What’s better than one top notch company developing a blockchain project? Two top notch companies coming together to collectively develop a blockchain pilot project, duh! Standard Chartered is joining hands with Siemens for a unique project which will legitimize bank guarantees for trade finance by putting them on a blockchain.
According to a report by Coindesk, the trial is scheduled to come to a fruition before the year ends, having started back in March. Guarantee issuance and amendments and claims have been a chronic headache for big companies like Siemens. If this pilot is successful, then it would really ease a lot of Siemens’ concerns by digitizing these processes and offer additional facilities to big clients.
So what really is a bank guarantee?
“A Bank guarantee is a promise from a bank that the liabilities of a debtor will be met in the event that you fail to fulfill your contractual obligations.”
Currently the entire process is extremely paper dependent and this is a bid to get it done digitally and save time and effort. Use of automated smart contracts would allow the digitisation of the process and this endeavour would be fully supported by digital ledger firm TradeIX.
The blockchain is likely to be built on R3’s open-source Corda platform and TradeIX will provide an application layer to it. The bank guarantees, in the process of being digitized and put on a blockchain, will become more credible and cannot be tampered with.
Motasim Iqbal, head of transaction banking UAE at Standard Chartered said:
“industry-defining solution will transform the way guarantees are issued and processed,”
Michael Bueker, Siemens’ Chief Financial Officer (CFO), has expressed his high hopes regarding this blockchain pilot by claiming that it will “streamline our processes and make our trade finance operations smoother, faster and more efficient.”