By Bhairav Patel, Chief Technology Officer, Teybridge Capital Europe.
In 2022, members of Teybridge’s founding team helped build and use an early model for funding real-world trade assets through decentralised finance. Four years later, we look at what we learned, and where tokenised trade finance could go next.
Teybridge Capital Europe is an alternative trade finance provider based in Dublin, providing working capital to growing businesses through invoice finance, stock finance, purchase order finance and bespoke combinations of these facilities.
We are not a crypto company. The capital we deploy to SMEs comes from established global banks and investment institutions, and our focus has always been straightforward: helping good businesses access the working capital they need to grow.
What sets Teybridge apart is how we do it. We combine flexible funding structures with our proprietary fintech platform, BRIDGE, to make accessing and managing working capital as seamless as possible.
So why are we interested in stablecoins, tokenisation and decentralised finance? Because we believe this emerging financial infrastructure is becoming increasingly relevant to the future of trade finance.
For us, the opportunity is practical rather than theoretical. Could new payment rails help capital move faster? Could tokenisation connect trade finance assets with additional pools of liquidity? Could smart contracts automate parts of the funding process without replacing the credit judgement and controls that sit behind every transaction?
These are not entirely new questions for us. In 2022,Teybridge Capital Europe was involved in one of the first decentralised finance models for funding real-world trade invoices: taking verified receivables, representing them on-chain and connecting them with decentralised pools of capital using USD stablecoins.
It was early. It was complex. And we learned a lot. Four years later, the technology, institutional infrastructure and regulatory landscape have progressed considerably. We think it is worth revisiting what happened, what we learned and what that experience tells us about where trade finance could go next.
This is the story of that early transaction; and why we are paying attention again.
New to Stablecoins? You might want to read What Is a Stablecoin and Why Stablecoins Matter to SME Finance, and Why We’re Paying Attention.
2022: An Early DeFi Trade Finance Model
Back in 2022, Dylan Martin (CEO, Teybridge Capital Europe) and Colm Devine (CSO, Teybridge Capital Europe) were establishing Teybridge Capital Europe an alternative finance provider. Their goal was to support SMEs with working capital through invoice finance, PO finance and stock finance.
At the same time, Bhairav Patel, (now CTO, of Teybridge Capital Europe) was one of six co-founders building Defactor, a Dublin-based platform designed to connect real-world assets such as trade receivables with decentralised liquidity using blockchain technology.
They were approaching the same problem from two different directions. Dylan and Colm understood the day-to-day reality of funding businesses that needed working capital. Bhairav was helping build the infrastructure that could connect eligible real-world assets with new pools of capital using tokenisation and smart contracts.
Those paths crossed in a small and still experimental corner of European fintech, and provided an early glimpse of how trade finance infrastructure might evolve.
From Verification to Funding in Hours
The platform built by Bhairav’s team went on to fund trade finance assets in 2022, with transactions moving from drawdown to funds received in a matter of hours. More than US$20 million was ultimately funded through the platform, with capital able to move quickly once the required checks had been completed.
The important point was not simply that blockchain was involved. It was that real-world trade assets such as invoices, could be verified, connected with available capital in stablecoins and funded through technology-led infrastructure with predetermined rules and controls.
For businesses, that distinction matters. The technology itself is not the end goal. The goal is to reduce friction between an approved funding requirement and usable working capital arriving with the business.
How It Actually Worked
Teybridge Capital Europe was looking to fund various clients, including alcohol suppliers, chocolatiers, and manufacturers, through Invoice Finance and Stock Finance. They wanted to test how this could be done using stablecoins.
The mechanics were relatively straightforward in principle: The trade receivable would first be verified. It could then be represented digitally on-chain; effectively creating a tokenised representation linked to the underlying real-world asset. That asset could then be connected with a pool of available capital, with funding released once the required conditions had been satisfied.
Smart contracts helped automate parts of that process. A smart contract is self-executing code on a blockchain that can carry out predetermined actions once specified conditions are met.
That did not mean removing underwriting, KYC, AML or credit assessment. Those controls remained fundamental. Instead, technology could help automate what happened after the relevant decisions and checks had been made.
Rules around eligibility and portfolio concentration could be embedded into the infrastructure itself. Limits could be set around exposure to particular countries, sectors, suppliers or debtors, while funders could maintain visibility over the assets being financed.
The biggest learning was that the technology made execution more efficient and it allowed us to use a different form of capital. It did not however replace the need for a disciplined credit and risk processes.
Why This Matters Now
We are not writing about tokenised trade finance as a trend we have simply noticed from the outside. Members of our founding team were involved while an early version of this infrastructure was being built and tested, before much of today’s regulatory framework and institutional infrastructure had developed.
The market has changed significantly since then. Stablecoins have become more prominent as a potential settlement mechanism. Tokenisation of real-world assets has attracted growing institutional attention. And regulated financial institutions are increasingly exploring how blockchain-based infrastructure might fit into established financial markets.
