New Forms of Shipping Finance Underway

Shipping finance tools are constantly evolving, with the concept of decentralised finance one of the latest developments. In its latest weekly report, shipbroker Intermodal noted that “whilst everyone focuses on the newly imposed banking sanctions and SWIFT bans, at the same time a new financial environment is growing in the background aiming to disrupt financial intermediaries, including but not limited to central banks. Decentralised Finance (De-Fi) is the fast evolving blockchain financing that could disrupt the finance world as we know it. A large debate is in progress on whether this new challenge could pose a threat to banks, capital markets, central authorities and create new decentralised, hence much less regulated outlets for asset financing. The fact that DeFi is based on blockchain and connected to cryptocurrency speaks for itself that middlemen and the consequent scrutiny, costs and red tape will most probably be removed from the picture.

According to Intermodal’s Deputy CEO, Mr. George Laios, “decentralised exchange systems, yield farming, lending platforms based on cryptos, stablecoins, smart contracts and flash loans are just a handful of terms that we need to make ourselves familiar with if we wish to follow this trend and should we believe that decentralization is the future of the western (and not only) economies. DeFi is already a multi billion market (in terms of USD locked in contracts), however, there is still a long way for replacement of fiat currency by crypto currency.

Credit risk issues, safety issues, market volatility risks and lack of an appropriate legal/justice system are just a few of the points that make investors still skeptical about this new form of economy. There have been quite a few DeFi applications that have crashed and burnt; DeFi bugs are still part of the picture; and our legal systems are not yet up to date for someone to turn to if he or she believes that was wrongfully treated”.

Mr. Laios added that “regarding shipping, the benefits of blockchain technology could be huge when it comes to logistics, cargo tracking and paperwork reduction – especially for container operators. Regarding ship-financing in particular, there are already initiatives dealing with ship-financing. More than a handful of platforms are currently being (or have already been) established in order to provide ship-financing based on digital units. Regardless of their differences in issues like prime offering, investment size, hold period and real time asset data, these are all noteworthy initiatives that may well develop in an additional form of financing for shipping companies and operators putting shipping in the forefront of technology developments (for a change). The key and decisive factor is whether blockchain can -as a start- win its fair share on all the remaining daily financial transactions (payments etc), so that individuals get familiar with the new landscape. The room for growth is definitely there, the speed for growth may be significant as well. Once DeFi proves itself, then its growth will be exponential”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide