Trade finance is one of the most promising blockchain use cases, and its transformation will impact and benefit the entire ecosystem. As a result, the number of people getting involved is growing, which is not only good news but also a prerequisite for success. Today, many products and solutions on the market improve and enhance processes by providing both basic and value-added services to finance traders. For instance, various blockchain trade finance initiatives and consortia harness the value of this technology to improve trade and working capital finance solutions. Together, they identify, challenge, develop, test, and implement new products and processes to create a new standard for efficient trade finance operations.
One of the major projects focusing on blockchain-based finance solutions is Marco Polo Network, the fastest-growing trade and operational capital finance network which develops various open-account commerce and working capital finance solutions. Other notable projects include VAKT and Komgo, which focus on commodity requirements, TradeLens and CargoX for shipping, Contour and eTradeConnect, revolving around letters of credit and electronic bills of lading, along with many others. Projects such as Polytrade, Scuchain and TradeFinex use an internal utility token to improve the efficiency of their platforms. These new initiatives are essential for the industry and lead to outstanding projects and valuable cooperation. They bring financial institutions, corporate clients, and technology providers together to achieve a common goal.
From the analysis of blockchain projects in trade finance, it can be concluded that perceived usefulness drives the adoption of blockchain technology because it can solve trade finance's main problems, namely regulatory compliance, accounting, and settlement. The comparison results show that trust, validity and distributed ledger transaction data as perceived usefulness are the main drivers of blockchain adoption because it provides solutions to automation challenges in these problem areas. Smart contracts offer fast transactions in letter of credit export processing and other benefits in terms of ease of use. Digital ledger technology aims to solve core supply chain problems, such as digitising records, transaction acceleration, security, traceability, transitions, validation, and regulatory compliance. It also offers supply chain innovations such as audit facilities, risk mitigation, and alternative funding. Blockchain technology is perhaps most needed in issues of publishing, clearing, and settlement, given the complexity of the trading process. The combination of blockchain and Al can be a solution because the differences in regulations and policies for each party involved must be accounted for, and they must adjust to ordinances.
Practical implications are as follows: the opportunities for blockchain adoption in trade finance and supply chain processes are cost savings and reduced errors through increased efficiency, speed, innovation, standardisation, automation, and security. The immutable and distributed nature of blockchain creates trustful, direct, digital, and transparent data. Real-time trusted information and smart contracts via cryptography instruments can drive automation practices for credit risk assessment issues. These processes provide practical implications for an efficient approach and cost savings to automate processes and reduce the risk of illegal practices such as trade-based money laundering. It is also necessary to share the advantages of blockchain technology with the supply chain business community to enter the global supply chain ecosystem with new standards.
So, the main obstacles to implementing blockchain technology in trade finance are likely to be a lack of knowledge, willingness, trust, and courage to take risks in new supply chain ecosystems.
The Tradeleaf project brings an ecosystem-based, end-to-end digital platform approach and directly competes with trade finance projects in two niches – consolidating traditional and alternative financial instruments, related services, and market participants. Hence, it vies in both sectors, the time-honoured trade finance market and digital asset platforms as alternative financial instruments.