The importance of blockchain document transfer in the new business reality
Chief Business Development Officer
The business world is changing rapidly, and it is quite clear that the world after COVID-19 will operate very differently from anything we have ever been used to until now.
Digitalization efforts in logistics and some other businesses have rapidly accelerated, as companies strive to solve the current challenges. These challenges were not created overnight, as they have been building for quite some time - yet at a slow pace. But recent circumstances have acted as a catalyst and have made for fresh, new urgency, and a real eye-opener for industries across the board - from logistics to finance, and from manufacturing to services.
Major efforts have been underway to awaken even the most conservative industries and to start digitizing their processes - and right now many of them are getting up to digital speed. These efforts are articulated, curated, and guided by numerous global organizations, overseeing forums of companies and other business personalities. The outputs are then compared against legal frameworks and turned into targeted efforts in specific countries or groups of countries - at the level of the United Nations, European Union, and other global economic blocks.
World Economic Forum
The World Economic Forum (WEF), for example, is building a comprehensive platform to shape the future of technology governance, putting among other things great emphasis on blockchain and distributed ledger technologies. They collaborate with partners and members to advance a systemic and inclusive approach to governing DLT, with the aim of empowering beneficial implementations of these technological approaches and applying them toward solving everyday business challenges. There are guidelines, analyses, opinions, and frameworks described, often summarizing and overviewing what is already being developed, tested, and implemented in the real-life operations of the most advanced companies in the world.
Alongside banks, logistics giants, and supply chain operators, insurance companies have also traditionally been wary about rushing ahead with innovations, and they have protected their procedures so global businesses can interact globally with a common set of standards. They, too, have started to accept digitalization not just as an option, but as a necessary evolution for global business to succeed in overcoming the new hurdles that were finally set in place in 2020, but were being built for a long time before that.
International Group of Protection and Indemnity Clubs
The International Group of Protection & Indemnity Clubs, consisting of 13 clubs and 22 of the world’s top 25 insurers who for over 120 years have been insuring 90% of the world’s ocean-going tonnage, has been a pillar of paper & ink business for ages. This is as old as modern shipping itself. Yet, in 2010 they started modernizing their approach to what is agreeable as a means of operating document flows, and even allowed the first digital channels to start transmitting documents of title (Bills of Lading, and other original documents). This was not a jump into the world of digital, cybernetic, binary reality - but a steady, slow-paced, and well-controlled exploration of technical possibilities. They concluded that the chances of digital document platforms being abused are extremely minimal, certainly no higher than the chances of the paper-delivery channels being compromised. It all culminated in 2019 and 2020, when they accepted blockchain document transfer technology, such as provided by CargoX, as a valid and viable channel for document transfer and document ownership transactions.
In regards to fears that digital B/Ls could in some unexpected scenario fail to fully replicate the functions of a paper B/L, the UK P&I Club actually quotes in their article explaining electronic bills of lading (part I and part II) that, since the IGP&I’s approval of the first electronic B/L solutions 10 years ago, after “many thousands of eBLs issued, the Club has not been made aware of a single case in any jurisdiction where the eBL’s ability to fully replicate the functions of a paper BL, or the validity of the eBL, has been challenged.”
International Chamber of Commerce
No survey of the status in digitalization of trade business is complete without a look at the International Chamber of Commerce and their activities in this regard. Recently, they issued a memo to governments and central banks about essential steps taken to safeguard trade finance operations. They call on governments to enable an immediate transition to paperless trading to mitigate the potential effects of restrictions related to COVID-19 on the financing of trade. Many operations in banks and financial institutions still require in-person staffing to review hard-copy paper documentation, since this is required as a matter of national law. The ICC calls on all governments to take emergency measures to immediately void all existing legal prohibitions on the use of electronic trade documentation. The complete memo is available here.
United Nations Commission on International Trade Law
At the same time, the United Nations Commission on International Trade Law (UNCITRAL) has long been striving toward an improved legal framework for the facilitation of international trade and investment. Its UNCITRAL Model Law on Electronic Transferrable Records is actually the legal framework in which CargoX relies upon for our blockchain document transfer! Established in 1966, UNCITRAL plays a crucial role in furthering the progressive harmonization and modernization of laws on international trade by drafting and promoting the use and adoption of legislative and non-legislative instruments in a number of key areas of commercial law.
The new reality is digital
All this means that even the most monolithic industries have opened up and started to embrace the new reality, and that global policy and economic forums have long been grinding while to get the right angle at digitizing commercial trade frameworks and document flows. The goal is a system where digital data flows and trading in a trustworthy environment are used for the timely and secure execution of trade and business deals, where signatures are no longer just wet ink and indigo stamps, and where documents of the highest importance are no longer delivered hand-to-hand through a line of ground, sea, air, or horse carriage - if a bit of humor is allowed in these times.
Both globally and locally, commercial and governmental organizations are thus entering a world of platforms where trust is the most valued asset but also the most fundamental component, and where that trust is delivered by default - if the technology is built and used correctly. The new cloud of trust is forged from public, neutral channels, where no single vendor has control of the cryptographically secured information - so very needed in these times of trustless networks and encapsulated data silos with proprietary protocols and locked-in data, held in the steel embrace of a single vendor.
Being able to trade these documents with supreme trust in unequivocal transactions and event auditability, but at the same time with dependable confidence and business privacy, is something many companies have desired for decades.
In such an environment, global trade can be elevated to a level where instant communication and original document flows, workflows and real-time processing, fast-tracking, and data immutability lay out a new foundation for the new economic world.
Especially with the implementation of solutions based on neutral, public blockchain infrastructure (such is the Ethereum-based CargoX Platform), the shocks caused by trade wars, political power plays, and even one-in-a-million black swan events such as this COVID-19 pandemic crisis can be minimized or even avoided entirely. At least in the part where the business relies on constant, undisturbed, reliable, and safe original document delivery.
Documents are a key part of business, but they should not be a main worry or potentially a cause of failure if they are not delivered on time in the event of damage or loss.
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