Bitcoin freight deals emerge in sanctions-hit countries
Date: Monday, January 29, 2018
Source: Lloyd's List
Varamar and Prime Shipping trial cryptocurrency deals in preparation for launching their own digital tokens this year.
FREIGHT deals transacted in bitcoins have started to emerge in sanctions-hit countries in recent months, initiated by shipping ventures that seek to test the waters in dealing in cryptocurrencies before launching their own digital tokens.
According to the companies involved, at least three deals have been transacted in bitcoins since late last year, including one Russian grains shipment to Turkey and two by Odessa-based Ukrainian shipping company Varamar.
The Varamar deals were worth less than $300,000 each when taking into consideration the prevailing currency exchange rate, fixed with a forwarding firm and a trading house for the respective deals, chief executive Alexander Varvarenko told Lloyd’s List.
Prime Shipping Foundation — backed by Gibraltar-based Quorum Capital and Russian shipbroker Interchart — charged 5.4983 bitcoins for a shipment of 3,000 tonnes of grains from Rostov-on-Don to Samsun in November-December, according to chief executive Ivan Vikulov.
The names of counter parties were not disclosed.
While the deals were for small amounts, both companies plan to use cryptocurrencies on a larger scale later as part of preparation for their initial coin offerings, according to the executives.
Other than bitcoins, Varamar would also accept the cryptocurrencies ethereum and dash and is studying whether to take neo, Mr Varvarenko said.
Transactions done in cryptocurrencies like bitcoins are generally recorded on the so-called blockchain, the use of which can save time and costs in a secure way.
Both Varamar and Prime Shipping said they would raise funds via the ICOs to develop blockchain-based freight trading platforms that use smart contracts, a computer protocol that digitally facilitates deals that can be self-enforced efficiently. Their tokens would then be used on their respective platforms.
Varamar is aiming to start selling its token “shipcoin” in the first quarter via its venture ShipNext, a freight platform that has attracted over 1,000 subscribers since its launch last October, even though it has not introduced its blockchain system, according to its website.
Prime Shipping is looking to raise $100m by selling its token “prime” in mid-2018, said Mr Vikulov, adding that there could be potential room for cooperation between his project and ShipNext. “But we need to finish building the [cryptocurrency] ecosystem first to assess feasibility and potential synergies.”
Dealing in cryptocurrencies can be particularly helpful in saving processing time and costs for companies like Varamar and Prime Shipping.
A blockchain is a ledger system maintained by a decentralised network that bypasses central banks and financial institutions, with transactions in cryptocurrencies tending to face less scrutiny from authorities that impose international sanctions compared with conventional deals in fiat currencies.
Companies based in sanctions-hit countries like Russia, Ukraine or Iran often have trouble using international financial institutions even if they are not on the sanction lists themselves, Mr Varvarenko said. This is because of the time-consuming process that banks need to engage in to ensure the deals are not subject to sanctions, he added.
“A lot of companies are good companies, but all those banks are afraid of dealing with such companies even when they are 100% transparent and trustworthy,” Mr Varvarenko said.
Both executives reject the notion that cryptocurrency trading should be used to circumvent sanctions.
“All users of our platform should operate under definite legal and maritime rules. Sanctioned companies won’t be using the platform,” Mr Varvarenko said.
“We are not promoting avoidance of sanctions,” Mr Vikulov said.
“[But it is] not a good feeling having $10m stuck in New York for three weeks…and [facing a] never-ending avalanche of questions from the core banks even when the transaction was perfectly transparent,” he added.
Click here to read the entire article from the original source
Have the News Delivered to you
Like what you see here? Why not let us send it directly to you?
Sign up to receive our Weekly Industry Newsletter, a compilation of all news articles that matter to you and your business.