maintenance costs low while exploring new services. The market is growing at an incredible speed and traditional players are forced to look for ways to improve the quality of existing services, maybe even reimagine them, offering innovative approaches and tools which haven’t been available before. Nekrasov believes that Blockchain technology in this sense is like a whiff of fresh air offering new perspectives in the way we think of telecom services. “Technology has a huge potential in building new reliable services allowing to compete with industry giants,” he says. Competition in the telecom industry is heightened, revenue from voice calls is decreasing, while expenses due to the high bandwidth demands are rising, all of which is forcing telecoms to both look for a way to reduce these costs and find new sources of revenue.

Nekrasov agrees:

“Revenues from traditional voice calls are indeed decreasing, however, the market of VoIP services is expanding, especially in B2B sector. It is one of the most fast-growing markets nowadays, and the positive dynamic will remain for upcoming five to 10 years.”

Nekrasov says that offering a free and secured connection with the focus on quality and encryption is among the main priorities at the moment.

He continues by explaining:

“At the moment ensuring privacy and protection from bugging is very important, especially for business. I think that Blockchain technology can shoulder a part of network load, as a result cutting down the expenses for network maintenance. Besides, exploration of cryptocurrency market allows attracting additional investments into business, telecoms mistakenly underestimate this market.”

Nekrasov and his colleagues possess an extensive experience of working in the industry. They have identified what is exactly missing to make customer’s experience better – security, ease of use, user-friendly interface, and affordable pricing.

Where exactly is Blockchain applicable?

According to a report by Deloitte Germany, the telecom industry will see a huge impact of Blockchain in upcoming years. Precisely offering new solutions for fraud management, Identity-as-a-Service and data management, enablement of 5G and building secure IoT connectivity. Fraud detection and prevention are still the hot topics in the industry, mostly due to massive losses annually. The blockchain is believed to offer an effective and sustainable tool for fraud prevention, especially in roaming and in subscription identity management.

5G technology implementation is said to be another example of how the industry can benefit from the deployment of Blockchain in streamlining the process. Thus, to ensure ubiquitous access to the networks through 5G, telecoms would need to handle heterogeneous access nodes and diverse access mechanisms. The central challenge here is expected to be the selecting the fastest access node for every user or machine. Blockchain technology is believed to enable the new generation of access technology selection mechanisms for building sustainable solutions.

Nekrasov agrees:

“Blockchain can indeed offer solutions to tackle fraud – here we talk about smart contracts and the overall transparency of transactions allowed by technology. The combination of solutions built on top of Blockchain and Identity-as-a-Service has a huge potential for identity and access management, allowing for stronger protection from hackers’ attacks. Blockchain is indeed useful for ensuring of communication between IoT devices, they are often more vulnerable to attacks, technology can help solving this problem.”

Remaining challenges

There is still a number of challenges in the industry, which should be addressed. These challenges mostly concern ensuring of security and confidentiality of calls and text messages, prevention of all kinds of attacks and hacks carried aiming at stealing customers’ personal data. There are certain challenges related to the deployment of VoIP, many customers face certain difficulties switching to this type of services. Nekrasov says that EncryptoTel aims at tackling these challenges. EncryptoTel is a complex telecommunication system which can be deployed for establishing simple and more complicated scenarios. The company is building an extensive platform for setting corporate networks for businesses, private customers are not left out of focus.

Nekrasov notes:

“It is actually not so common for PBX systems to be oriented at personal customers. We are trying to simplify the platform to make it available for less tech-savvy customers. Our competitive advantage is that we are trying to take the best out of innovative technologies, including Blockchain technology, and expanding payment methods to cryptocurrencies.”

EncryptoTel is developing encryption protocols deploying Blockchain technology to ensure the security of customers’ personal data. In addition, the team is deploying multilevel authentication system. Centralized storing of data always raises a number of concerns,

Nekrasov explains to Cointelegraph:

“Currently in beta version we are working with a centralized database, however, later we are planning to reconsider it and develop a new approach where we store only minimum amount of data in a centralized way while ensuring encryption.”

