A Remarkable Cross-border Settlement of Iron Ore: Blockchain, Commodities, And RMB Internationalization
On May 2020, a cross-border settlement of iron ore trade attracted attention from both inside and outside the industry: China Baowu Iron and Steel Group announced that it is subsidiary listed company Baosteel and Australian Rio Tinto completed a
cross-border settlement of RMB with a total value of more than 100 million yuan through blockchain technology. Baowu Group is the largest enterprise in China’s steel industry and the leading central enterprise in the overall strength of the Chinese steel industry. This settlement uses the blockchain technology-based on “asymmetric encryption technology”, which can improve efficiency significantly.
It took at least 5–10 days for the bank letter of credit documents and offline banking processes that are very important in international trade. Now, the entire process is online and can be completed within 24 hours.
Yu Jianing, deputy director of the Blockchain Special Committee of the China Communications Industry Association, believes that because of the technical characteristics of the blockchain and the requirements for cross-border payment clearing, it will be used in a large-scale cross-border settlement in the future. However, since this is a relatively low-level technological change, there will be a transformation cycle that will gradually replace the old system. From a global perspective, the current scale of using the blockchain system for international trade cross-border settlement is still relatively small, has not yet been applied on a large scale, and is still in the exploratory stage of development, but it is attracting more and more attention from financial institutions and trading companies. There is a trend of the outbreak. This transaction based on blockchain technology is the first full-process paperless transaction settled in RMB in the international trade of iron ore. It is an important offshore RMB cross-border electronic settlement attempt. It is likely that there will be more industries in international trade to implement cross-border trade based on the technology system.
