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DEAL: first agricultural commodity blockchain transaction

Lai, Karry. 
International Financial Law Review; London (Jan 30, 2018).

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Distributed ledger technology helps cut costs, time and human error

The blockchain platform has hosted the world’s first agriculture commodity trade transaction.

Dutch food processing firm Louis Dreyfus Company sold a cargo of US soybeans to China’s Shangdong Bohi Industry via a sales contract hosted on the Easy Trading Connect platform, which included all aspects of the deal from financing to documentation management.

Step-by-step

The transaction started with the signing of the sales contract by both the seller and buyer. The buyer then requested a so-called smart letter of credit which was reviewed by the banks. This digital letter enables participants to a trade to share information using private distributed ledger technology. Once this is agreed, the transaction be executed automatically through digital smart contracts.

Russell Marine Group and Blue Water Shipping issued the required certificates, including the bill of lading and certificates of quality and quantity. The US Department of Agriculture advised on how to include phyto-sanitary certificates in the end-to-end encryption process. These documents were then presented by the seller to the banks, which signed them off. The assets were automatically transferred and the payment was made to the seller simultaneously.
Work cut out
Participants to the transaction said there is still some work that still needs to be done to overcome regulatory barriers and the lack of standardisation. A spokesperson for ABN AMRO, which participated in the deal, said there were regulatory barriers related to the asset transfer such as using a digital bill of lading instead of a paper version and also the smart contract. In using the blockchain platform, the challenging aspect was aligning how different parties work: this stems from the fact that, all parties have a different way of agreeing on standardisation, digitisation and data transparency.

Robert Serpollet, global head of trade operations at...