Can blockchain make trade finance more inclusive?

Benjamin Jessel () and Alisa DiCaprio
Additional contact information
Benjamin Jessel: The Capital Markets Company, Postal: 77 Water Street, New York, http://www.capco.com
Alisa DiCaprio: R3 (R3CEV)

Journal of Financial Transformation, 2018, vol. 47, 35-50

Abstract: There is little doubt that blockchain technology will change global trade. The question, however, is how it will impact some of the most intractable issues in trade finance. Last year, U.S.$15.5 trillion of merchandise exports were transported around the world. Up to 80% of global commerce requires trade finance to provide liquidity and risk mitigation. However, inefficiencies in trade finance today mean that many applications go unfunded. This U.S.$1.5 trillion trade finance gap is widest in emerging markets and for small- and medium-sized enterprises. Efforts to address these shortfalls have gained limited traction due to the decentralized nature of trade. In this paper, we review the design of enterprise blockchains to explore how changing the architecture of trade finance could impact the drivers of trade finance gaps. By grounding our analysis in the technical architecture of a live, enterprise blockchain platform, we aim to provide a tangible discussion around the technology. Applying blockchain technology to trade finance – regardless of the top of stack application – will directly impact the flow of information, compliance challenges, and profitability in ways that can contribute to a more inclusive trade finance structure.

Keywords: trade finance; finance; trade; blockchain; distributed ledger; distributed ledger technology; DLT; corda; R3; capco; gap; oracle; oracles; notary; notaries; credit; letter of credit; credit gap; bill of lading; digitization; cryptography; SME; demurage; innovation; hsbc; multi-sig; multisig; truth; truth layer; trust (search for similar items in EconPapers)
JEL-codes: B27 F11 F12 F13 F18 F23 F34 F36 F41 F42 G15 O16 O30 O31 O32 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1608

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