Blockchain can transform commodity trading

Conservatives fear the tech of being able to disrupt the status quo

London, May 22: Alistair Cross was flying high after showing in a pilot project how blockchain - the technology first developed for the crypto-currency bitcoin - could transform the old-fashioned and secretive world of commodity trading.

But since the pilot ran early this year, Cross and his rivals have hit some hard realities as they try to propel their industry into the digital age at last.

Word spread fast through the business when Mercuria, the Swiss-based commodities house where Cross is head of operations, successfully tested an oil trade. "The number of phone calls I've had from people in the last month once they heard we had done this has been incredible," he told Reuters.

Cross and many others in the sector are excited about the possibility of saving billions of dollars a year in commodities trading by scrapping millions of paper documents and moving to a digital equivalent with blockchain.

But adopting some form of blockchain, which in the case of bitcoin allows for transactions through a peer-to-peer computer network, with no need for middlemen, wouldn't be universally welcomed.

Many in the conservative commodity business shrink from the thought of losing discretion in their dealings, as well as jobs and perhaps even their business if the technology succeeds disrupting the status quo.

After a series of upbeat announcements from Mercuria and others about successful pilots and "proofs of concept", Cross and rivals have found that translating enthusiasm into a broad-based roll-out of the technology is proving difficult.

Even if problems in the blockchain technology are ironed out, the sector has to hammer out common legal standards, ensure there are links between different dealing platforms and persuade scattered elements of the supply chain - from commodity producers and brokers to traders and consumers to co-operate.

For Cross, the fear is that a profusion of systems will emerge. "There's got to be consolidation in all this because if everyone comes up with their own offering it will be too burdensome, it will kill itself," he said.