Blockchain-based trade finance platform we.trade is reportedly shutting down and is ready to call in the liquidators. The platform was backed by IBM and 12 of the biggest names in finance, but has failed to secure necessary funds to continue trading.
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Dublin-based we.trade will hold a creditors’ meeting this week, where it is expected to appoint PwC as liquidator, according to a report in the Irish Times. At the time of writing the company had not responded to a request for comment from Tech Monitor, but an internal memo seen by Global Trade Review suggests the company has not been able to secure the funds required to continue trading.
Trade finance has been touted by many financial institutions as an area where blockchain could prove transformative, but we.trade’s apparent failure may suggest the market is not yet ready to embrace the technology.
How can blockchain help trade finance?
Trade finance is often required when importing and exporting goods between countries, and requires the importer to pre-pay for goods to cover the costs associated with shipping and taxes. The process involves banks providing credit based on documents proving funds are available and that the goods have arrived at their destination. However, banks after often reluctant to provide this service to small businesses. A World Trade Organisation report says up to 60% of trade finance requests from SMEs are rejected by banks.
Proponents say blockchain’s distributed nature could make it easier to perform checks which would enable more trade finance requests to be granted, speeding up transactions and opening new markets for businesses. Barclays claims to have carried out the first such transaction using a blockchain system in 2016, working with tech start-up Wave.
What is we.trade?
Founded by 12 major European banks including Deutsche Bank, HSBC and Santander, we.trade was set up as a platform to facilitate such deals and started operation in 2019. Built by IBM on the Hyperledger Fabric blockchain, it is licensed by 16 banks across 15 countries, but has been battling financial difficulties since 2020, when it laid off half its workforce. A funding round of €5m from backers including IBM, which took a 7% stake in the business, was secured later that year, but it appears the cash has now run out.
Digitising trade finance is a priority for banks, with 54% of those surveyed by the International Chamber of Commerce’s International Trade Finance survey saying they see digital platforms as a priority area for growth.
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But despite this, uptake among banks has been slow, with only two of the we.trade founders – Spain’s CaixaBank and Finland’s Nordea – fully deploying the system, alongside several other smaller banks. The failure of we.trade could also be a blow to IBM’s financial blockchain ambitions. The company provides a range of distributed ledger consulting and technology services, including products directly designed for trade finance.
Other trade finance blockchain platforms, such as the Marco Polo Network, continue to provide similar services for businesses.
