17:36 GMT15 August 2020
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    Major banks announced that the first ever cross-border blockchain transaction has taken place, between the Commonwealth Bank of Australia and California-based Wells Fargo, for a shipment of cotton sent from the United States to China.

    Brighann Cotton Marketing in Australia bought a shipment of 88 bales of cotton from a US-based division of their company in Texas, for $35,000, using blockchain technology to complete the transaction, Commonwealth Bank told Reuters.

    "Existing trade finance processes are ripe for disruption and this proof of concept demonstrates how companies around the world could benefit from these emerging technologies," Michael Eidel, Commonwealth Bank's executive general manager for cash flow and transaction services, said in the statement on Monday.

    Blockchain is an encrypted decentralised database, most well-known for being used in transactions using bitcoins, a virtual cryptocurrency.

    “Blockchain is a web-based transaction-processing and settlement system whose efficiency banks say could slash costs. It creates a ‘golden record’ of any given set of data that is automatically replicated for all parties in a secure network, eliminating any need for third-party verification,” Fortune magazine detailed.

    The banks also used the internet to geotrack the goods to coincide with the release of payments.

    “The trade introduced a physical supply chain trigger to the terms of the transaction to confirm the geographic location of goods in transit before a notification is sent to allow for release of payment. The tracking feature adds a new dimension, providing all parties with greater certainty compared with traditional open account and trade instruments like Letters of Credit, which focus on documents and data,” CBA’s statement continued.

    It is hoped that the groundbreaking transaction will lead to blockchain being more commonly used.

    “The interplay between blockchain, smart contracts and the IoT [internet of things] is a significant development towards revolutionising trade transactions that could deliver considerable benefits throughout the global supply chain,” CBA said.

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    Tags:
    Blockchain, Wells Fargo, Commonwealth Bank, Brighann Cotton Marketing, United States, Australia, China
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