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EU’s Free Trade Infrastructure Needs a Lift From Blockchain

EU’s Free Trade Infrastructure Needs A Lift From Blockchain

The European Parliament has published a document ‘Blockchain: a forward-looking trade policy,’ which continues to push forward the adoption of DLT in EU trade.

As a provisional resolution, the document sets out a scenario by which the free trade agreements (FTAs) currently enjoyed by member states could be used to bolster blockchain technology. The document states:

“EU FTAs have large untapped potential and have yet to be fully utilized. Blockchain has the potential to support the TSD agenda by providing trust in the provenance of raw materials and goods, transparent production processes and supply chains.”

Although no policy changes are suggested, the EU resolution does advocate a set of guidelines by which blockchain might provide industry, customs, and regulatory authorities with a degree of legal certainty. The resolution wants more clarification on how economic efficiency can be legally enhanced across Europe supply chain and infrastructure logistics. The document states:

“The EU has an opportunity to become a leading actor in the field of blockchain and international trade, and that it should be an influential actor in shaping its development globally, together with international partners.”

The resolution noted that FTAs in the EU was underutilized with only 67 percent of EU exporters and 90 percent of EU importers making use of the preferential tariffs. It emphasized that blockchain could help improve these trade policies.

Last month, the formation of  “Blockchain for Europe” association was revealed, naming Ripple, NEM, EMURGO/Cardano and Fetch.AI as founding members.

A Finextra press release describes the association as “the first credible attempt” to establish a “unified voice” for the European blockchain industry. It argues that policy debates are “fragmented – with inconsistent information from those outside the blockchain sector challenging consensus within it.”

The four members of Blockchain for Europe are taking it upon themselves to educate EU and member-state institutions on the “true nature and potential of the distributed ledger (DLT) and blockchain technology.” Like many of the associations before it, Blockchain for Europe echoes concerns with regards to regulations and desires to establish ones that promote innovation in the region.

Also, four major European banks recently used R3’s Corda platform to create a live transaction for their Euro Debt Solution.

The banks, Commerzbank, ING, Natixis, and Rabobank have adapted blockchain technology, according to a new Banking Tech report, by finding a solution to minimize operational costs and risks using R3. Corda is a distributed ledger platform that is the outcome of over two years of intense research and development by R3 and 80 of the world’s largest financial institutions.

This month seven EU member states signed their own declaration calling for the promotion of DLT’s use in the region. The declaration was co-signed by Malta, Italy, France, Cyprus, Portugal, Spain, and Greece.

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Four Major Euro Banks Collaborate to Use Corda R3 for Debt Solution

It’s been reported that four major European banks have used R3’s Corda platform to create a live transaction for their Euro Debt Solution.

The banks, Commerzbank, ING, Natixis, and Rabobank have adapted blockchain technology, according to a new Banking Tech report, by finding a solution to minimize operational costs and risks using R3. Corda is a distributed ledger platform that is the outcome of over two years of intense research and development by R3 and 80 of the world’s largest financial institutions.

The banks combined their individual strengths to develop the solution. Natixis as the issuer, Rabobank as the investor, while ING acts as both the dealer and escrow agent. Commerzbank, on the other hand, provides the pilot framework, software and distributed ledger network for the transaction which involved the issuance of a one-day maturity Euro Commercial Paper (ECP) worth EUR100,000 or more than $113,000. ING’s head of money market and central bank sales commented:

“This live trade lays the foundation for dealing ECP more efficiently and cost-effectively. It also marks the start of building an improved DLT platform that enables direct settlement and reduces operational risk and costs at the same time.”

Ripple’s XRP has become the banking system’s go-to transaction solution in the crypto sphere, but this use of the Corda platform demonstrates that Ripple has not got a complete stranglehold on the space for such payments.

R3 leads a consortium of more than 200 financial institutions in research and development of DLT usage in the financial system and other commercial sectors. Corda was designed for dealing with complex transactions and security and is expected to have many of the benefits of the blockchain. A new version of Corda was released earlier this year aimed specifically at businesses, called Corda Enterprise, it includes a blockchain applications firewall.

However, Ripple does appear to be growing from strength to strength following the company’s recent announcement that Japanese banking corporation Mitsubishi UFJ Financial Group (MUFJ) Inc has struck a partnership with Brazilian bank Banco Bradesco for a new Ripple-based cross-border payments system.

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Shell, Equinor, BP to Use Blockchain for Energy Trading

Shell, Equinor and BP will be using the blockchain-based platform Vakt for energy trading, with operations on the platform to go live by the end of November 2018 in the North Sea oil fields. The purpose of using Vakt is to move energy trading from cumbersome paper contracts to digital smart contracts. Cryptocurrency will not be used for the trades but the deal recap, contract, confirmation, logistics, and invoicing will be recorded on the blockchain.

Shell is based in the Netherlands and has an annual revenue of USD 300 billion. Norway-based Equinor records annual revenues of USD 60 billion and BP USD 245 billion. Combined, these energy companies have assets of nearly USD 800 billion, approximately eight times the Bitcoin market cap.

Blockchain is known to shorten and strengthen supply chains, by providing a cryptographically secure, immutable, and transparent ledger. Inefficiencies and errors in the energy trading process will be easy to spot and correct, and fraud will be reduced due to the transparency. Overall, energy trading on the blockchain will be more reliable and efficient than with paper. It is expected that energy trading fees will drop 40% once the blockchain platform is implemented.

