Blockchain & Money: Session 22: Trade Finance & Supply Chain, by M.I.T. Sloan School of Management with Professor Gary Gensler

Session 22: Trade Finance & Supply Chain

• Overview: Readings and Study Questions; Trade Finance; Trade Finance Blockchain Technology Efforts; Shipping and Supply Chain Blockchain Projects; Final Projects; Spring Courses; Conclusions.

• Session 22: Study Questions
  • What attributes of trade finance and supply chain management might make this a ripe set of use cases for blockchain applications?
  • What lessons might be drawn from the ongoing projects?

• Session 22: Readings
  • ‘Trade Tech–A New Age for Trade and Supply Chain Finance’, World Economic Forum/Bain.
  • ‘How Banks Are Teaming Up To Bring Blockchain To Trade Finance’, CB Insights.
  • ‘Hong Kong, Singapore to link up trade finance blockchain platforms’, Reuters.
  • ‘Business Interest in Blockchain Picks Up While Cryptocurrency Causes Conniptions’, Wall Street Journal.
  • ‘De Beers turns to blockchain to guarantee diamond purity’, Reuters.

• Financing International Trade
  • Bank Supported–‘Trade Finance‘
    • Letter of Credit
    • Documentary Collection
    • Factoring and Forfaiting (more here)
    • Import and Export Loans
    • Pre-Export Finance
    • Supplier Credit
    • Supply Chain Finance
  • Commercial Arrangements–‘Trade Credit’
    • Open Account
    • Cash in Advance
    • Consignment
  • Export Credit Insurance and Public Guarantees

• Trade Finance–Additional Projects
  • China–Peoples Bank of China backed trade finance blockchain platform
  • Dubai–TradeAssets marketplace for buying and selling trade finance assets
  • Hong Kong & Singapore–Global Trade Connectivity Network for Documents
  • India— a). Finacle Trade Connect for validation, documents and payment
    • b). Trade Receivables e-Discounting linked to RBI Trade Receivable e-Discounting System
  • Singapore–National Trade Platform with NTT Data and MUFG Bank proof of concept
  • Komgo SA–Ethereum based–ConsenSys plus 15 Banks and trading firms

• Shipping and Supply Chain Blockchain Projects
  • Shipping
    • Accenture–With APL, Kuehne & Nagel, and AB InBev
    • TradeLens–IBM and Maersk
  • Supply Chain
    • Carrefour–Chickens, Dairy and other food products
    • DeBeers–Diamonds
    • TrustChain–IBM–Jewelry supply chain
    • Walmart–IBM–Food from farm to grocery shelf
    • World Bank–Indonesian Palm Oil proof of concept

• Final Projects: Assessing Use Cases
  • What is the value creation proposition and ‘pain point’ being solved?
  • Which transactions and data need recording?
  • Which multiple stakeholders need ‘write’ and ‘read’ access to ledgers?
  • Which costs of verification or networking can be reduced?
  • What are competitors doing to address similar value propositions or markets?
  • Why are append-only log and multiple party consensus the best solution?
  • If permissionless applications, why is native token the best solution?
  • If so, why permissionless?
  • Tradeoffs of scalability, performance, privacy, security, & coordination
  • Can traditional data base adequately address use case?
  • How can broad adoption be realized?
  • What is the customer experience vs. current experience and interface?

• Spring 2019 Policy Course
  • Public Policy & Private Sector (15.S66) Tuesday 5-8pm
    • Explores the intersection of public policy and the private sector
    • Senior level public policy guests in discussion-based course
    • Key economic policy–technology, trade, tax, financial, and competitions policies
    • Tentative Guests Speakers–Sheila Bair, Sara Bianchi, Steve Moore, John Podesta, Sharis Pozen, & Miriam Shaprio
    • Taught with Simon Johnson

• Spring 2019 Blockchain Technology Courses
  • Blockchain Lab (15.S68) Tuesday 1-2:30pm
    • Action Learning working on Digital Currency Initiative projects
    • With Simon Johnson, Neha Nerula, Michael Casey
  • Emerging Blockchain Havens (15.228 B) H3 Monday 6-9pm
    • Student Led trip to Estonia and Switerland during Spring break & SIP weeks
  • Crypto Finance (15.S04) H4 Tentatively Mon/Wed 10-11:30am
    • With Antoinette Schoar and Leonid Kogan

• Conclusions:
  • Trade Finance plays Significant Role in $17 Trillion Export Markets for Goods
  • Trade Finance is multi-party and document intensive
  • Verification, Networking and Trust key to Trade Finance Economics
  • Multiple Consortia and Projects Underway
  • Banks, Governments and Shippers mostly Exploring Permissioned Systems
  • Blockchain Technology is Likely to be Catalyst for Change in Trade Finance

Biblio:

• Gary Gensler. 15.S12 Blockchain and Money. Fall 2018. Massachusetts Institute of Technology: MIT OpenCourseWare, https://ocw.mit.edu. License: Creative Commons BY-NC-SA.
• Video Link: Session 22: Trade Finance & Supply Chain.
• Slides Link: Session 22: Trade Finance & Supply Chain, Slides.