China’s Belt and Road Initiative (BRI), sometimes referred to as the New Silk Road, is one of the most ambitious infrastructure projects ever conceived. Launched in 2013 by President Xi Jinping, the vast collection of development and investment initiatives would stretch from East Asia to Europe, significantly expanding China’s economic and political influence – writes Colin Stevens.
BRI seeks to revive the ancient Silk Road trade routes to link China with other countries in Asia, Africa and Europe through building a trade and infrastructure network.
The vision includes creating a vast network of railways, energy pipelines, highways, and streamlined border crossings, both westward—through the mountainous former Soviet republics—and southward, to Pakistan, India, and the rest of Southeast Asia.
China’s colossal infrastructure investments promise to usher in a new era of trade and growth for economies in Asia and beyond.
Increasing Chinese influence in Europe has been a growing source of anxiety in Brussels in recent years.
So, what are the implications of China’s growing influence as a global actor for the EU and its neighbours? We asked a range of experts for their views.
Sir Graham Watson, a former senior UK MEP, is among those who support the exciting initiative while at the same time warning that the EU needs to be closely involved.
Sir Graham, formerly a Liberal deputy, said, “The EU should embrace an initiative which will improve transport links across the Eurasian landmass and not allow China to own it entirely. To realise its full potential, this initiative must be a two-way street.
"Rather than allow the PRC to buy up and monopolise infrastructure such as the Port of Piraeus we should be investing in it together. Only that way can we tame China’s expansionist ambitions and tie it down into co-operation.”
Similar comments are voiced by Fraser Cameron, Director of the EU-Asia Centre in Brussels who said that China had “learned some important lessons from the first two-three years of the BRI, especially on financial and environmental sustainability.”
He adds, “This means that the EU, with its own connectivity strategy, could now consider partnering with China, as well as Japan and other Asian partners, to develop infrastructure projects of benefit to both continents.”
Paul Rubig, until recently a veteran EPP MEP from Austria, told this site that the “whole world, including the EU, needs to be part” of the BRI.
He added, “The scheme connects people through infrastructure, education and research and stands to benefit European people greatly
“The EU should be investing in the BRI because it will be a win win for both sides, the EU and China,” said Rubig who is closely involved with SME Europe
Similar comments were aired by the vastly experienced Dick Roche, a former Europe Minister in Ireland, who said, “BRI and the EU’s involvement in it makes perfect sense. It will help re-establish our historic connections with China. Yes, there are some differences between the two sides but BRI is in the mutual interests of the EU and China. Europe can play an active role in the initiative by maintaining dialogue with China.
"That is the best way forward and not by following the U.S approach to BRI. The U.S stance is a backward step and will achieve nothing.”
Roche, now a Dublin-based consultant, added, “If you look at what is happening in China now compared with 50 years ago the progress that is being made, including benefits brought about by BRI, are incredible.”
BRI investment began to slow in late 2018. Yet by the end of 2019, BRI contracts again saw a big uptick.
The U.S has voiced opposition, but several countries have sought to balance their concerns about China’s ambitions against the BRI’s potential benefits. Several countries in Central and Eastern Europe have accepted BRI financing, and Western European states such as Italy Luxembourg, and Portugal have signed provisional agreements to cooperate on BRI projects. Their leaders frame cooperation to invite Chinese investment and potentially improve the quality of competitive construction bids from European and U.S. firms.
Moscow has become one of the BRI’s most enthusiastic partners.
Further reflection comes from Virginie Battu-Henriksson, EU spokesperson for Foreign Affairs and Security Policy, who said, “The starting point for the EU’s approach to any connectivity initiative is whether it is compatible with our own approach, values and interests. This means that connectivity needs to respect the principles of sustainability and a level playing field.
“When it comes to China’s Belt and Road Initiative, the European Union and China should share an interest in making sure that all investments in connectivity projects meet these objectives. The European Union will continue to engage with China bilaterally and in multilateral fora to find commonalities wherever possible and push our ambitions even higher when it comes to climate change issues. If China fulfils its declared aim of making the BRI an open platform that is transparent and based on market rules and international norms, it would complement what the EU is working for - sustainable connectivity with benefits for all involved.”
Elsewhere, a senior source at the EU foreign affairs directorate noted that the Belt and Road Initiative “is an opportunity for Europe and the world, but one that must not only benefit China.”
The source said, “EU unity and coherence are key: in cooperating with China, all Member States, individually and within sub-regional cooperation frameworks have a responsibility to ensure consistency with EU law, rules and policies. These principles also apply in terms of engagement with China's Belt and Road Initiative.
“At the EU level, cooperation with China on its Belt and Road Initiative takes place on the basis of China fulfilling its declared aim of making the BRI an open platform and adhering to its commitment to promoting transparency and a level playing field based on market rules and international norms, and complements EU policies and projects, in order to deliver sustainable connectivity and benefits for all parties concerned and in all the countries along the planned routes.”
At last year’s EU-China Summit in Brussels, the two sides’ leaders discussed what they called the “huge” potential to further connect Europe and Asia in a sustainable manner and based on market principles and looked at ways to create synergies between the EU's approach to connectivity.
Noah Barkin, a Berlin-based journalist and a visiting fellow at the Mercator Institute for China Studies, noted that when Wang Yi, China’s top diplomat, visited Brussels in December, he delivered a key message to Europe.
"We are partners, not rivals," he told his audience at the European Policy Centre think tank, calling on the EU and Beijing to draw up an "ambitious blueprint" for cooperation.
Such cooperation is happening right now - thanks to BRI.
Business Europe’s “China Strategy”, recently published, points out that the EU is China’s most important trading partner, while China is the EU’s second most important trading partner. Total bilateral trade flows in goods grew to EUR 604.7 billion in 2018, while total trade in services amounted to almost EUR 80 billion in 2017.
And, says Business Europe, "here is still plenty of untapped economic potential for both sides."
The strategy notes that the EU is China’s most important trading partner, while China is the EU’s second most important trading partner. Total bilateral trade flows in goods grew to EUR 604.7 billion in 2018, while total trade in services amounted to almost EUR 80 billion in 2017. And there is still plenty of untapped economic potential for both sides.
The Chinese and European economies have benefitted tremendously from China’s accession to the WTO in 2001.
It says, “The Chinese and European economies have benefitted tremendously from China’s accession to the WTO in 2001.The EU should continue to engage China.”
Many new opportunities have already emerged as a result of new infrastructure that has been completed along the Belt Road route.
For example, Italy and China have worked to strengthen their relations and cooperation on the digital economy via a “digital” silk road and tourism.
A digital silk road is seen as a significant part of BRI. China, with the largest number of internet users and mobile phone users in the world, stands at the world’s largest e-commerce market and is widely recognized one of the top players in big data.
It is this huge market that seasoned observers like Watson, Rubig and Roche believe the EU should now try to tap in to, including via BRI.
The European Institute for Asian Studies cites the Budapest-Belgrade railway link refurbishment as a “great” case study to gain a better understanding of the BRI.
The project is part of the 17+1 Cooperation and the Belt and Road Initiative (BRI). It had been announced in 2013 but was stalled on the Hungarian side until 2019 due to EU tender regulations. The project has progressed differently on the Hungarian side than it did on the Serbian side as a non-EU member, due to the EU’s intervention, says the EIAS report.
“A digital silk road is a significant part of BRI. China, with the largest number of internet users and mobile phone users in the world, stands at the world’s largest e-commerce market and is widely recognized one of the top players in big data.
But, clearly, there is more to do to realise its full potential.
The European Union Chamber of Commerce in China (European Chamber), compiled its own study, The Road Less Travelled: European Involvement in China’s Belt and Road Initiative (BRI). Based on a member survey and extensive interviews, the report highlights the “peripheral” role currently played by European business in the BRI.