That does not mean every trade finance transaction belongs on a blockchain, or that traditional banking infrastructure is about to disappear. It does mean the technology is becoming increasingly difficult for trade finance providers to ignore. What interests us now is not simply that blockchain, stablecoins or tokenisation exist. It is what this infrastructure could practically enable for businesses that need working capital. We see three areas worth watching closely.
Faster Movement of Capital
Trade finance is international, but moving money across borders can still involve banking cut-off times, multiple intermediaries and settlement delays.
Stablecoins offer a different type of payment rail: digital value that can potentially move 24 hours a day and settle quickly across borders. In the right structure, that could reduce some of the friction between capital being approved and funds becoming available to the business.
For an SME waiting for working capital, the technology behind the transaction is largely irrelevant. What matters is how quickly usable funds arrive. That is the opportunity we are interested in.
Access to New Pools of Liquidity
Potentially even more significant is where the capital itself comes from. Tokenisation can create a digital representation of a real financial asset, such as an eligible trade receivable, which can potentially be connected with additional pools of institutional or on-chain liquidity.
For a finance provider like Teybridge, that raises an interesting question: could this infrastructure give us access to additional sources of capital that can then be deployed to SMEs that need working capital? More diverse sources of liquidity could ultimately mean greater capacity to fund growing SMEs. That is where, for us, the conversation becomes much bigger than cryptocurrency.
Smarter Automation
There is also an opportunity to automate more of what happens between approving a transaction and releasing the funds. Smart contracts can encode predetermined rules into the infrastructure itself. An invoice could still go through underwriting, KYC, AML and credit assessment, while elements of eligibility checking, funding and settlement could potentially be automated once the required conditions have been satisfied.
The important distinction is that technology does not have to replace credit judgement. It can help execute that judgement more efficiently. That was one of the biggest lessons we took from 2022: speed is valuable, but only when the controls underneath it are robust.
Four years later, that principle remains central to how we think about innovation at Teybridge. We are not interested in blockchain because it is fashionable, and we are not becoming a crypto company. We are interested because if new financial infrastructure can help us access more capital, move it more efficiently and ultimately get working capital into the hands of good businesses faster, then we think it is worth exploring.
Members of our team helped build an early version of that future. Now we are watching closely and exploring what the next version could become.
Explore the Stablecoins in Trade Finance series
01 — What Is a Stablecoin?
A plain-English guide to what stablecoins are and how they work.
02 — Why Stablecoins Matter to SME Finance
How stablecoins could affect payments, working capital and international trade.
03 — Inside One of the Early DeFi Trade Finance Deals
The Teybridge founders’ experience of putting blockchain-based trade finance into practice.
Frequently Asked Questions
What is tokenised trade finance?
Tokenised trade finance uses blockchain technology to create a digital representation of a real-world trade finance asset, such as an invoice or receivable. The underlying asset and credit risk remain real; tokenisation changes how information about the asset can be represented, transferred or connected with capital.
How can stablecoins be used in trade finance?
Stablecoins can potentially be used as a payment or settlement mechanism within a trade finance transaction. Because they can move on blockchain networks outside traditional banking hours, they may help reduce settlement friction in some cross-border transactions. The practical benefit depends on the structure, jurisdictions, regulation and the process for converting between stablecoins and conventional currencies. Read our summary: What is a Stablecoin
What is decentralised finance (DeFi)?
Decentralised finance, or DeFi, refers to financial services delivered using blockchain-based infrastructure and smart contracts rather than relying entirely on traditional financial intermediaries. In trade finance, DeFi structures can potentially connect tokenised real-world assets with pools of digital capital.
What is a smart contract?
A smart contract is code stored on a blockchain that can automatically carry out predetermined actions when specified conditions are met. In trade finance, smart contracts could potentially automate parts of eligibility checking, funding or settlement once the necessary underwriting and compliance requirements have been satisfied.
What does it mean to put an invoice ‘on-chain’?
Putting an invoice on-chain does not mean the physical invoice disappears. It generally means creating a digital record or representation linked to that real-world receivable on a blockchain, allowing aspects of its funding or transfer to be managed through blockchain-based infrastructure.
Can blockchain make invoice finance faster?
Potentially. Blockchain infrastructure and smart contracts can automate parts of a transaction and enable faster settlement in certain structures. However, technology does not remove the need for invoice verification, underwriting, KYC, AML and credit controls.
Is Teybridge Capital Europe becoming a crypto company?
No. Teybridge Capital Europe is an alternative trade finance provider. Our core business remains providing working capital to growing businesses through products including invoice finance, stock finance and purchase order finance. We are exploring emerging financial infrastructure because of its potential to improve how capital is accessed, moved and deployed; not because we are changing the fundamental nature of our business.
