Royal Dutch Shell, Mercuria and Gunvor, and financial institutions such as ING, Société Générale, Citigroup and ABN Amro are backing two new blockchain platforms.

By digitising the large amount of contracts, letters of credit, invoices and other paperwork currently sent around the world by email, fax or post, and putting them on the Ethereum blockchain platform, they are hoping that the new platforms will lead to faster, cheaper and more secure ways of completing a trade as well as settling the transaction

Energy traders and banks back new blockchain platforms

Aim is to provide faster, cheaper and more secure ways of completing trades

A group of the world's leading energy traders and banks is looking to shake up the centuries-old trade finance industry with the launch of two new platforms underpinned by blockchain technology.

Energy groups including Royal Dutch Shell, Mercuria and Gunvor, and financial institutions such as ING, Société Générale, Citigroup and ABN Amro are backing two new blockchain platforms.

By digitising the large amount of contracts, letters of credit, invoices and other paperwork currently sent around the world by email, fax or post, and putting them on the Ethereum blockchain platform, they are hoping that the new platforms will lead to faster, cheaper and more secure ways of completing a trade as well as settling the transaction.

"Blockchain technology will answer the needs of key participants in commodity trading by improving efficiency and security," said Souleima Baddi, chief executive of Komgo, which will focus on commodity trade financing by digitising the lenders' customer identification documents as well as electronic letters of credit.

Komgo will launch in November alongside VAKT, which will focus on the raw material transaction, putting the information and paperwork needed for a deal to be processed on the platform. The two blockchain platforms share seven common shareholders and will work in tandem so that users can complete a transaction on the physical material side as well as the deal's financing.

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Commodity trading and finance, by contrast, is a centuries-old sector still reliant on the exchange of physical documents. This can lead to delays, high costs and also an increased risk of fraud.

In an attempt to move into the digital age, banks and big commodity traders and their lenders have been trialling deals using blockchain, using the technology to process paperwork.

One of these experiments saw document-processing times cut to a fifth of the average, while another oil trade led to cost savings of 25-30 per cent, according to participating banks.

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"The projects are unique in that you see both traders and lenders backing the ventures, and the solution is answering to the needs defined by the industry itself, and co-constructed together," said Ms Baddi, a former deputy head of commodity finance at SocGen. See the whole article on the FT here: https://www.ft.com/content/648c3dda-bb47-11e8-8274-55b72926558f


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