First Agricultural Commodity Trade On Blockchain
ABN AMRO, Louis Dreyfus Company (LDC), Shandong Bohi Industry Co., Ltd (Bohi), ING and Societe Generale have successfully completed the first full agricultural commodity transaction using a blockchain platform. The enhanced Easy Trading Connect (ETC) blockchain prototype reduces time spent on processing documents and data from hours to minutes, and allows for a larger trading scope.
Karin Kersten, Head of Trade & Commodity Finance at ABN AMRO: “The blockchain technology has the potential to significantly optimise administrative processes around international trade. We are excited that this test was succesfully completed and that we can move to further exploring the added value and use of the blockchain technology.”
Time spent reduced fivefold
For the first time ever in the agricultural commodities sector, the trade included a full set of digitalised documents (sales contract, letter of credit, certificates) and automatic data-matching, thus avoiding task duplication and manual checks. The transaction, which mirrored the paper-based process, demonstrated significant efficiency improvements for all participants in the chain. Time spent on processing documents and data has been reduced fivefold. Other benefits include the ability to monitor the operation’s progress in real time, data verification, reduced risk of fraud, and a shorter cash cycle. The platform’s success demonstrates the immense potential of distributed ledger technologies to advance commodity trading and financing.
Digitalise and standardise commodity transactions
The Easy Trading Connect (ETC) platform was designed to digitalise and standardise commodity transactions. It was first validated with an oil cargo transaction in February 2017, with the subsequent launch in November 2017 of an energy consortium aiming to offer ‘blockchain-based’ services to the energy sector. The same principle was then applied to develop a blockchain-based platform tailored to agricultural commodities trading, in collaboration with the various participants in such transactions. This new, adapted ETC platform accommodates the agricultural sector’s complex and rigorous documentation chain flows, covering not only the financing aspects, but also the full set of relevant documents pertaining to a transaction, such as the signing and processing of the sales contract at the start.
Soybeans from the US to China
In this test, the enhanced platform was used to execute a soybean shipment transaction from the United States to China and covered the full complexity of the operation, including a larger number of participants and a broader scope. The transaction involved user participation on the blockchain-based platform by teams from Louis Dreyfus Company as the seller and Bohi as the buyer, with banks issuing and confirming the letter of credit. Russell Marine Group and Blue Water Shipping also participated in the process, issuing all required certificates. The U.S. Department of Agriculture (USDA) provided valuable insights on how to include phyto-sanitary certificates in the process.
ABN AMRO ING and Societe Generale and other major industry players such as LDC have a long-term ambition to improve security and operational efficiency in the commodity trading and finance sector through digitalisation and standardisation.
See infographic with further explanation of the initiative.
Source: ABN Amro
The network is driving adoption of standardized post-trade swap data models and workflows.
The market maker will contribute real-time crypto market data before expanding into equities.
Pyth is built on a blockchain to handle receipt and distribution of fast-moving data.
Interoperability with current capital markets infrastructure is a challenge.
Investors have more understanding on the operational side of crypto markets.