Envoy Group, a London-based global trade and trade finance platform, is set to launch in the second quarter of this year following a US$13.5mn investment from Alcedo Digital Ventures.
Built on R3’s Corda network, Envoy is a blockchain-based digital marketplace which connects lenders to buyers and sellers and seeks to tackle the age-old problem of limited access to finance for exporters in developing – and developed – markets.
“The fastest way to solve the trade finance gap is to enable the flow of new funds available from financial institutions,” says Lee Tarone, CEO of Envoy. “We built the solution from the ground up, which uses a tokenised payment system to deal with multiple currencies from multiple financiers across variant risk/reward profiles. This opens up rapid and efficient access to the R3 network through our Corda node.”
On the Envoy platform, buyers, sellers and financiers first purchase NVOY tokens – a cryptocurrency which runs on the Stellar open network – and deposit and stake a minimum amount of tokens for Envoy membership. “There are two reasons for the tokenised system,” Tarone tells GTR. “One, it enables multiple currencies, so this doesn’t just have to be focused on dollars. This creates more liquidity for exporters in developing markets that struggle with local currency availability. We have built a cross-border payment solution that enables us to utilise global payments at endpoints, so wherever it is, we are able to adopt local currency and change that to a tokenised payment solution to then exit in whichever currency you want. The second reason is that through tokenisation we are not governed purely by the banking system.”
On the Envoy platform, each user, be they a buyer, seller or financier, has a personal dashboard where they can view their total NVOY token balance, any contracts with which they are associated, the relevant details of those contracts and the credit rating profile of any related parties. To help users analyse counterparty risk, Envoy will implement a decentralised verification and credit scoring system, calculated using factors such as reliability, on-time payments and contribution to the network. All parties interacting with Envoy can view counterparty ratings and use the information to make contract decisions. Each user can also set minimum rating requirements for any deal to assure high-quality counterparties.
When purchase orders enter the marketplace, financing terms can be agreed with financiers and smart contracts created. Those contracts are then immediately sent off-chain to Corda for financial transactions, digital bills of lading validation and goods verification checks from internet of things (IoT) providers.
Whenever a settlement activity occurs, such as if a shipper ships goods, or if a buyer receives goods, an immutable record of this activity is kept on the blockchain. Envoy pulls the information onto the marketplace where it is presented on user dashboards.
“The transparency of the Envoy platform reduces the risk of trade finance fraud which often relies on the fragility of the manual processes and paper documents of the traditional system. Nefarious attempts by both the buyer and seller to double finance a trade will be all too easy to read on the blockchain. Users need only do their KYC due diligence offline thanks to Envoy’s enterprise-grade credit risk rating system,” the company says in a statement.
Tokenised payments are not a new idea in cross-border transactions. In 2017, IBM launched a similar cryptocurrency-based solution which also uses the Stellar network, while blockchain-based payments network Ripple has its own cryptocurrency, XRP, which can similarly be used as a ‘bridge’ between fiat currencies. The benefit of such solutions is that they reduce intermediaries and bring down settlement times to seconds while avoiding high foreign exchange fees. However, Tarone says that Envoy is the first end-to-end solution which brings together both cryptocurrency bridges and financing. “The way in which we differ from other trade finance or supply chain solutions is that we have the payment solution as well as the supply chain and transparency solution. This is a one-stop shop.”
The company says it currently has a number of OTC deals within trade finance in Brazil that it is onboarding onto its new solution, and will run pilot trials with funds and financiers before rolling out in Q2. It is also in talks with a Miami-based freight company to engage its solutions into its trade routes through Latin America.