The famous Swedish furniture and appliance store IKEA have used a token built on the Ethereum blockchain to settle an invoice, in a world-first for such a large global organization.
IKEA Iceland utilized the U.S. blockchain payments platform Tradeshift to facilitate the receipt of funds from retailer Nordic Store. A local Icelandic fintech firm, Monerium, acted as a middleman to settle the invoice in Iceland’s local fiat currency, the Krona.
According to a press release announcing the landmark payment, Monerium is the “world’s first and only authorized provider of licensed e-money for blockchains”. The report goes on to claim that the transaction proves “government-regulated, programmable e-money” is now ready or mainstream markets.
In June this year, the Financial Supervisory Authority of Iceland (FME) gave Monerium approval to operate as an electronic money institution. The Reykjavik-based company raised $2 million in a seed funding round in January this year, backed by one of the world’s largest Ethereum development firms, ConsenSys.
European Central Bank’s e-money directive
In order to achieve regulatory status, Monerium uses an act that was established by the European Central Bank in 2009 following the global financial crisis. Article 2(1) of Directive 2009/110/EC defines an “electronic money institution” as a legal person that has been authorized to issue e-money, which is defined as “electronically, including magnetically, stored monetary value […] for the purpose of making payment transactions”.
Despite being a law in practice for over 10 years, this is the first time that a settlement has been made in a digital form of fiat money using smart contracts and blockchain technology.
“Programmable money regulated by governments will become the foundation for e-commerce payments because they enable so-called ‘smart contracts,’ said Tradeshift co-founder Gert Sylvest. “Smart contracts have many use cases. For example, they can be used to generate ‘Smart Invoices’, which are invoices that basically settle themselves.”
The World Economic Forum (WEF) estimates that as much as 10 percent of the world’s global domestic product (GDP) will be blockchain-based by 2027.
Programmable Supply Chain Finance
Sylvest foresees this technology as changing the way in which companies do business by creating a system of programmable finance.
“With a ‘smart invoice’ we can issue tokens that represent the future cash flow down to each dollar on the invoice. Whoever holds tokens will get paid upon due date, which makes smart invoices ideal to use for financial-services apps,” said Sylvest.
Monerium and Tradeshift plan to revolutionize the financial landscape, creating an environment where supply chain transactions of completed instantly, automatically and at a fraction of current costs. They believe this be greatly beneficial to small businesses in the 190 countries where Tradeshift already supports 1.5 million companies.
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