The Baltic Exchange and fintech-enabled fund manager TradeFlow Capital Management have completed a pilot escrow transaction as part of a commodity trade from India to China.
The transaction, which involved a shipment of agri-commodities, is said to herald a new age in the fast and secure digital exchange of ownership of physical commodities and payment. The service will initially focus on small and medium-sized enterprises (SMEs) operating in the bulk commodity markets.
“This successful test case paves the way for greater adoption of technologies and escrow processes which will reduce paperwork, minimise transaction time, and improve the overall efficiency of commodity trades, increasing the turnover velocity of capital in the commodity trade ecosystem without compromising security,” the Baltic Exchange said.
The Baltic Exchange, which runs an independent escrow service that holds funds on behalf of clients in dedicated escrow bank accounts, added that with a growing SME trade finance gap estimated by the Asian Development Bank (ADB) to be in excess of $1.7trn, this use of escrow within a commodity trade holds the promise of unlocking and enabling additional SME commodity trades worth billions of dollars each year.