Even so, hi-tech cooperation between China and EU has huge potentials, and dialogues and mutual trust are keys to forming closer digital ties between the two sides, Luigi Gambardella, the president of the China EU business association, said.
China. by way of further example, successfully launched the twin Beidou-3 satellite last September, contributing to the digital Silk Road initiated by China in 2015, which involves helping other countries to build digital infrastructure and develop internet security.
Commenting on the digital Silk Road, Gambardella said it has the potential to be a "smart" player in the Belt and Road Initiative, making the BRI initiative more efficient and environment friendly. The digital links will also connect China, the world's largest e-commerce market, to other countries involved in the initiative.
Andrew Chatzky, of the Council on Foreign Relations, says, "China’s overall ambition for the BRI is staggering. To date, more than sixty countries—accounting for two-thirds of the world’s population—have signed on to projects or indicated an interest in doing so."
"Analysts estimate the largest so far to be the $68 billion China-Pakistan Economic Corridor, a collection of projects connecting China to Pakistan’s Gwadar Port on the Arabian Sea. In total, China has already spent an estimated $200 billion on such efforts. Morgan Stanley has predicted China’s overall expenses over the life of the BRI could reach $1.2-1.3 trillion by 2027, though estimates on total investments vary," he said.
The original Silk Road arose during the westward expansion of China’s Han Dynasty (206 BCE–220 CE), which forged trade networks throughout what are today the Central Asian countries. Those routes extended more than four thousand miles to Europe.
Today, BRI promises to, once again, put China and Central Asia - and maybe the EU - at the epicentre of a new wave of globalisation.
The crypto currency bull run isn’t just about Bitcoin
It’s been a wild and unpredictable year in so many ways. Crypto currencies boomed with institutional investors flooding in. Bitcoin hit a new all-time high in December. Institutional investment in bitcoin was the headline news of 2020. Companies both big and small moved huge percentages of their cash reserves into bitcoin, including the likes of MicroStrategy, Mass Mutual, and Square. And if recent announcements are anything to go by, they’re only just getting started, writes Colin Stevens.
However, as exciting as it’s been to watch them pour into the space over the last year, the numbers are still relatively low. In 2021, the success, or not, of their decisions will become clear. This could motivate a whole new wave of institutional investors to follow their lead. MicroStrategy’s $425 million investment in bitcoin, for example, has already more than doubled in value (as of 18 December 2020). These are numbers that will interest any business or investor.
Furthermore, cryptocurrency and investment platforms such as Luno are already making it even easier for institutions to get involved. The recent news that the S&P Dow Jones Indices — a joint venture between S&P Global, the CME Group and News Corp — will debut cryptocurrency indexes in 2021, for example, should put crypto in front of even more investors on a daily basis.
The next big news for crypto currency will be sovereign wealth funds and governments. Will they be ready to make a public investment into crypto next year?
It’s actually technically already happened, albeit not directly. The Norwegian Government Pension Fund, also known as the Oil Fund, now owns almost 600 Bitcoin (BTC) indirectly through its 1.51% stake in MicroStrategy.
An open and public investment by such an entity would be a show of trust that could set off a frenzy of government activity. If institutional investment brought mainstream respectability to Bitcoin and other cryptocurrencies, imagine what the backing of a sovereign wealth fund or government would do?
The recent bull run has certainly started people talking, but compare the media attention in 2017 to this time around. It’s been limited, to say the least
One reason is that this bull run has been driven primarily by institutional investors. This has often meant crypto news landing on the lesser-spotted business pages. The mainstream media’s attention has also, understandably, been elsewhere – pandemics and contentious presidential elections have a tendency to dominate the news cycle.
But there are signs this is changing. December’s new historical all-time high has brought with it a significant amount of positive coverage across major publications, including The New York Times, The Daily Telegraph, and The Independent.
