- Viral News: In a first for India, HSBC facilitates blockchain-based transaction for Reliance industries.
- Reality: This is a first transaction for transfer of Letter of credit. There have been many blockchain based transactions completed in the past in India.
- ICICI Bank was the first in India to complete an international transaction in banking for trade finance on Blockchain, in October 2016. Since then has on-boarded 250+ partners.
- Reliance transaction is to facilitate transfer of a title. There is no transfer of monetary value, so it is not equivalent to public blockchain like Bitcoin, Ethereum, etc.
At Coin Crunch India, we clarify misinformation and ill-informed news published by local Indian mainstream media. When the mis-information comes from agencies such as Press Trust of India, the job becomes a little more difficult because the “fake” news reaches every mainstream media. Something like that happened on Monday this week.
Business Standard published a copy of Press Trust of India with title “In a first for India, HSBC facilitates blockchain-based transaction for RIL”. Soon the news went viral and even international crypto media picked it up, albeit they reported it correctly in most cases.
The headline is fiercely misleading on many of the articles. Even the content is delusional in some. Check out how these articles begin on a couple of these news portals.
“In a first for India, British banking major HSBC has executed a trade finance transaction involving an export by Reliance Industries to an American client using the blockchain, which massively reduced the time taken for processing the documents.”Business Standard
“In a first for India, HSBC Holdings Plc has executed a trade finance transaction using blockchain for an export by Reliance Industries Ltd (RIL) to US-based Tricon Energy.”Livemint
In both cases, media is implying that this particular transaction is India’s first transaction in trade finance using blockchain. But is it true?
Is it the First?
Reliance did something new, something that hasn’t been done before. But it definitely isn’t the first blockchain transaction in Trade Finance, not in India, not in the world.
According to an official press release from HSBC:
“HSBC India and ING Bank Brussels have successfully executed a blockchain enabled, live trade finance transaction jointly with Reliance Industries and Tricon Energy. “HSBC India
Do you see the word “First” in it? No. Because it isn’t the first.
ICICI bank completed a blockchain based trade finance transaction, which incidentally was India’s first blockchain based banking transaction in Trade Finance in 2016. A press release from ICICI in October, 2016 said
“ICICI Bank is the first bank in the country and among the first few globally to exchange and authenticate remittance transaction messages as well as original international trade documents related to purchase order, invoice, shipping & insurance, among others, electronically on blockchain in real time.”ICICI Bank, October 2016
What Reliance, HSBC India, ING Brussels and Tricon energy were able to achieve using R3 Corda blockchain is a near real-time validation of a letter of credit, which earlier had to be done by sending the letter via fax or courier of the physical document.
Letter of Credit (LC) is a letter issued by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.
So basically, Tricon’s bank ING created the LC, to guarantee payment to Reliance’s Bank HSBC. The LC was verified on Corda Blockchain and Reliance then transferred the title of goods to Tricon. Simple, yet this was the first time such a transaction was done. But it isn’t the first transaction in trade finance. Remember, the transfer of funds did not happen over blockchain.
Think of Blockchain as a human baby. As it grows, it learns to crawl, walk, eventually talk. It learns to say Mumma, papa and a few other words. Now, initially you are all excited to see the baby learn new words. But after a few days, you don’t care, unless ofcourse the baby learns cuss words.
Similarly, trade finance on blockchain is growing concept. It is booming. Do we really have to get excited about each and every type of new transaction that is gradual step towards growth? Does this news have to be pushed on every homepage of every media channel?
It is a significant achievement for Reliance Industries nevertheless confirms Srikanth Venkatachari, Joint Chief Financial Officer:
“The use of blockchain offers significant potential to reduce the timelines involved in exchange of export documentation from the extant 7 to 10 days to less than a day”Srikanth Venkatachari, joint CFO, RIL
Since most of us were sharing this news faster than wildfire and also beginning to mis-interpret it, we decided to clarify it. Hope you guys can share this article to clarify it with everyone.
If you want to learn more about operational blockchain solutions in India, we have reported them in the past.