A recap of the QualitaX webinar featuring Saloi Benbaha, Head of Institutional Partnerships at TradeFinex, and Christoph Gugelmann Founder & CEO at Tradeteq.
Trade finance is one of the oldest and most essential mechanisms in global commerce — and one of the most resistant to modernisation. The global trade finance gap, the shortfall between the demand for trade financing and what banks and financial institutions actually provide, has grown to an estimated $2.5 trillion annually, with small and medium-sized enterprises bearing the largest share of that burden. In a recent QualitaX webinar, Saloi Benbaha, Head of Institutional Partnerships at TradeFinex, and Christoph Gugelmann Founder & CEO at Tradeteq, joined us to explore why previous attempts to digitise trade finance failed, what the current generation of blockchain-based solutions is doing differently, and where the market is heading.
Why Previous Trade Finance Networks Failed
The webinar opened with an honest question: three of the most prominent blockchain-based trade finance networks — TradeLens (IBM and Maersk), Marco Polo, and Contour (backed by a consortium of more than twenty banks including HSBC) — all ceased operations within the past two years, despite significant investment and institutional backing. What went wrong?
Both Saloi and Christoph converged on a common diagnosis, though from different angles.
Governance and collaboration failure, not technology failure. Saloi was direct: building on blockchain does not automatically solve the coordination problem. Consortium networks brought together parties who each wanted control, each had different risk tolerances, and each ultimately tried to do their own thing rather than building genuine shared infrastructure. A blockchain can create a shared source of truth, but it cannot create the willingness to actually share.
The wrong use case first. Christoph offered a sharper analytical distinction: distributed ledger technology for information sharing — connecting suppliers, buyers, funders, and logistics providers on a shared platform — is genuinely valuable, but the benefits are diffuse, the implementation complexity is enormous, and the network effects take years to materialise. You need millions of SMEs to participate before the shared ledger generates sufficient value for any single participant to justify the investment. That is a very hard cold-start problem.
Building on private chains compounded the problem. Private consortium chains require each participant to run nodes, agree on governance, and accept that a small number of entities hold the infrastructure for everyone else. As Andreas Freund of Consensus Mesh described in the first webinar in this series, these governance structures have consistently collapsed under the weight of competing interests and liability concerns.
Tokenisation, by contrast, creates immediate value. Christoph’s key insight is that the second use case for blockchain in trade finance — tokenising the underlying trade instruments themselves — delivers immediate, tangible benefits that do not depend on broad network adoption. 24/7 settlement, fractional ownership, near-zero friction costs, and programmatic securitisation all create value from the moment the first token is issued, without requiring a global network of SMEs to change their workflows simultaneously.
The Trade Finance Gap: Why Banks Say No
To understand what trade finance digitisation is trying to solve, it helps to understand why banks decline so much of the demand they receive.
Trade finance transactions are individually small, operationally intensive, and documentation-heavy. A single invoice financing request might involve KYC and AML verification, credit risk assessment, collateral review, multiple document checks, and cross-border regulatory compliance — all for a transaction worth a few tens of thousands of dollars. The cost of that due diligence often exceeds the margin the bank would earn. Banks accordingly focus on larger transactions where the economics work, leaving SMEs — particularly newer businesses without established credit histories or those operating in higher-risk jurisdictions — without access to financing.
The documentation challenge is compounded by the fact that trade documents — bills of lading, letters of credit, invoices, certificates of origin — are still largely paper-based in many parts of the world. Physical documents get lost in transit. Ships sit at ports while paperwork catches up. Goods worth millions sit undelivered because a courier is late. These are not edge cases; they are routine occurrences in global trade.
Saloi described a pilot involving a copper shipment where tokenising the trade document allowed the exporter to raise seven-day treasury financing against the shipment in transit — with investors able to verify on-chain exactly what they were financing, who owned the document at each stage, and when the transaction settled. What previously required weeks of bank processing and physical document courier was compressed into a digital workflow measurable in seconds.
