First blockchain-enabled LC goes live between Vietnam and Korea

By Trang Nguyen - Jul 23, 2019 | 03:15 PM GMT+7

TheLEADERThe first live blockchain Letter of Credit (LC) has been facilitated between Vietnam’s Duy Tan Plastics and INEOS Styrolution Korea Ltd., marking the pilot digital transformation for trade finance between the two nations.

First blockchain-enabled LC goes live between Vietnam and Korea
Blockchain is now a solution to trade digitisation

HSBC has lately announced its success in executing a blockchain-enabled live trade LC transaction between Vietnam’s plastics manufacturer Duy Tan Plastics Corporation and Korea’s styrenics supplier INEOS Styrolution Korea, a subsidiary of Germany-based INEOS Styrolution.

The live blockchain transaction is the first of its kind in both Vietnam and Korea, and the seventh globally, led by the London-based bank.

The blockchain transaction involved a bulk shipment of raw plastic from INEOS Styrolution, the seller in Korea, to Duy Tan, the buyer in Vietnam. This was an end-to-end trade between buyer and seller completed on a single shared application called Voltron, rather than multiple systems, with HSBC Vietnam as the issuing bank and HSBC Korea as the advising/nominating bank.

Voltron is a platform developed by eight banks (Bangkok Bank, BNP Paribas, CTBC Holding, HSBC, ING, Natwest, SEB and Standard Chartered). Its objective is to provide a single, simplified channel to enable digitisation of the trade finance process, from issuance of LCs through to presentation/ exchange of documents.

The LC between the two parties was issued and advised on July 3. The transaction demonstrates that blockchain as a solution to trade digitisation, is commercially and operationally viable. Conventional exchanges for paper-based documentation related to letters of credit usually take between 5-10 days. This exchange was done in 24 hours.

Both Duy Tan and INEOS Styrolution saw increased operational efficiencies and greater transparency and security with regard to the transaction. The need for paper reconciliation was removed because all parties were linked on the platform and updates were instantaneous. The quick turnaround means unlocking liquidity for both businesses

According to Dirk Arhelger, head of Group Treasury and Investor Relations for the INEOS Styrolution Group, using blockchain to simplify its trade finance processes is a logical move, thanks to the transparency on the Voltron platform that can make what is normally a paper-intensive process clear and simple.

“Vietnam as a country stands to benefit from the rapid movement in supply chains. Faster documentation turnaround time will open doors for businesses to further leverage Vietnam as a trade hub in Asia,” said Pham Hong Hai, CEO of HSBC Vietnam.