Where does Bangladesh stand on adopting Blockchain technology?

In 2016, North Korean hackers stole $81 million from Bangladesh Financial institution. Often called ‘the Lazarus Heist,’ it’s the largest cyber heist on this planet until date. 

The cash was stolen from Bangladesh Financial institution’s account in New York Federal Reserve Financial institution.  A stunning facet of the historic heist was the hackers managed to entry SWIFT, thought-about probably the most safe technique for transferring massive sums of cash from financial institution to financial institution. 

Regardless that most high-value monetary transactions on this planet are carried out by means of SWIFT, it has come below criticism once in a while for ‘inefficiency’. In 2018, for instance, the Monetary Occasions famous that transfers are “time-consuming, expensive and missing transparency.”

As US Congresswoman Carolyn Maloney, a member of the congressional committee on monetary providers informed BBC “with SWIFT underpinning so many billions of {dollars} of worldwide commerce, a hack like this [Lazarus Heist] may fatally undermine confidence within the system.”

Istiaque Ahmed agrees with this view. He’s a blockchain developer and analysis scientist on the Blockchain Economic system Analysis Heart at Gwangju Institute of Science and Know-how (GIST), South Korea. In response to him, if blockchain know-how is used, then these sorts of monetary frauds can probably be prevented.

To this point, a number of monetary establishments in Bangladesh have already began to undertake blockchain know-how, corresponding to Normal Chartered Financial institution, Prime Financial institution, HSBC Financial institution and many others in addition to bKash. Furthermore, a number of agro-tech startups have adopted the know-how as a pilot undertaking, together with Krishi Swapno.

Bkash, for example, launched blockchain in 2020 to facilitate inbound remittance from Malaysia. Bkash partnered with Cell Cash (a Malaysian cellular pockets firm) and Ripple (a blockchain-based international cost answer supplier) to permit wallet-to-wallet funds to create this remittance hall between the 2 nations.

In the meantime, the Bangladesh-based banks executed various letter of credit score (LC) transactions by means of blockchain within the final two years. Krishi Swapno, which calls itself a blockchain-based agricultural know-how platform, reportedly has carried out blockchain on a pilot undertaking in its provide chain. 

How blockchain works

First, let’s perceive the fundamental idea of blockchain know-how. To take action, IBM’s guide “Blockchain for dummies” is useful. IBM describes blockchain, briefly, on this means: Blockchain is a shared, immutable ledger that facilitates the method of recording transactions and monitoring belongings in a enterprise community.

The important thing components of a blockchain are a) distributed ledger know-how; b) immutable data; and c) sensible contracts. And that is how blockchain works: as every transaction happens, it’s recorded as a “block” of knowledge; every block is related to those earlier than and after it; and transactions are blocked collectively in an irreversible chain: a blockchain.

A legitimate transaction should have an entry in any system’s database. In earlier instances, for instance, banks had entries within the ledger (a guide wherein the financial transactions are recorded). Blockchain is such a ledger the place there are lots of blocks aspect by aspect, thus creating a sequence. Every block accommodates all the information of all of the transactions that passed off throughout a time period.

This knowledge is open however encrypted i.e. everybody can see this knowledge however to learn it, one wants a ‘non-public key’. Which means, solely when you’ve got undertaken a transaction are you able to learn all of your transaction info from right here utilizing its non-public key; nobody else can. However what individuals will see is the transaction quantity.

Blockchain in Bangladesh

Only some examples of the usage of blockchain have been recorded in Bangladesh within the final couple of years. Most are on a pilot foundation or single-case use. Whereas a number of monetary establishments have additionally launched this know-how, widespread utility will not be seen within the nation. 

Since 2020, bKash has been utilizing state-of-the-art blockchain know-how to facilitate safer, quicker and dependable inbound remittance. In a response to our e-mail, bkash’s communications group replied:

“In a nutshell, the usage of blockchain has simplified bKash’s remittance service and ensured these: Decentralised construction; Improved safety and privateness; Tokenization (Safety Characteristic); Velocity (Actual-time replace); and Visibility and traceability.”

They added, “Notable that Malaysia is likely one of the high 10 sources of remittances for Bangladesh. This partnership has created the power to higher serve the remitters with a cheaper, quick, clear and dependable remittance-sending expertise to thousands and thousands of non-resident Bangladeshis all around the world. The intention of this partnership is to carry nice comfort to each recipients, and senders and contribute additional to Bangladesh’s nationwide financial system by encouraging inward overseas remittance movement by means of authorized channels.”

Prime Financial institution claimed to be the primary Bangladeshi financial institution to execute an interbank blockchain LC transaction in December 2020 with HSBC financial institution. The pilot transaction was accomplished by means of Contour – a world blockchain community – whereby an inland LC was opened by Prime Financial institution on behalf of Ananta Group. This transaction was performed for the import of uncooked supplies from Tamishna Group, a buyer of HSBC Bangladesh.