The Electronic Trade Documents Act and Regulatory Progress
One of the most significant enabling developments for trade finance digitisation is the UK’s Electronic Trade Documents Act (ETDA), which came into force in 2023. The Act gives electronic trade documents the same legal standing as their paper equivalents under English law — which governs a substantial portion of international trade contracts globally. For the first time, a bill of lading, a promissory note, or a warehouse receipt can be issued, transferred, and enforced digitally without requiring a paper original.
The ICC UK and the UK Law Commission were instrumental in developing the framework. The ETDA provides clarity on what documents can be digitised, what technical requirements apply, and what legal enforceability digital documents carry. Combined with the Model Law on Electronic Transferable Records (MLETR) framework being adopted in multiple jurisdictions, this regulatory foundation is removing one of the most significant barriers to trade finance digitisation.
Saloi made an important observation about the difference in regulatory approach between established jurisdictions and newer financial centres. The UK and EU are updating centuries-old commercial law frameworks — a slow process requiring careful amendment of existing legislation. Dubai’s International Finance Centre, by contrast, has built a new regulatory framework from scratch, designed to be amended iteratively as the technology evolves. Neither approach is inherently superior, but the greenfield regulatory model has allowed some jurisdictions to move considerably faster in creating workable environments for digital trade instruments.
Trade Phenix: Building Ecosystem Infrastructure on the XDC Network
TradeFinex operates as a marketplace and ecosystem built on the XDC Network — an EVM-compatible Layer 1 blockchain developed specifically with trade finance use cases in mind, including ISO 20022 messaging standards compatibility. The XDC network is designed to support the kind of cross-border, multi-party transaction flows that characterise trade finance, with both public chain transparency and the ability to connect with existing financial messaging infrastructure.
Saloi’s description of TradeFinex’s approach reflects several lessons from the failures of previous networks. Rather than attempting to build a comprehensive platform that replaces existing processes, TradeFinex focuses on specific, demonstrable use cases where blockchain adds immediate value:
Document tokenisation: Trade documents are tokenised as a hybrid of a hash and an NFT, creating a verifiable, immutable record of document ownership and provenance. Authorised parties can verify in real time who created the document, who owns it, and what its current status is — while non-authorised parties cannot access the underlying commercial data.
Invoice aggregation and pooling: Rather than asking banks to evaluate individual SME invoices — the economics of which rarely work — TradeFinex aggregates invoices into pools that can be offered to investors. An investor deploying capital into a pool gets diversification across multiple underlying trade transactions, better yield, and higher utilisation than any single transaction could provide.
Short-term treasury financing: Pools are structured around 30, 60, and 90-day instruments — short-term trade receivables that are familiar to institutional and qualified investors as an asset class. The native stablecoin used in the protocol (fxp) is over-collateralised and on-chain verifiable, addressing one of the trust concerns that has historically plagued stablecoin-based trade finance solutions.
TradeFinex has active pilots with organisations including SBI in Japan, ICC France, and Morocco, and has partnered with invoice factoring specialists including Invoice Mate and ZFin. The XDC Trade Network, one of the applications built on the ecosystem, has achieved MLETR compliance and worked with Singapore authorities and TradeFlow/TradeTrust to enable fully digital, verifiable bill of lading workflows.
Tradeteq: Programmatic Securitisation at Scale
Christoph’s Tradeteq brings a complementary perspective — that of a transaction servicer that has processed $3.6 billion in trade finance instruments and is now replicating that infrastructure on-chain.
His framing of the problem is worth restating precisely. Trade finance as an asset class has three structural barriers to broad investor access:
Workflow complexity: Trade finance instruments are granular, short-tenored, and irregular. Underlying obligors pay late, pay partially, pay in bulk. Managing a portfolio of trade receivables manually at scale is operationally intensive and error-prone. Automation — programmatic matching, allocation, and settlement — is not optional; it is the prerequisite for the asset class to work at all.
Allocation and diversification: A single investor wanting to deploy $10 million into trade finance cannot rely on a single corporate counterparty to absorb that capital consistently. Diversification across multiple obligors, geographies, and instrument types is required for both risk management and capital utilisation. Building that diversification efficiently requires automated sourcing from multiple originators.
