The Hong Kong Monetary Authority (HKMA) has announced its plans to use One Connect tech group from Ping An to launch a blockchain platform to improve the efficiency of trade finance in the economy. As a global shipping hub, Hong Kong sits at the core of the Asian financial markets.
According to a recent report by Financial Times, the Hong Kong Monetary Authority, which also serves as the central bank of Hong Kong, partnered with a Chinese financial group, Ping An, to implement the new blockchain finance project.
The partnership between the Hong Kong Monetary Authority and Ping An Group’s fintech subsidiary OneConnect intends to significantly minimize paperwork and costs security risks for financial institutions in the country.
The new blockchain platform will be possessed by the financial institutions that make use of it, as top banks such as HSBC and Standard Chartered are already showing interest in the new program. The annual worth of global shipping finance is estimated to be $9 trillion.
Ping An had implemented a similar platform which is currently functional in China, and the platform has shown some significant benefits. The blockchain finance platform appears to be ideal for trading funds as the banks that are financing the trades can use the innovation to access another level of information about the estimation of exchanges in a particular territory.
In China, the capacity of banks to determine the actual costs engaged with an exchange has diminished the general level of over-financing. Numerous organizations request for more cash than is expected for a particular arrangement. The previous method of exchange was unclear, but with this platform, banks can now perceive what other comparative provisions cost, and curb misspending of funds.
Likewise, small-scale organizations can profit from this new framework, accessing exchange has been a significant setback for SME’s because banks require a great deal of information about potential client or organization before they can offer them trade finance. The framework to be used by Ping An will enable small organizations to give their information over to the significant banks effortlessly, and access a similar back system that more prominent organizations utilize.
The new system is expected to influence trade finance by making the process significantly quicker. Rather than taking a long time to anchor financing, it could be completed within a day. While increasing the efficiency, the platform will reduce the amount of work for the banks, and will potentially minimize the general cost of doing global business.
The initiative by Hong Kong’s central bank to unite banks has several favorable advantages. While commenting on the HKMA’s new program, the deputy chief executive of Ping An, Jessica Tan, stated that:
“Instead of individual banks trying to do this you have the regulator trying to bring the banks together.”
A total of 21 banks will reportedly participate in the Hong Kong blockchain finance program. It will be difficult for banks to turn down the prospect of embracing and integrating blockchain into their business model. Therefore, more financial institutions and shipping firms are adopting the use of blockchain based finance and tracking solutions.