Ongoing ICO

EncryptoTel is now in the middle of ICO, Nekrasov shared with Cointelegraph preliminary results. Thus, during the first week of ICO, EncryptoTel saw a huge interest in the project and managed to attract $1,800,000. Nekrasov expressed his gratitude to the community actively supporting the initiative and wishing best of luck to the team, it is certainly a great motivator. Besides, EncryptoTel team wished to thank Waves community, which demonstrated their support, also in the form of extensive investments amounting to over 1,000,000 Waves ($700,000).

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Mauritius: The Tropical Paradise Looking to Become a Blockchain Hub

Mauritius:
The Tropical Paradise Looking to
Become a Blockchain Hub

  

Known as the home of lush tropical beaches,

the world's second-oldest horse racetrack and the now-extinct Dodo bird, the East African island nation of Mauritius is seeking to brand itself as a regional haven for blockchain innovation. Since its independence in 1968, the former Dutch, French and British colony has become one of the most successful economies in the region by building itself up as a technology and financial services hub. Now, Mauritius is looking at blockchain as a catalyst to fortify its competitive advantage and drive continued innovation on the island.

"We are working to take our economy to another level, and these kinds of technologies are very important in our strategy," said Atma Narasiah, head of technology, innovation, and services at the Board of Investment Mauritius, the national investment promotion agency of the island.

He told CoinDesk:

"Blockchain is an area where we will be focusing, building competencies and ensuring that it permeates other sectors of the economy and government."

The island nation has well-established financial services, information, and communications technology industries, so attracting investors and entrepreneurs in blockchain and financial technology could be seen as a logical next step. "Blockchain is one of these technologies we want to drive. We see a window of opportunity here to be able to leapfrog others," Narasiah said.

Open invitation

In its quest to become the blockchain hub of the Indian Ocean, Mauritius has issued an open call for innovators to take advantage of the country's new Regulatory Sandbox License (RSL). The sandbox allows companies operating in areas such as financial, medical and communications technology to start operating despite the absence of a formal legislative or licensing framework. "We've been receiving innovative project [proposals] over the years but couldn't execute them because of the gap in the regulatory framework. We've got a very good legal system, but at the pace at which technology is changing, we haven’t been able to keep pace on the regulatory front," said Narasiah, adding:

"So we came up with Regulatory Sandbox License to be able to catalyze the execution of these projects."

Modeled after similar approaches employed in Australia, Singapore, and the UK, the RSL is open to all innovators, but there's an emphasis on attracting blockchain innovators across all verticals. The expectation is that completed projects will help drive domestic and cross-border commerce and eventually expand into a smart city concept that links to other hub cities. Since launching in November 2016, the RSL has fielded 11 project proposals, with most under the fintech umbrella.

To be considered for approval, applicants must demonstrate their project is innovative, beneficial to the Mauritian economy and it cannot be accommodated in the investor’s home jurisdiction because of legal or regulatory gaps. Qualified applicants can obtain licensure in as little as 30 days, provided that all relevant information is received and risks are properly addressed.

Regional force

So, why should blockchain investors consider setting up in Mauritius? Narasiah points to the nation's strong business and governance environment, which has been internationally recognized as the strongest in sub-Saharan Africa. According to the World Bank's annual "Doing Business" survey, Mauritius has the best business climate of any country in the region and ranks 49th out of 190 countries worldwide. The World Bank's rankings weigh factors such as ease of starting a business, enforcing contracts, obtaining credit, protecting investors and paying taxes.

In its annual competitiveness rankings, the World Economic Forum said Mauritius possesses Africa’s most competitive economy, best infrastructure, and highest-educated workforce. Narasiah also highlighted an ongoing build-up of the country’s communications infrastructure – including projects to roll out free Wi-Fi across the island and install fiber optic connections in every residence – as a key attraction for technology investors.

