Hong Kong Considers Blockchain Use in Trade Finance

James Henry Lau, Hong Kong’s Secretary for Financial Services and the Treasury, said at a forum on Friday the institution was examining blockchain technology in the context of a trade financing system. The distributed ledger technology (DLT) could be advantageous in regions taking part in China’s Belt and Road development strategy, according to the senior government official.

China proposed the Belt and Road Initiative (BRI) in a push to create conditions for collaboration with the land-based Silk Road Economic Belt (SREB), the oceangoing Maritime Silk Road (MSR), and other Chinese partners. Today, the initiative links 69 countries, with China serving as its trade center. The strategy aims to make China a leading player in global affairs.

President Xi Jinping initially announced BRI in 2013. In September this year, Hong Kong’s Monetary Authority unveiled plans to make equity investments in several BRI projects.

Since trading within the BRI network involves primarily small and medium-sized businesses, blockchain is the ideal technology given its potential to eliminate intermediaries and central authorization, Henry Lau said.

As a distributed ledger system, the technology will allow the automatic recording of all transactions within the network and enable all parties involved to keep track of them.

Blockchain can also reduce the significant number of middlemen and speed up the processing. Furthermore, it can increase security, making fraud almost impossible.

A potential move in the context of BRI would not be the first blockchain-related initiative in the territory. Recently, the Monetary Authority of Hong Kong successfully implemented DLT in a platform designed to digitize contracts. The central bank worked with Deloitte and six lenders, among them Bank of China and Bank of East Asia.

We reported earlier that the central banks of Hong Kong and Singapore had joined forces to support collaboration between the cities in the area of financial technologies, blockchain included.

The central bank of China does not want to sit on the sidelines when it comes to blockchain implementation. It is true that the country cracked down on cryptocurrencies and ICOs, but it retains a positive attitude where DLT is concerned. China even plans to develop its own digital fiat currency based on blockchain.