Best known as the platform for cryptocurrencies like Bitcoin, blockchain technology allows transactions to be validated without the use of a centralized database. This innovation holds the potential to transform trade finance, argues SkuChain Vice President Rebecca Liao for Foreign Affairs.
She observesthat “because blockchain provides a distributed digital record that does not require trust or coordination between firms, it allows for secure, standardized transactions to occur almost instantaneously, even across borders” and finds that “the widespread adoption of blockchain . . . would especially benefit importers and exporters, granting them access to the financial backing that many now lack.”
The author outlines how blockchain can “reduce friction in international commerce, broaden the distribution of the gains from trade, and encourage higher economic growth.”
Liao concludes, “There is a real chance that blockchain’s potential has been overhyped. In the case of trade finance, however, it might just be a tool that could make global markets more accessible at a moment when they seem to be closing off.”
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