Bridge to big markets 

Such stability and its geographic location has made Mauritius a popular venue for financial services companies looking to make the jump into new markets on the African continent – where many of the world’s largest unbanked populations exist. "Mauritius is a country that many of the governments of African states would like to emulate. So if you have systems that have been tested properly in Mauritius – it gives a kind of assurance and credibility to that solution when you market it in Africa," said Narasiah.

He added:

"Having done it in Mauritius gives it lots of mileage for you to expand into Africa."

Mauritius also possesses a bilingual workforce speaking both English and French – two of the African continent’s lingua francas – and tax treaties with more than 20 African nations including South Africa, Zambia, Uganda and Rwanda. The island nation also maintains close cultural and economic ties to India – a $2tn economy projected to surpass China as the world’s most populous nation in the next decade. Roughly two-thirds of Mauritians are of Indian descent, and Mauritius has been the largest single source of foreign direct investment into India in recent years because of a favorable double taxation avoidance treaty between the two nations.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

Bonding Experience: Can Kenya Pave a Path for Blockchain Change?

Bonding Experience:
Can Kenya Pave a Path for Blockchain Change?

 A country with rickety infrastructure

and a reliance on agriculture could be poised to kickstart mainstream use of blockchain technology. I'm talking about Kenya, where last month, the government issued infrastructure bonds – with a twist. They were only available via mobile phones. In a world first, the general public had access to government debt via an app. The M-Akiba project (akiba is Swahili for 'savings') aims to: 1) broaden participation in public financing, 2) stimulate the savings rate, and 3) raise funds for infrastructure investment. The target was $1.5m, with the minimum investment set as low as KSh3,000 (approximately $30). It was open to all Kenyans with an M-Pesa mobile money account – well­ over half the population. The issue sold out two days ahead of schedule.

Blockchain sweet spot

As CoinDesk reported this week, the World Bank plans to formally support the project with research on, among other things, how blockchain technology could simplify the underlying platform. The use case is appealing. A recent World Bank report pointed out that the two main weaknesses of the bond issue were: 1) the intermediaries between the Treasury and investors, each charging fees, and 2) the lack of a liquid secondary market for the bonds. A blockchain platform connecting the issuer and the buyer could lower costs and enhance yields. And a blockchain-based secondary market could improve liquidity and make the investment more attractive to retail investors.

The Commonwealth Bank of Australia is also looking at the blockchain for issuing bonds, as are Japanese securities firm SBI and French bank BNP. However, comparing M-Akiba to other bonds-on-blockchain projects is missing the point. This isn't about adapting a current system to a new technology – it's about bypassing the current system altogether. In 2007, Kenya’s leading network operator Safaricom started offering M-Pesa mobile banking accounts to anyone with a Safaricom phone number.

For many, the choice wasn't between their current banking system and M-Pesa, it was no banking system and M-Pesa. The lack of a strong infrastructure propelled Kenya into the lead position in global rankings of mobile money use. A similar trend could be happening to public investment in government bonds. While Kenya has one of the most developed bond markets in Africa, it's still relatively new. It is also dominated by foreign and local institutional investors. With a minimum investment of KSh50,000 and significant paperwork requirements, small retail investors are largely excluded.

Opening up

But that could soon change. Offering a 10% tax-free return (almost double that on standard savings accounts) with a low minimum investment and easy inscription, the bond is likely to appeal to a broad demographic, from long-term savers to first-timers. The April issuance was a trial, and the government is planning a much bigger tranche of KSh4.85bn ($48m) on the M-Akiba platform for June. The World Bank research on the blockchain potential is part of a broader initiative, and will not be completed for some time. Meanwhile, the technology will continue to develop, gradually removing obstacles to implementation. And the experience in Kenya shows that the market is eager for a platform that directly connects issuer and investor, and removes access barriers.

If this takes off, it could herald a new form of public financing and private savings.