If the bitcoin price continues to rise - as many suspect it will - this may drive another wave of headlines and again cement cryptocurrency firmly on the front pages. This puts cryptocurrency firmly back in the public consciousness, potentially lighting a fire under consumer demand.
There are a number of reasons why this could be, but chief among them is that this bull run has been driven fundamentally by institutional demand rather than retail.
An increase in media attention would certainly change this, but perhaps even more important is that it’s now easier than ever to buy crypto currency, with the success of Luno and Coinbase, supporting customers around the world, but also the likes of PayPal and Square are seeing huge success in the US. They’re currently buying the equivalent of 100% of newly minted bitcoin just to cover the demand they’re getting from US customers.
There is another element. This latest bull run for the crypto ecosystem as a whole is proving that there is an appetite for tokens that do more than just act as a store of value (i.e., bitcoins) and now tokens with more specific and sophisticated use cases are becoming more popular.
Cryptocurrency tokens are fungible digital assets that can be used as mediums of exchange (traded) inside of the issuing blockchain project’s ecosystem. They are best described by how they serve the end user. Think of tokens as the foods that nourish blockchain-based ecosystems.
Crypto tokens, which are also called crypto assets, are special kinds of virtual currency tokens that reside on their own blockchains and represent an asset or utility. Most often, they are used to fundraise for crowd sales, but they can also be used as a substitute for other things.
The Silk Road Coin is a special-purpose token, designed for application within the global commodity trading industry. According to LGR Global’s founder and CEO, Ali Amirliravi, “there are many pain-points within the commodity trading business, including delays in fund transfers and settlements. Transparency issues and currency fluctuations work to further undermine the efficiency and speed of commodity trading transactions. Building on our vast industry knowledge, we have created the Silk Road Coin to address these issues and comprehensively optimize the commodity trading and trade finance industries.”
To begin, LGR Global is focused on optimizing cross-border money movement and will then expand to digitizing end-to-end trade finance using emerging technologies like Blockchain, Smart Contracts, A.I. and Big Data Analytics. “The LGR platform was launched in the Silk Road Area (Europe-Central Asia-China)”, explains Amirliravi, “an area which represents 60% of the global population, 33% of the world’s GDP, and posts incredibly high & consistent rates of economic growth (+6% p.a.).”
The LGR Global platform aims to safely and successfully complete money transfers as quickly as possible. It achieves this by removing the middlemen and transferring the money directly from sender to receiver. The Silk Road Coin fits into the LGR ecosystem as the exclusive mechanism for fee payments incurred by traders and producers who use the LGR platform to conduct large and complex cross-border money movement transactions and trade finance operations.
When asked what 2021 will look like for LGR Global and the Silk Road Coin, Amirliravi stated, “we are incredibly optimistic for the new year; industry and investor feedback for the SRC and digital trade finance platform has been overwhelmingly positive. We know we can make a big difference in the commodity trading industry by digitizing and optimizing processes, and we are excited to showcase successful pilot projects beginning in Q1 & Q2 of 2021.”
Industry-specific tokens and blockchain platforms have garnered significant interest from institutional investors – it’s clear there is an appetite for forward-thinking solutions that solve concrete issues.
McGuinness presents strategy to deal with Non-Performing Loans
The European Commission has today (16 December) presented a strategy to prevent a future build-up of nonperforming loans (NPLs) across the European Union, as a result of the coronavirus crisis. The strategy aims to ensure that EU households and businesses continue to have access to the funding they need throughout the crisis. Banks have a crucial role to play in mitigating the effects of the coronavirus crisis, by maintaining the financing of the economy. This is key in order to support the EU's economic recovery. Given the impact coronavirus has had on the EU's economy, the volume of NPLs is expected to rise across the EU, although the timing and magnitude of this increase is still uncertain.