Vakt is a post-trade management platform that is meant to digitize the commodities trading industry. Aside from the major oil companies backing Vakt, the banks ING, Societe Generale, and ABN AMRO are on board, as well as the independent traders Koch, Mercuria, and Gunvor.

After the integration of energy trading in the North Sea oil fields in late 2018, Vakt will look to integrate barges, waterborne energy markets, and United States crude pipelines in 2019. Additionally, in 2019 Vakt expects its first licensees and shareholders, implicitly indicating the door is open for other energy trading firms to join Vakt.

 

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7 Banks to Form Trade Finance Blockchain Platform in Hong Kong

Seven banks including Hong Kong’s banking regulator are to launch a trade finance platform this September using blockchain.

The platform is reported to be one of the largest government-led cross-bank cooperation globally. It will include UK banking giant HSBC and Standard Chartered PLC. HSBC is the seventh largest bank globally by assets and the largest in Europe; Standard Chartered is a London-based bank with businesses across Asia.

Other banks involved are said to be one of Australia’s big four, ANZ, and four Asian banks, BOC Hong Kong Holdings, Hang Seng Bank, Bank of East Asia Ltd and Singapore’s DBS Holdings Ltd.

The financial sector has been increasingly under the microscope both by private companies and government bodies, who are beginning to regard blockchain technology as a way of modernizing record keeping and speeding up payments, in what is often described as an overly paper-driven industry, particularly given the technologies available in 2018.

The cross-bank project has been proposed to alleviate exactly some of these institutional operating issues, as Howard Lee deputy chief executive of the Hong Kong Monetary Authority (HKMA) explained. The main focus will be the digitalization of documentation and automating processes. Lee added that the group will want to “link up with other trade platforms in other jurisdictions to further facilitate cross-border trades”.

It appears that banks, at one time shunning blockchain due to in part to its connection with Bitcoin and Ethereum, are coming around to seeing the advantages of integrating the technology into upgrading financial systems.

The multi-bank platform will not be the first official blockchain encounter for HSBC. Along with Dutch giant ING, the two banks are reported to have made the world’s first trade finance transaction using blockchain earlier in May.

In China, The Shanghai Stock Exchange (SSE) published a research paper on Tuesday, which analyzed the use of DLT in various stages of a security transaction. The SSE is one of the two stock exchanges operating independently in the People’s Republic of China and is the world’s third-largest stock market by market capitalization.

 

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38% of South Africans Polled Regret Missing Early Bitcoin Uptake

A recent poll in South Africa on awareness and attitudes towards cryptocurrency has shown that 38% of respondents wished that they had invested in digital currency before, writes Cointelegraph.

The poll was conducted by Pan-African financial services company Old Mutual Limited. The annual Savings and Investment Monitor survey for South Africa revealed that in general, South Africans were currently largely positive about cryptocurrencies.

Along with 38% of people responding positively to the statement “I wish I had invested in [crypto] before”, another statement, “You can make a lot of money with them”, received a huge 71% agreement from the public.

The statement “They are bad news, like a pyramid scheme” seemed to resonate with 43% of respondents, while 53% had no idea how digital currencies actually worked.

Overall, and clearly important for the development of cryptocurrency in the region, according to the poll, more South Africans were unaware of the industry than those who were, with a 60/40 split.

As Bitcoin News reported recently, South Africa is developing its cryptocurrency space. The South African Reserve Bank has recently taken steps to introduce a new non-state self-regulatory body (SRO) aimed at overseeing further developments in the industry. Further to that, the SARB has announced that it wants to build a proof-of-concept wholesale payment system for interbank settlement using a South African rand token on DLT.

Europeans, according to recent statistics, are reported to be far more familiar with cryptocurrencies and take up in some countries such as Switzerland and the UK is significant. A recent ING survey suggested that 66% of Europeans were familiar with crypto and 33%, when prompted, saw it as the future of online spending. The awareness rate was found to be lower in the US with only 57% of respondents having heard of cryptocurrencies.

 

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HSBC and ING Announce Successful Utilization of R3’s Blockchain Platform

HSBC and ING bank have recently reported that they have utilized blockchain technology using R3’s Corda blockchain platform.

The banking conglomerates used the tech to achieve a transaction that oversaw soybeans, shipped from Argentina to Malaysia via Singapore. Additionally, a letter of credit between the two banks was issued directly from the R3 Corda platform.

HSBC and ING commented that the transaction was a success, demonstrating that blockchain technology had been used in a commercial and operational setting.

The trade finance industry is worth around USD 9 trillion. Using any number of conventional monetary means of managing these transactions can take days, with multiple parties included. With blockchain technology on a single platform, the transaction took less than 24 hours to be completed.

Credit letters are one of the most commonly used methods for reducing the risk involved between importers and exporters. These letters help guarantee more than USD 2 trillion worth of transactions annually, and it is a lengthy and time-consuming paper trail that can take between five and ten days to complete.

Vivek Ramachandran, HSBC’s head of growth and innovation stated, “Trade finance transactions have been made simpler, faster, more transparent and more secure. The need for paper reconciliation is removed because all parties are linked to the platform and updates are instantaneous. The quick turnaround could mean unlocking liquidity for businesses.”

The transaction was received well by third parties involved. “Blockchain is a key technology we are exploring and using with our customers and, now, using for ourselves with the completion of this transfer on Corda,” explained Rani Misra, regional treasurer, APAC, Cargill.

Events have led R3, the company behind Corda along with 12 other supportive banks, to further the reach behind this technology, in a hope to expand the network as a utility for the trade finance sector and to waive all paper-based documentation.

 

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