Securitisation friction: Traditional securitisation — the mechanism that has historically made trade receivables investable for institutional capital — is expensive, slow, and complex. It was designed for large-scale transactions where the fixed costs are justifiable. Tokenisation is the on-chain equivalent of securitisation, and done programmatically, it makes the economics work for much smaller transaction sizes.
Tradeteq’s position in the ecosystem is to provide the full operational stack: automated workflow, diversified allocation, and programmatic tokenisation, delivered as infrastructure that specialist trade finance funds and institutional investors can access without building it themselves.
The Secondary Market Question: The Real Unlock
Christoph identified the secondary market as the most consequential near-term development for trade finance tokenisation — and the one most dependent on regulatory progress.
The reason primary market tokenisation has not yet driven the institutional interest it theoretically should is that secondary market liquidity remains thin. If an investor buys a tokenised trade receivable today, the ability to exit before maturity depends on finding another buyer — and the marketplace infrastructure to support that consistently does not yet exist at scale.
The regulatory barrier here is specific: Central Securities Depository (CSD) rules, implemented in the post-2008 regulatory environment, require that securities transactions clear through regulated clearing systems where atomic settlement — simultaneous exchange of instrument and cash — is guaranteed. Smart contracts can provide this functionality more cheaply and efficiently than traditional clearing infrastructure, but they are not yet legally admissible as the settlement mechanism in most jurisdictions for regulated securities transactions.
Once that gap closes — through sandbox approvals, exemptions, or outright legal recognition as has happened with the ETDA for trade documents — the secondary market will open. At that point, a qualified investor can complete a single KYC process on one platform and trade in and out of tokenised trade finance instruments continuously, with near-instant settlement, fractional amounts, and 24/7 availability. Christoph’s view is that this is the genuine inflection point: when secondary market liquidity is accessible, capital will move from traditional off-chain structures into tokenised equivalents because the access and efficiency advantages will be too large to ignore.
ESG, Transparency, and the Blockchain-AI Convergence
A thread through both conversations was the ESG dimension of trade finance digitisation. Blockchain’s immutability and traceability make it a natural fit for supply chain transparency — verifying that goods were produced under acceptable conditions, that certifications are genuine, and that the provenance of commodities is as claimed.
Saloi made a broader point about the relationship between blockchain and AI that is worth highlighting. As AI-generated content makes verification of documents and data increasingly difficult, blockchain’s role as an immutable record becomes more valuable — not less. A trade document anchored on-chain provides a verifiable reference point that AI cannot easily fabricate or alter. The combination of AI for processing and analysis with blockchain for provenance verification may be the infrastructure that makes global trade both more efficient and more trustworthy simultaneously.
Key Takeaways
- Previous trade finance networks failed for governance and collaboration reasons, not technology reasons — private consortium chains could not solve the coordination problem, and shared information platforms need massive network scale before they deliver value
- Tokenisation delivers immediate value without requiring broad network adoption — fractional ownership, 24/7 settlement, and programmatic securitisation create tangible benefits from the first transaction
- The UK ETDA and MLETR provide the legal foundation for digital trade documents to be legally equivalent to paper — removing one of the most fundamental barriers to trade finance digitisation
- TradeFinex’s approach — aggregating SME invoices into diversified pools on the EVM-compatible XDC Network — addresses the economics problem that makes individual SME financing unworkable for banks
- Tradeteq’s approach — programmatic workflow automation, diversified allocation, and on-chain securitisation — brings institutional-grade trade finance infrastructure on-chain
- The secondary market is the real unlock: when tokenised trade instruments are legally tradeable on regulated secondary markets with atomic settlement, capital will move from off-chain structures into tokens at significant scale
- Over-collateralised on-chain stablecoins for trade settlement address the trust concerns that have accompanied stablecoin-based solutions — full on-chain collateral verification is a meaningful differentiator
- Blockchain and AI are complementary: as AI-generated content becomes harder to distinguish from authentic documentation, blockchain’s immutable provenance records become more valuable, not less.