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providers will have to work with the authorities to find out what can and cannot be achieved. 3. The lack of global standards for this sort of scheme makes like for like comparison between solution providers difficult – this has in turn created the appearance of a solution overload with a sometimes baffling choice to market participants. Technology providers naturally want to protect their share of the blockchain cake when it takes hold. However, first the market has to get to like the taste of cake. 4. There are some tricky legal questions inherent in blockchain and other automation solutions – ensuring that the potential risk of systems failure is covered clearly and that there is an express seat of jurisdiction so that remedies can be pursued against someone if it all goes horribly wrong. As firms across Britain face up to the introduction of GDPR, the issue of data (and financial) security within blockchain systems and the question of who owns the resultant IP and data on any system will be scrutinized. However, the potential savings are great and banks, traders and other participants are rushing to buy a part of their local offering. The opportunity to use blockchain to de-risk certain aspects of trade execution is very attractive. “The lack of global standards for this sort of scheme makes like for like comparison between solution providers difficult – this has in turn created the appearance of a solution overload with a sometimes baffling choice to market participants.” There is more work to be done. Care has to be taken in ensuring that all parties are able to digitally contract (there should not be a digital gap between rich and poor countries if a real breakthrough in global trade is to be made). There may also be local jurisdictional rules in play. Slicing and dicing the areas suitable for blockchain/smart contract delivery will also require some legal analysis to avoid gap risk. One benefit may be the standardisation of some trade rules to avoid unnecessary cost and breaches. Commentators estimate that the first arms’ length “on risk” (rather than proof of concept) commercial LC transaction fulfilled through blockchain (and without any paper) may take place within 18 months.
Electronic settlement of payments and standardising of contracts is of course the low-hanging fruit in terms of efficiencies to be made. The oil trade, with its high value cargos and increasingly standardised contact terms and vessel charters, is another target under consideration. Traders may have to concede some loss of control to the “system” and flexibility to achieve real savings, but that is still achievable without changing the general role of the trader. Dematerialized transport documents or at least alternative ways of fulfilling/evidencing the shipment obligation will still require some careful global due diligence – but that project is already underway with the ICC Banking Commission, so real breakthrough may not be far off.
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