MBX eliminates the fraud vulnerability in transactions involving warehouse receipts

Warehouse receipts are documents that provide proof of ownership of commodities that are stored in a warehouse, vault, or depository for safekeeping. These documents are used by commodity traders in trade transactions or as collateral to obtain loans. The receipts, which come from a variety of issuers and are frequently imprinted with holograms and secret codes, have become the backbone of bank loans backed by metal as collateral.

Major problems arise when warehouse receipts have been faked, and it happens often as the paper-based nature of these receipts makes them an easy target for fraudsters. Banks face the choice of either accepting that risk, or completely restructuring the way the industry operates.

As an example, in 2014 major banks revealed that they had been defrauded of almost $648 mln with duplicate warehouse receipts for copper, aluminum, and alumina stored in the Chinese port of Qingdao that had been used to raise finance from the damaged credit institutes. Many Chinese metal companies are struggling to secure credit in the aftermath of the Qingdao scandal.

To be able to deal with warehouse receipts effectively, there needs to be mutual trust and co-dependence among participants and the industry and warehousing companies are increasingly releasing their own digital warehouse receipt systems. Yet no solution is as secure, efficient, interconnected, and practical as a blockchain-powered system. A blockchain is a distributed ledger that holds records of digital data and transactions in a way that is tamper-resistant. Users may access, inspect or add to the data, but they can’t change or delete it.

Mercantile-BX utilizes blockchain technology to provide a platform where tokenized warehouse receipts can be held and traded against crypto-currency and stable-coins. These standardized digital warehouse receipts are called MBX E-Commodities and are negotiable. Furthermore, a consumer of the underlying asset may exchange Tokens for the underlying commodities accordingly to the specific terms of each type of token.

But our system is more than just secure. Mercantile-BX allows you to minimize transaction and holding costs while offering you a very large degree of flexibility in regards to how, where, and when you want to trade your assets. For example, users can choose to trade their digital warehouse receipts by making or taking orders in our marketplace or trade them with their known customers in off-market deals where smart contracts replace costly banking tools.