Blockchain to add $1 tn to world trade by 2028: WEF and Bain & Co report
Distributed ledger technology (DLT) like blockchain has the potential to generate $1 trillion in new trade over the next ten years, said a joint report from the World Economic Forum and Bain & Company.
The report, titled ‘Trade Tech – A New Age for Trade and Supply Chain Finance’, highlighted the economic benefits of integrating DLTs into existing supply chains.
According to the report, an additional $1 trillion in financing will be added to global supply chains by 2028 as a direct result of increased DLT integration.
“Distributed ledger and other technological innovations promise groundbreaking advances in trade and supply chain finance by reducing costs and ease of use,” the report stated.
DLT will facilitate new trade, which will close the current trade finance gap of $1.5 trillion. This figure is expected to reach $2.4 trillion by 2025, according to estimates by the Asian Development Bank. This number can fall to $1 trillion if DLT is used in areas like smart contracts and single digital records for customs clearance.
The researchers are of the opinion that around 30%, or $1.1 trillion in new trade volume, will come from DLTs removing existing market barriers. Roughly 40%, or $0.9 trillion of traditional trade, will move to the blockchain for better services and reduced fees, the report said.
The largest beneficiaries of blockchain technology would be small and medium enterprises and emerging markets, particularly in Asia, including ASEAN, China and Hong Kong SAR, India and Korea. These countries account for almost 7% (or $105 billion) of the trade finance gap, the report stated.
“The benefits of adopting DLT in trade will affect everyone from banks to companies to governments to consumers,” said Gerry Mattios, vice president at Bain & Company, and a key contributor to the study. “But action has to be taken in a collaborative way and with an ecosystem approach in mind. Individual actions won’t bring the expected results,” he added.
The report shows that governments have marked out DLTs as a major value driver for the future.
The report concludes that governments should include DLT as part of any relevant, forward-looking regulatory considerations, such as cross-border food imports.
“With some governments already starting to make these moves, the laggards will become increasingly disadvantaged,” the report added.