Depending on how quickly the EU's economy recovers from the coronavirus crisis, banks' asset quality – and in turn, their lending capacity – could deteriorate. An Economy that Works for People Executive Vice President Valdis Dombrovskis said: “History shows us that it is best to tackle non-performing loans early and decisively, especially if we want banks to continue supporting businesses and households. We are taking preventive and coordinated action now. Today's strategy will help contribute to Europe's swift and sustainable recovery by helping banks to offload these loans from their balance sheets and keep credit flowing.”
Mairead McGuinness, the commissioner responsible for financial services, financial stability and the Capital Markets Union, said: “Many firms and households have come under significant financial pressure due to the pandemic. Making sure that European citizens and businesses continue to receive support from their banks is a top priority for the Commission. Today we put forward a set of measures that, while ensuring borrower protection, can help prevent a rise in NPLs similar to the one after the last financial crisis.”
In order to give member states and the financial sector the necessary tools to address a rise of NPLs in the EU's banking sector early on, the Commission is proposing a series of actions with four main goals:
1. Further developing secondary markets for distressed assets: This will allow banks to move NPLs off their balance sheets, while ensuring further strengthened protection for debtors. A key step in this process would be the adoption of the Commission's proposal on credit servicers and credit purchasers which is currently being discussed by the European Parliament and the Council. These rules would reinforce debtor protection on secondary markets. The Commission sees merit in the establishment of a central electronic data hub at EU level in order to enhance market transparency. Such a hub would act as a data repository underpinning the NPL market in order to allow a better exchange of information between all actors involved (credit sellers, credit purchasers, credit servicers, asset management companies (AMCs) and private NPL platforms) so that NPLs are dealt with in an effective manner. On the basis of a public consultation, the Commission would explore several alternatives for establishing a data hub at European level and determine the best way forward. One of the options could be to establish the data hub by extending the remit of the existing European DataWarehouse (ED).
2. Reform the EU's corporate insolvency and debt recovery legislation: This will help converge the various insolvency frameworks across the EU, while maintaining high standards of consumer protection. More convergent insolvency procedures would increase legal certainty and speed up the recovery of value for the benefit of both creditor and the debtor. The Commission urges the Parliament and Council to reach an agreement swiftly on the legislative proposal for minimum harmonisation rules on accelerated extrajudicial collateral enforcement, which the Commission proposed in 2018.
3. Support the establishment and cooperation of national asset management companies (AMCs) at EU level: Asset management companies are vehicles that provide relief to banks that are struggling by enabling them to remove NPLs from their balance sheets. This helps banks refocus on lending to viable firms and households instead of managing NPLs. The Commission stands ready to support member states in setting up national AMCs – if they wish to do so – and would explore how co-operation could be fostered by establishing an EU network of national AMCs. While national AMCs are valuable because they benefit from domestic expertise, an EU network of national AMCs could enable national entities to exchange best practices, enforce data and transparency standards and better co-ordinate actions. The network of AMCs could furthermore use the data hub to co-ordinate and co-operate with each other in order to share information on investors, debtors and servicers. Accessing information on NPL markets will require that all relevant data protection rules regarding debtors are respected.
4. Precautionary measures: While the EU's banking sector is overall in a much sounder position than after the financial crisis, member states continue to have varying economic policy responses. Given the special circumstances of the current health crisis, authorities have the possibility to implement precautionary public support measures, where needed, to ensure the continued funding of the real economy under the EU's Bank Recovery and Resolution Directive and State aid frameworks Background The Commission's NPL strategy proposed today builds upon a consistent set of previously implemented measures.
In July 2017, finance ministers in the ECOFIN agreed on a first Action Plan to tackle NPLs. In line with the ECOFIN Action Plan, the Commission announced in its Communication on completing the Banking Union of October 2017 a comprehensive package of measures to reduce the level of NPLs in the EU. In March 2018, the Commission presented its package of measures to tackle high NPL ratios. The proposed measures included the NPL backstop, which required banks to build minimum loss coverage levels for newly originated loans, a proposal for a Directive on credit servicers, credit purchasers and for the recovery of collateral and the blueprint for the set-up of national asset management companies.
