According to Martha Reyes, Bequant’s head of research, tokenizing trade finance assets can help SMEs gain access to credit.
Because of established infrastructures, global trade and financing are inefficient. However, crypto, according to Martha Reyes, Bequant’s head of research, can solve this problem.
Reyes discussed the current status of global trade and funding, as well as how crypto can help. Despite the rise and volume of global trade, remittance payments, according to Reyes, are still hampered by the number of intermediaries that transactions must pass through. As a result, transaction times are prolonged. Global trade is a “ideal candidate” for blockchain adoption, according to Reyes, because of legacy mechanisms for cross-border payments.
“Digital ledger technology has the potential to improve the efficiency and security of complicated commerce operations.” Smart contracts enable parties to set contract conditions and ensure that they are immutable and transparent.”
The traceability of ownership for documents and agreements kept within smart contracts, according to Reyes, tightens security. Aside from that, the researcher points out that blockchain transactions settle much faster and with less friction.
Apart from global trade, Reyes believes that tokenization can also help with funding. Small and medium-sized businesses (SMEs) may have access to funding as a result of this.
“Tokenizing trade financing assets can make cash more accessible to SMEs wishing to trade as well as investors looking for a yield, better aligning supply and demand.”
XDC Network was also mentioned by Reyes as an example. “The smart contract transactions use a digital token called XDC, which symbolises the value of off-chain, bank-issued assets with yield-generating potential,” Reyes explains.
This, according to the study director, is a method to “break through obstacles” and provide SMEs access to finance that isn’t part of the regular financial system. “This can also promote competition among lenders,” says Reyes.
In addition, the Bequant head of research talked about the rise of hybrid procedures and what makes them unique.
“As more institutions become interested in DLT, and they are frequently compelled to keep the information in their transactions secret, adopting a public blockchain can offer a problem.” Some organisations are even developing their own centralised private blockchains. Here’s when a hybrid model comes in handy.”
Reyes points out that in hybrid networks, transaction details can be kept private while data sent to the public network for transaction confirmation is limited. “The system blends the speed of private blockchains with the security of public blockchains, leveraging both strengths while limiting any shortcomings,” says Reyes.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.