They stated: “The top-to-end strategy of pre-negotiation and drafting of LCs by importer and beneficiary, approval, issuance of LCs and presentation of paperwork have been all concluded digitally by means of Contour’s community. The transaction required no paperwork or have to bodily go to banks. As an alternative, all events concerned within the course of – consumers, banks and beneficiaries – logged into Contour’s community to hold out any exercise.”

In August 2020, Normal Chartered Financial institution executed a blockchain transaction by issuing an LC for Viyellatex Ltd, an RMG firm in Bangladesh, performing because the issuing financial institution for the applicant. This transaction was additionally performed by means of Contour.

The identical yr, HSBC grew to become the primary Bangladeshi financial institution to carry out a cross-border blockchain transaction. The financial institution opened a cross-border mortgage for the import of 20,000 tonnes of gas from Singapore in favour of United Mymensingh Energy Restricted by means of blockchain know-how. After opening the LC, United Mymensingh Energy Restricted informed the media that whereas it took 5 to 10 days to open an LC earlier, with the brand new know-how it took lower than 24 hours.

Krishi Shwanpo, an agro-tech startup, has initiated the usage of blockchain in its provide chain administration. In response to Zubaer Hassan, CEO of Krishi Shwapno, the said goal of the undertaking was to create a traceable setting by gathering knowledge from all provide chain stakeholders – from farmers to companies to prospects. He hopes that blockchain know-how will acquire shoppers’ belief within the worth chain. Blockchain’s traceability will enable prospects to seek out details about merchandise simply, for example, the origin and commonplace of meals.

Advantages of blockchain

Md Al Amin, Founder and CEO of Deepchain Labs, can also be a lecturer of CS at AIUB. Deepchain Labs is a blockchain ecosystem firm primarily based in Bangladesh that gives providers to overseas clientele.

“Blockchain know-how is a novel innovation of latest instances. It’s the most safe and open technique of knowledge storage ever invented. This know-how is revolutionising the pace and effectivity of transactions,” he stated. 

To this point the applying of this know-how remains to be in its infancy. However technologists largely agree that it could possibly play a constructive position in numerous industries and sectors, together with banking, commerce, provide chain, asset administration, digital identification and licensing, regulatory compliance, buying and selling processing, insurance coverage, anti-counterfeiting and many others. 

“Meaning any business that requires the trade of data,” defined Md Al Amin.

In truth, companies and monetary establishments all around the world are more and more adopting blockchain know-how. Although blockchain is often related to crypto, it isn’t at all times the case. Furthermore, blockchain will not be at all times about monetary dealings. It may be used for issues corresponding to licensing, digitalisation of paperwork, certification verification and many others. 

Many central banks are already exploring CBDC (central financial institution digital foreign money), which is predicated on blockchain. As of 2022, 9 nations together with Nigeria, The Bahamas and Grenada, have rolled out their very own CBDCs. 

In March final yr, US president Biden directed the nation’s businesses to discover a government-controlled digital foreign money. Our neighbouring nation India’s central financial institution, the Reserve Financial institution of India (RBI), has stated final yr that it’s exploring ‘a digital rupee’ which might probably be launched within the coming yr. And based on Atlantis Council’s CBDC tracker, some 80 nations have some type of CBDC undertaking.

“Blockchain permits firms to have near-instant entry to their funds from anyplace on this planet at any time. Money transactions can run at a continuing tempo to satisfy the corporate’s working capital and international money wants. And on this case, the safety danger is lower than any know-how invented so far. That’s, the safety system is the strongest in blockchain know-how,” stated Al Amin.

He expounded on one business and the way it may very well be benefited from utilizing blockchain: “The RMG business is the principle export sector of Bangladesh. Most uncooked supplies on this business are sourced domestically, by means of inland letters of credit score. These inland LCs contain a number of tedious paperwork. If these transactions may be moved right into a paperless blockchain, main efficiencies may be achieved in native commerce throughout this business. There’s a enormous scope to scale up transactions over blockchain if all events of the RMG provide chain may be added to this community,” stated Al Amin

Al Amin nonetheless identified that even on a world scale, the applying of the know-how remains to be in its infancy. All of the fanfare and optimism apart, the world’s largest banks and nations are cautiously watching the event of the know-how. In most developed nations, central banks and different monetary establishments are both experimenting with it or have launched it on a pilot foundation. 

Basically, it isn’t all roses. Among the regarding points are financial coverage affect and cybersecurity. And most significantly, why banks and governments usually are not dashing in is that this tech requires a rupture from the normal monetary construction, which could show dangerous to hurry.