The system could end up expanding, not only to other countries but also other sectors, bringing in private issuers and offering the public an even broader choice of saving and investment vehicles. If users get accustomed to parking their money with bond issuers accessed via easy-to-use apps on their phones, this could change how they view banking. And, as such, it could change the banking industry. The irony is that a country with a relatively unsophisticated financial infrastructure could end up kickstarting a fundamental reform that might achieve what higher-profile and better-funded projects have yet to pull off: putting the blockchain in the hands of the man on the street. And in the process, improving public finances and private wealth.

Chuck Reynolds
Contributor

Alan Zibluk Markethive Founding Member

How Ripple is Targeting an Entirely Different Market to Bitcoin

How Ripple is Targeting an Entirely Different Market to Bitcoin

Bitcoin was introduced in 2009 as an alternative network to the global financial system monopolized by centralized institutions and strictly regulated financial service providers. By providing a peer to peer protocol wherein users can send and receive transactions with the absence of intermediaries, Bitcoin essentially became the first decentralized financial platform.

Replicating or being inspired by Bitcoin’s structure, alternative cryptocurrencies or altcoins emerged. One of the most successful cryptocurrencies that has maintained its market cap and client base over a relatively long period of time is Ripple. It consistently has ranked in the top three altcoin, falling behind Bitcoin and Ethereum. Ripple’s vision was to provide a more efficient infrastructure for the centralized institutions and the conventional finance industry.

Ripple is significantly different to Bitcoin philosophically and structurally. If bitcoin is described as a decentralized peer to peer network developed to operate as an alternative financial network to that of the existing global financial system, Ripple can be explained as a protocol structured to serve and enhance the existing global financial system. It has partnered with leading banks and major financial institutions to settle cross-border and cross-bank transactions transparently, with strong security measures in real time.

The current global financial system operates on top of an outdated and inefficient IT infrastructure and system. For a transaction to become fully verified and settled, it could take days to weeks with a substantial fee, usually in the range of $30 to $50 per transaction. Often times, transactions initiated by banks through an international financial network such as SWIFT get lost within the system, requiring manual confirmation and a period of weeks for the transaction to be recovered and settled.

Essentially, Ripple utilizes blockchain technology and the concept of digital tokens to simplify global banking. Major banks and financial institutions are in agreement with Ripple’s vision and strategy and have adopted Ripple’s system. Most recently, CryptoCoinsNews reported that Spanish banking giant BBVA began to utilize Ripple blockchain for Spain-Mexico money transfers.

“This pioneer initiative is a clear demonstration of how payment processes can be vastly improved through the implementation of emerging technologies. These improvements will benefit our clients’ transnationality,” head of digital transformation in investment banking at BBVA stated.

However, an ambiguous component of Ripple’s services is the necessity of intermediaries. In an email, Ripple representative told CryptoCoinsNews that Ripple executives believe “bank’s aren’t going away” and that “bitcoin is getting it wrong.” Yet, by growth, bitcoin has evidently appealed to a wider range of users, businesses and investors as it is valued at $23.7 billion at the time of reporting. Ripple’s market cap is below 10 percent of bitcoin’s.

`An intermediary such as BBVA utilizing the Ripple network for a customer can be understood as an intermediary using another intermediary to process transactions. Thus, in the long run, one of the two intermediaries could be rendered ineffective. Either users will solely rely on the Ripple network and utilize XRP to make transactions with each other or banks will develop their own blockchain network similar to SWIFT and simply discard its partnership with Ripple.

The issue with banks developing their independent blockchain networks is the necessity of cooperation and collaboration. Hence, by relying on an existing blockchain network structured to serve financial institutions, banks can cut development costs.
 

Three advantages Ripple offers to its banks is speed, certainty and cost. By utilizing a decentralized blockchain in Ripple, banks can potentially see a reduction of billions of dollars in operating costs. Whether banks will remain with Ripple and work on the development of a cross-bank network or form their own blockchain network like JP Morgan is still difficult to speculate.

David Ogden
Entrepreneur

Source: CryptoCoinNews

Alan Zibluk Markethive Founding Member