To mitigate the impact of the coronavirus crisis, the Commission's Banking Package from April 2020 has implemented targeted “quick fix” amendments to the EU's banking prudential rules. In addition, the Capital Markets Recovery Package, adopted in July 2020, proposed targeted changes to capital market rules to encourage greater investments in the economy, allow for the rapid re-capitalisation of companies and increase banks' capacity to finance the recovery. The Recovery and Resilience Facility (RRF) will also provide substantial support to reforms aimed at improving insolvency, judicial and administrative frameworks and underpinning efficient NPL resolution.
COVID-19 reveals the shortcomings of a paper-based trade system
According to a recent report by the International Chamber of Commerce, as COVID-19 reveals the shortcomings of a paper-based trade system, financial institutions (FIs) are finding ways to keep trade circulating. It states that the problem being faced today is rooted in trade’s single most persistent vulnerability: paper. Paper is the financial sector’s Achilles heel. The disruption was always going to happen, the only question was, when, writes Colin Stevens.
Preliminary ICC data shows that financial institutions already feel they are being impacted. More than 60% of respondents to the recent COVID-19 supplement to the Trade Survey expect their trade flows to decline by at least 20% in 2020.
The pandemic introduces or exacerbates challenges to the trade finance process. To help combat the practicalities of trade finance in a COVID-19 environment, many banks indicated that they were taking their own measures to relax internal rules on original documentation. However, only 29% of respondents report that their local regulators have provided support to help facilitate ongoing trade.
It’s a critical time for infrastructure upgrades and increased transparency, and while the pandemic has caused a lot of negative effects, a potential positive impact is that it has made clear to the industry that changes do need to be made to optimize processes and improve the overall functioning of international trade, trade finance, and money movement.
“I think it comes down to integrating new technologies in smart ways. Take my company for example, LGR Global, when it comes to money movement, we are focused on 3 things: speed, cost & transparency. To address these issues, we are leading with technology and using things like blockchain, digital currencies and general digitization to optimize the existing methodologies.
"It's quite clear the impact that new technologies can have on things like speed and transparency, but when I say it’s important to integrate the technologies in a smart way that’s important because you always have to keep your customer in mind - the last thing we would want to do is introduce a system that actually confuses our users and makes his or her job more complicated. So on one hand, the solution to these problems is found in new technology, but on the other hand, it’s about creating a user experience that is simple to use and interact with and integrates seamlessly into the existing systems. So, it’s a bit of a balancing act between technology and user experience, that’s where the solution is going to be created.
"When it comes to the broader topic of supply chain finance, what we see is the need for improved digitalization and automation of the processes and mechanisms that exist throughout the product lifecycle. In the multi-commodity trading industry, there are so many different stakeholders, middlemen, banks, etc. and each of them have their own way of doing this - there is an overall lack of standardization, particularly in the Silk Road Area. The lack of standardization leads to confusion in compliance requirements, trade documents, letters of credit, etc., and this means delays and increased costs for all parties. Furthermore, we have the huge issue of fraud, which you have to expect when you are dealing with such disparity in the quality of processes and reporting. The solution here is again to use technology and digitalize and automate as many of these processes as possible - it should be the goal to take human error out of the equation.
"And here is the really exciting thing about bringing digitalization and standardization to supply chain finance: not only is this going to make doing business much more straightforward for the companies themselves, this increased transparency and optimization will also make the companies much more attractive to outside investors. It’s a win-win for everyone involved here.”
How does Amirliravi believe these new systems can be integrated into existing infrastructure?
“This is really a key question, and it's something that we spent a lot of time working on at LGR Global. We realized you can have a great technological solution, but if it creates complexity or confusion for your customers, then you’ll end up causing more problems than you solve.
In the trade finance and money movement industry, that means that new solutions have to be able to plug in directly into existing customer systems --using APIs this is all possible. It’s about bridging the gap between traditional finance and fintech and making sure that the benefits of digitalization are delivered with a seamless user experience.
