HSBC has become the first foreign bank to complete a forfaiting interbank transaction featuring a letter of credit (L/C) on the China Trade Finance Inter-bank Trading Blockchain Platform (CTFU).

The platform was unveiled in late 2018 by the China Banking Association with nine Chinese banks and HSBC as the only foreign bank.

Deferred payment L/C

The transaction involved the Bank of Communications issuing a deferred payment L/C.

HSBC then bought the L/C over the CTFU platform, completing the transaction in two to three hours rather than the two to three days it usually takes to complete a similar paper-based transaction.

Blockchain benefits

The CTFU platform, which went live in August this year, uses blockchain technology to achieve efficiency gains, deal transparency and enable banks to share resources across a common infrastructure.

Transacting L/Cs on the CTFU platform aims to reduce trade financing costs, ensure transaction information security and provide all counterparties access to all relevant parts of a transaction.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.