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By Jemima Kelly
LONDON, Sept 7 (Reuters) - Barclays and anIsrael-based start-up company have carried out what they say isthe world's first trade transaction using blockchain technology,cutting a process that normally takes between seven and 10 daysto less than four hours.
The transaction guaranteed the export of almost $100,000worth of cheese and butter from Irish agricultural foodco-operative Ornua - formerly the Irish Dairy Board - to theSeychelles Trading Company.
The deal was executed via a blockchain platform set up byWave, a firm that came through a Barclays development programme.
The blockchain technology provides an electronicrecord-keeping and transaction-processing system, which lets allparties track documentation through a secure network andrequires no third-party verification. This contrasts with thepresent cumbersome and lengthy paper-heavy process.
Proponents of the technology, which originally came fromdigital currency bitcoin, say that because it does not requiremanual processing, nor authentication through intermediaries, itmakes transactions faster, more reliable and easier to audit.
Widescale adoption of blockchain, though, is still betweenfive and 10 years away, many say.
"We've proved the reality of this technology and the client,Ornua, has asked us when they can do the next transaction inthis way, which proves how user-friendly the entire processwas," said Barclays' global head of trade and working capital,Baihas Baghdadi.
The transaction was executed by means of a letter of credit- a widely used way to cut risk between importers and exporters.
But such transactions typically involve a complicated papertrail that requires international courier services, isvulnerable to document fraud, and can take as long as a month tobe completed.
In this transaction, both parties were able to transfer theshipping, insurance and other original documents that had beencryptographically sealed via the blockchain.
"I've been here for more than two decades and I never evendreamed of a solution where you can remove completely thedocuments from the circle and just get everything moving aroundthe world on an electronic basis within minutes, rather thandays of couriers and shipping and all that," said Baghdadi.
Barclays is not the first to experiment with using thetechnology for trade finance - a sector identified as one of themost ripe for blockchain-based innovation - though the bank saysthis marked the first time that a trade transaction had beenexecuted this way in the real world, rather than in a lab.
Last month an HSBC and Bank of America Merrill Lynch ventureand fintech firm R3 said separately that they had found ways tosimplify trade finance processes with blockchain.
"Moving to paperless trade would be hugely beneficial insupporting the supply chain, through reduced costs, error freedocumentation, and fast transfer of original documents to ourcustomers worldwide," said Ornua group trade finance managerDavid Rourke. (Reporting by Jemima Kelly; Editing by Richhard Balmforth)
