Martha Reyes, head of research for Bequant, says that tokenizing trade finance assets can facilitate access to capital for SMEs.
Global trade and financing suffer from inefficiencies because of traditional infrastructures. However, according to Martha Reyes, the head of research at Bequant, crypto can fix this issue.
In an interview with Cointelegraph, Reyes shared her thoughts on the state of global trade and financing and how crypto makes this more efficient. According to Reyes, despite the growth and magnitude of global trade, areas like remittance payments still suffer from the number of intermediaries that transactions have to go through. This leads to lengthy transaction times. Reyes notes that legacy systems for cross-border payments make global trade a “prime candidate” for blockchain technology adoption.
“Digital ledger technology can make complex trade transactions more efficient and secure. Smart contracts allow parties to specify the terms of an agreement and ensure that those are immutable and transparent.”
Reyes adds that the traceability of ownership for documents and agreements stored within smart contracts makes security tighter. Apart from this, the researcher notes that transaction settlement within blockchains is a lot faster and reduces friction.
Apart from global trade, Reyes thinks that tokenization helps in the aspect of financing as well. This may add benefits for small and medium enterprises (SMEs) in the form of access to capital.
“Tokenizing trade finance assets can facilitate access to capital for SMEs looking to trade as well as investors searching for yield, matching supply and demand more efficiently.”
Reyes also cited XDC Network as an example. “The smart contract transactions feature a digital coin, XDC, which represents the value of off-chain, bank originated assets that have yield generating capabilities,” says Reyes.
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The research head believes that this is a way to “break through barriers” and give SMEs access to financing that’s outside of the sphere of the traditional financing system. Reyes notes that this “can also increase competition among lenders.”
Adding to the topic, the Bequant head of research also discussed the rise of hybrid protocols and what sets them apart.
“As more institutions take an interest in DLT, and they are often required to keep the information in their transactions private, this can present a dilemma in using a public blockchain. Some institutions are even creating their own private centralized blockchains. This is where a hybrid model becomes useful.”
Reyes notes that within hybrid networks, transaction details can be private while limiting data that’s given to the public network for the confirmation of the transaction. According to Reyes, “The technology combines the speed of private blockchains with the security of public ones, drawing on the strengths of both while minimizing any disadvantages.”