QME And Ant Financial Launches Blockchain Warehouse Receipt Alliance
The Qianhai Mercantile Exchange and Ant Financial launched a blockchain warehouse receipt partnership.QME is a commodity trading platform and a subsidiary of the Hong Kong stock exchange (HKEX), which also owns the London Metal Exchange.
Through an alliance with Ant Financial, the trading system can combine warehousing and logistics utilizing blockchain to give transparency for the complete lifecycle of a commodity.
Warehouse receipts contending for the underlying commodity’s existence are essential documents for commodities markets to trace the physical inventory. Companies carrying a warehouse receipt can use it as security for finance, utilizing a digital receipt into a digital asset.
Blockchain can significantly improve the authenticity of warehouse receipts, which have been the topic of significant fraud in recent years.
Two years ago, some global banks briefly suspended credit lines for Singapore metal traders after a part of commodities giant Glencore revealed fake warehousing receipts, a Reuters report stated. With blockchain, a warehouse certificate can be tracked to limit double financing.
One of the biggest scams was uncovered in 2014 at China’s Qingdao metal warehouse, where it is expected that double financing cost Western and Asian banks as much as $3 billion.
QME will leverage Ant Financial’s blockchain to operate with all parties in the commodity’s life cycle. That involves production, processing, trade, and end-consumer enterprises, but also warehouses, logistics companies, insurance companies, and financial institutions. A jointly built blockchain consortium aims to create a trusted asset system based on blockchain.
By utilizing blockchain technology, warehouse receipts can become standardized assets, enhancing their risk profile for financial institutions. In turn, it will improve liquidity for small and medium businesses based on their credit rating and performance of the commodity market.
“The exchange is a natural provider of market infrastructure. Relying on blockchain technology, it can promote the transformation and upgrading of traditional centralized enterprise-level warehouse receipt systems based on the main credit of warehouses to industrial chain enterprises,” stated Dong Feng, general manager of Qianhai Mercantile Exchange.
The warehouse blockchain project will work in tandem with the current Internet of Things (IoT) projects and warehouse receipt insurance projects. By joining blockchain and IoT, it will become simpler for borrowers to demonstrate that physical assets exist in a warehouse.
Also, on the subject of commodity warehouse receipts, lately, Rabobank, commodities trader Concord Resources, and warehousing firm PGS performed a metals repo trade using blockchain.
The commodities industry is ready for innovation and significant commodities trading firm Mercuria, in association with other sector players, intends to invest as much as $100 million in blockchain, AI, and other technologies.