A Structured Digital Asset for Trade Finance Liquidity and Global Capital Access.

Blockchain-Based Trade Finance Token to Expand Global Liquidity

Trade finance fuels global commerce, but accessing capital remains a persistent challenge. The trade finance gap surged to $2.5 trillion in 2022, reflecting a growing disconnect between available capital and businesses in need.

SMEs, particularly in emerging markets, struggle the most. Banks, constrained by compliance obligations and risk exposure concerns, frequently decline creditworthy applicants. As a result, businesses with confirmed purchase orders and strong transaction histories often face cash flow shortfalls.

We are exploring a blockchain-based trade finance token designed to expand liquidity by linking capital providers directly to short-term trade transactions.

This system could open new opportunities for investors seeking stable yield while giving businesses an alternative source of working capital.

Discussions are ongoing with trade finance providers, blockchain developers, and institutional liquidity sources to design a model that provides  profitable, transparent, and low-risk participation for all stakeholders in global trade.

This paper outlines the existing funding shortfall, the business model for the token, how capital providers and investors generate returns, and how the entire ecosystem functions.

A Structured Approach to Liquidity

1. The Trade Finance Shortfall and the Demand for Liquidity

Trade finance underpins 80% to 90% of global trade, yet a large portion of businesses struggle to obtain financing. Banks reject approximately 40% of trade finance applications from SMEs, largely due to stringent risk models, lack of collateral, and compliance hurdles.

Market opportunity breakdown (2022 figures):

• Unmet demand in developing Asia: $700 billion
• Unmet demand in Africa: $120 billion
• Total global trade finance gap: $2.5 trillion

*Source: Asian Development Bank (ADB), Future of Trade 2024

Businesses with valid purchase orders often turn to expensive non-bank lenders or, in many cases, are forced to cancel transactions due to lack of financing. Liquidity exists in the market, but current risk models prevent it from reaching businesses that need it most.

2. The Blockchain-Based Trade Finance Model and How It Works

The proposed trade finance token system would allow businesses to secure short-term funding backed by tokenized trade instruments. Investors and liquidity providers can fund trade transactions directly, earning yield in the process.

Key system components:

• Tokenized Trade Credit Pools – Liquidity providers stake stablecoins (USDC, USDT) into structured pools that finance short-term trade transactions (30-180 days).
• On-Chain Credit Risk Assessment – Smart contracts analyze trade flows, payment histories, and external credit signals to determine risk-based funding terms.
• Programmable Trade Instruments – Invoices, LCs, and Bills of Lading are converted into NFTs, ensuring transparent, real-time tracking.
• Automated Settlement Mechanisms – Smart contracts release funds upon shipment verification or other predefined triggers, reducing settlement risk.

These features would allow the creation of a secondary market for tokenized trade finance instruments, enabling early liquidation options for investors.

3. How Token Holders and Other Participants Make Money

The ecosystem is structured to generate sustainable returns for all stakeholders, ensuring that liquidity flows efficiently while mitigating risks.

3.1. Token Holders (Retail & Institutional Investors)

• Yield from Liquidity Pools: Token holders provide stablecoins to trade finance pools, earning an annualized return (APY) based on transaction fees and interest paid by borrowers.
• Secondary Market Trading: Tokenized trade instruments (e.g., invoice-backed NFTs) can be resold, allowing liquidity providers to exit before loan maturity.
• Staking Rewards: Long-term participants who stake the platform’s governance token earn additional rewards based on network fees.

3.2. Businesses (Importers & Exporters Seeking Funding)

• Faster Access to Capital: Instead of waiting weeks for bank approvals, businesses receive trade financing in hours or days through smart contract execution.
• Lower Costs vs. Private Lenders: Traditional non-bank lenders often charge 15-30% annualized rates. The blockchain-based model reduces intermediaries, potentially lowering costs.
• On-Chain Trade Reputation: Businesses that complete transactions successfully build an on-chain credit history, improving future borrowing terms.

3.3. Liquidity Providers (Institutional Capital Providers & Hedge Funds)

• Institutional-Grade Yield: Liquidity providers earn returns similar to structured trade finance instruments but with real-time settlement and programmable risk management.
• Regulated Stablecoin Settlement: Transactions are conducted in USDC, USDT, or tokenized bank deposits, ensuring minimal volatility.
• Risk-Tiered Pools: Investors can select risk levels, with higher-risk pools offering higher yield potential.

3.4. Trade Finance Brokers & Underwriters

• Origination Fees: Brokers facilitating trade finance transactions earn a fee per deal, providing an incentive to bring in high-quality borrowers.
• Risk Assessment Incentives: Underwriters and insurers participating in risk assessment receive a portion of transaction fees.

4. Why This Model Works for Both Investors and Businesses

The traditional trade finance model has long been profitable for banks and private lenders, generating double-digit returns with low default rates. By tokenizing trade finance assets, this model becomes accessible to a wider range of investors while keeping risk management intact.

Risk Mitigation Measures:

• Asset-Backed Financing: Loans are secured against real trade assets (verified purchase orders, inventory, receivables).
• Smart Contract Enforcement: Automated settlement reduces fraud risks and non-payment.
• Insurance & Credit Guarantees: Select pools include trade credit insurance to protect against default.

For businesses, the benefit is simple: cheaper, faster capital that is tied directly to real transactions, not speculative lending.

5. Development Roadmap and Next Steps

A blockchain-based trade finance token requires market adoption, regulatory alignment, and institutional participation. We are working with trade finance providers, liquidity partners, and blockchain developers to structure a functional model.

Planned milestones:

• Q2 2025: Secure institutional liquidity partnerships and finalize compliance framework.
• Q3 2025: Deploy testnet for structured trade finance transactions.
• Q4 2025: Pilot tokenized trade finance pools with selected businesses and liquidity providers.
• Q1 2026: Launch commercial platform with global trade finance participants.

Institutional capital providers and regulatory stakeholders are being engaged to ensure compliance and a clear path to adoption.

6. Closing Thoughts

A blockchain-based trade finance token could provide an alternative source of liquidity to businesses struggling with traditional financing roadblocks. By offering stable returns for investors, real-time settlements, and programmable risk management, this model introduces a transparent, scalable approach to trade finance.

We are open to discussions with institutional investors, liquidity providers, and regulatory stakeholders as we move toward structured pilot transactions.

For further engagement, contact us directly.