A new report from the WTO has predicted that international trade could be revolutionised by blockchain in the coming years, predicting a possible increase of $3tn in new trade by 2030. The paper titled ‘Can blockchain revolutionise international trade?’ noted that the technology “could well become the future of trade infrastructure and the biggest disruptor to the shipping industry and to international trade since the invention of the container”.
The findings echo those of Long Finance’s ‘Distributed Futures’ research programme, as reported in the latest edition of the Institute’s quarterly member journal, World Trade Matters. James Pitcher, Associate at Z/Yen and Programme Director for Distributed Futures, told us that the potential impact of Smart Ledgers on World Trade was anything from a modest rise of $35bn per annum to as much as $140bn.
Technological and Regulatory Challenges
However, as with any potential technological revolution in its infancy, there is much to be done before the benefits of blockchain can come to fruition. Certainly, more needs to be done to join up the various innovations taking place in this space to allow for businesses worldwide to embrace it coherently.
The report notes that the system would have to properly connect all banks – a significant technical challenge. As reported on Global Trade Review, “Issues around interoperability between blockchain platforms and standardisation are major hurdles to widespread adoption”.
The report noted that a regulatory layer will need to be applied as well. The author of the paper, Emmanuelle Ganne, Senior Anlayst at WTO, said:
“I think it is very important for trade officials and regulators to keep an eye on what’s going on. Without this regulatory layer, blockchain will likely be confined to proofs of concept and pilot projects”.
Voltron project leads the way
The realisation of a blockchain being coherently adopted worldwide is a long way off at the moment, but steps are already being taken towards it. For example, the Voltron platform, launched by several international banks and R3 earlier this year, has already seen its first live trade finance transaction carried out by HSBC and ING – a cargo of soybeans exported by Cargill from Argentina to Malaysia.
The WTO note that there will be a few more years of pilots and proofs of concept before a sustainable model comes around. It also notes that all stakeholders will need to come to terms with the full practical and legal implications of a worldwide adoption of blockchain.