LONDON: Global banks and trading firms are launching the first blockchain-based platform for financing the trading of commodities from oil to wheat, they said in a joint statement. The platform will be run by a venture called komgo SA, based in Geneva, Switzerland, and is due to go live later this year.
Banks and major trading firms have been testing numerous pilot schemes across commodities over the last few years but this venture will be the first that any firm can join.
The komgo founders include ABN AMRO, BNP Paribas, Citi, Crédit Agricole Group, Gunvor, ING, Koch Supply & Trading, Macquarie, Mercuria, MUFG Bank, Natixis, Rabobank, Shell, SGS and Societe Generale.
Blockchain, originally the platform behind cryptocurrency Bitcoin, is viewed by many as a solution to trade and settlement inefficiencies, and to improving transparency and reducing the risk of fraud.
A high-tech ledger, blockchain uses a shared database that updates in real-time and can process and settle transactions in minutes without the need for third-party verification.
Instead of sharing a mountain of paperwork between a long list of parties, a trader will instead be able to use a digital letter of credit, speeding up transactions considerably.
Komgo will first be used for energy. The first trades will be crude cargoes in the North Sea, the benchmark setting region for much of the world’s crude trading.
From early next year, komgo will widen to agriculture and metals.
The firm will work alongside Vakt, an energy trading platform run by many of the same shareholders in komgo.
“The launch of komgo SA highlights a shared vision for industry innovation and underlines the ongoing commitment among members to build a truly open and more efficient network within commodity trading” said Souleima Baddi, Chief Executive Officer of komgo SA.
Komgo will provide the financing via blockchain for all commodities and can scale itself up to new and emerging commodities.
The platform will be developed in partnership with blockchain technology company ConsenSys.
Meanwhile, a division of PNC Financial Services Group Inc will use technology built by startup Ripple to process international payments, the companies said on Wednesday, a possible precursor to the use of blockchain in mainstream finance.
PNC Treasury Management will use xCurrent, a system developed by Ripple, to speed up the way its US business clients get paid invoices by overseas buyers, Ripple said.
Over the past few years banks have been ramping up their investments in distributed ledgers, an umbrella under which so-called blockchains fall, in the hopes that it can help them streamline some of the most cumbersome processes. Despite the fanfare, few blockchain systems have been deployed so-far.
Distributed ledgers are databases maintained by a network of computers rather than a centralised authority.
Several banks have tested or deployed xCurrent, which uses “bi-directional messaging” that can eventually plug them into distributed ledgers, but that “is not a distributed ledger” itself, Ripple’s Chief Technology Officer David Schwartz said in June. He added banks were unlikely to use distributed ledgers for payments for now.
Ripple is among the most well known startups that builds blockchain technology, or the software that first emerged as the system underpinning cryptocurrencies.
Ripple also champions the use of a cryptocurrency called XRP, of which it holds a large share, and which it hopes will be used by financial firms for payments in conjunction with its payment platform xRapid. — Reuters
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