While we are still recovering from the blow on Crypto that RBI announced on April 5, 2018, it has come to attention that TReDS exchanges approved by RBI are already using Blockchain to fight fraud.
RBI introduced the new TReDS (Trade Receivables Discounting System) for small businesses to be able to borrow capital over receivables.
Early April, a US-based Blockchain solutions company MonetaGo deployed an interoperable platform built on Hyperledger fabric and it does not rely on Cryptocurrencies.
The three competing TReDS exchanges namely RXIL, M1xhange, and A.TREDS will use this MonetaGo blockchain solution to eliminate systemic fraud in the Receivables Financing Market. The fraud is when someone tries to finance the same receivable on multiple exchanges.
In simple words, when you have an account receivables – an outstanding invoice or money owed by customers, you can use that as a collateral to borrow more money. It is a common ill-practice around the world to use the same receivables (same invoice) and borrowing cash from multiple exchanges.
MonetaGo’s solution will hash the information of a receivable being financed and share it over the blockchain. This information will then be used by other all exchanges to verify the new receivables they receive to process, are legit. All three competing exchanges will know if the receivable is already financed before. This will drastically reduce the frauds. In the words from Cryptoverse, this is like preventing double spending.
This blockchain solution was deployed in April and the Government as well as RBI look pretty bullish on the technology. MonetaGo has provided a private blockchain to curb fraud in a small financial sector. But this holds potential to bring changes in the bigger markets.
One might ask, isn’t sharing the particulars of an invoice risky for competition? Apparently, that has been taken care of. Regarding the privacy of the data, Mr. Kalyan Basu, M.D. & C.E.O, A.TReDS said,
“Our clients are particularly sensitive about their sourcing inputs, and we absolutely could not broadcast any of their private information to a shared network. This technology however enables us to work together with the other exchanges to achieve shared goals without sharing specific data.”
It should be noted that this is a blockchain with no cryptocurrency.
No Coins = No Regulatory Limitations
MonetaGo’s no coin blockchain is good and bad news for India. The good news is that this is a great Proof of concept of what Blockchain can achieve in the Financial sector. Bad news because the government has another reason to be bullish on Blockchain and bash the Cryptocurrencies.
But, what the future has in store for us, only time will tell.
About Receivables Exchange of India Limited (RXIL)
Receivables Exchange of India Ltd (RXIL), is a joint venture promoted by National Stock Exchange of India Limited (NSE), leading stock exchange of India and Small Industries Development Bank of India (SIDBI), the apex financial institution for promotion and financing of MSMEs in India. RXIL operates the Trade Receivables Discounting System (TReDS) Platform and launched India’s 1st TReDS Exchange on January 9, 2017.
M1’s Trade Receivables Discounting System “TReDS” is an online exchange being set up under the approval of Reserve Bank of India (RBI) to facilitate discounting of invoices and Bills of exchange on a PAN India basis. Key participants in TReDS are Micro, Small & Medium Enterprises “MSME” (“The Suppliers”), large Corporates including PSUs and Govt. Departments (“the Buyers”) and Banks/NBFCs (“the Financiers”). M1 aims to provide MSMEs supply chain related cash flow finance at competitive rates through an open bid process via multiple financiers. Financing on M1 is “Without Recourse” to MSME supplier as per RBI guidelines. M1 employs the latest technologies to ensure the authenticity of the underlying transactions. Mynd Online National Exchange has been launched in April 2017, to set-up and operate TReDS under the Payment and Settlement System (PSS) Act 2007. Mynd solutions is one of the very few entities approved by RBI to set up this online platform which is known as M1xchange.
A.TREDS is a joint venture of Axis Bank and mjunction services. Axis Bank is India’s third largest private bank. It offers a wide range of services to retail, corporate, and SME customers. mjunction is the largest e-marketplace for steel in the world, and also India’s largest e-commerce company which is itself a venture promoted by Tata Steel and SAIL. A.Treds Ltd. owns and operates Invoicemart, a digital invoice discounting marketplace. The platform connects MSME suppliers (sellers) and their corporate buyers to multiple financiers. The platform allows MSME suppliers to avail finance quickly and at competitive interest rates which in turn helps increase their working capital efficiency without impacting their relationship with buyers.
MonetaGo provides enterprise distributed ledger solutions and applications for financial operations. The MonetaGo product suite is compliant with existing regulations and designed to improve the efficiency and security of financial products. Built to support multiple private distributed ledger technologies and interoperate seamlessly with legacy financial infrastructure, institutions can integrate MonetaGo’s products with minimal disruption and cost.