Around Christmas of 2018, the China Banking Association (CBA) unveiled the “China Trade Finance Union Blockchain Platform” (CTFU). There were ten banks at the time, with the only foreign-owned bank as HSBC (China). The solution officially went into production in August of this year.
Yesterday, HSBC said it had made its first live interbank forfaiting transaction on the CTFU platform. With forfaiting, a negotiable instrument is sold to a bank, the forfaiter, which buys it without recourse. In this case, the Bank of Communications issued a deferred payment Letter of Credit, and HSBC bought the Letter of Credit using the CTFU system. It would usually take a few days, but now it takes two to three hours.
Forfaiting is just the first solution planned for the platform. The CBA was keen to use it to drive standards and digitization, and the first standard was published at the end of 2019. Other purposes include efficiency gains, the tamper-resistant and transparent benefits offered by blockchain, and finally, to enable banks to share resources with this common infrastructure.
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