The trade finance ecosystem has a number of different stakeholders, each with their own systems in place. What we really see a need for is an end-to-end solution that brings transparency and speed to these processes but can still interact with the legacy and banking systems that the industry relies on. That’s when you’ll start to see real changes being made.”
Where are the global hotspots for change and opportunities? Ali Amirliravi says that his company, LGR Global, is focusing on the Silk Road Area - between Europe, Central Asia and China - for a few main reasons:
“First, It’s an area of incredible growth. If we look at China for example, they have maintained GDP growth of over 6% for the last years, and central Asian economies are posting similar numbers, if not higher. This kind of growth means increased trade, increased foreign ownership and subsidiary development. It’s an area where you can really see the opportunity to bring a lot of automation and standardization to the processes within the supply chains. There is a lot of money being moved around and new trading partnerships being made all the time, but there are also a lot of pain points in the industry.
The second reason has to do with the reality of currency fluctuation in the area. When we say Silk Road Area countries, we are talking about 68 countries, each with their own currencies and the individualized value fluctuations that come as a by-product of that. Cross-border trade in this area means that the companies and stakeholders that participate in the finance side have to deal with all kinds of problems when it comes to currency exchange.
And here is where the banking delays that happen in the traditional system really have a negative impact on doing business in the area: because some of these currencies are very volatile, it can be the case that by the time a transaction is finally cleared, the actual value that is being transferred ends up being significantly different than what might have been agreed to initially. This causes all kinds of headaches when it comes to accounting for all sides, and it’s a problem that I dealt with directly during my time in the industry.”
Amirliravi believes that what we are seeing right now is an industry that is ready for change. Even with the pandemic, companies and economies are growing, and there is now more of a push toward digital, automated solutions than ever before. The volume of cross border transactions has been growing steadily at 6% for years now, and just the international payments industry alone is worth 200 Billion Dollars.
Numbers like that show the impact potential that optimization in this space could have.
Topics like cost, transparency, speed, flexibility and digitization are trending in the industry right now, and as deals and supply chains continue to become more and more valuable and complex, demands on infrastructure will similarly increase. It’s really not a question of “if”, it’s a question of “when” - the industry is at a crossroads right now: it’s clear that new technologies will streamline and optimize processes, but parties are waiting for a solution which is secure and reliable enough to handle frequent, high volume transactions, and flexible enough to adapt to the complex deal structures that exist within trade finance. “
Amirliravi and his colleagues at LGR Global see an exciting future for the b2b money movement and trade finance industry.
“I think something that we are going to continue to see is the impact of emerging technologies on the industry “he said. “Things like blockchain infrastructure and digital currencies will be used to bring added transparency and speed to transactions. Government-issued central bank digital currencies are also being created, and this is also going to have an interesting impact on cross-border money movement.
"We’re looking at how digital smart contracts can be used in trade finance to create new automated letters-of-credit, and this gets really interesting once you incorporate IoT technology. Our system is able to trigger transactions and payments automatically based on incoming data streams. This means, for example, that we could create a smart contract for a letter of credit which automatically releases payment once a shipping container or a shipping vessel reaches a certain location. Or, a simpler example, payments could be triggered once a set of compliance documents is verified and uploaded to the system. Automation is such a huge trend - we’re going to see more and more traditional processes being disrupted.
"Data is going to continue to play a huge role in shaping the future of supply chain finance. In the current system, a lot of data is siloed, and the lack of standardization really interferes with overall data collection opportunities. However, once this problem is solved, an end-to-end digital trade finance platform would be able to generate big data sets that could be used to create all kinds of theoretical models and industry insights. Of course, the quality and sensitivity of this data means that data management and security will be incredibly important for the industry of tomorrow.
"For me, the future for the money movement and trade finance industry is bright. We’re entering the new digital era, and this is going to mean all kinds of new business opportunities, particularly for the companies that embrace next generation technologies.”
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