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Standard Chartered has successfully issued its first international letter of credit transaction on blockchain using the yuan, China’s national currency.
Standard Chartered has announced that it has issued a blockchain-based letter of credit. The institution stated that this would ensure cross border transactions are guaranteed for parties involved.
According to a release by the London-based bank, the letter of credit which was denominated in Chinese yuan was made possible through collaboration with the trade finance blockchain company Contour. Originally known as Voltron, Contour was founded by a consortium of seven banks. It aims to make international trade more secure and faster through its tokenization project for shipping and banking documents.
Pioneering Trade Finance Digitization
Contour had earlier proven the efficiency of its blockchain-based tokenization project after it initiated the first-ever LC transaction between to petrochemical companies based in Asia.
Speaking on its accomplishment, the company Chief Executive Officer (CEO) Carl Wenger said that the prospects of trade finance is huge, considering that trillions of dollars change hands in international trade. This is despite the fact that the sector is still characterized by slow, poorly defined duplicative processes.
Standard Chartered in its recent release stated that a deal between Australian mining corporation Rio Tinto and Chinese Baosteel was sealed on the blockchain. This is the first yuan-based letter of credit transaction pioneered by the bank.
Baosteel is not new to tokenized LC. The recent transaction is the second time the Chinese company is using a blockchain-based LC. The steelmaker concluded a similar trade deal valued at 100 million yuan ($14.1 million) with BHP on Tuesday.
Banks are increasingly seeking more efficient ways of managing international trades as exemplified by the Standard Chartered – Contour partnership. Last week, the Vietnam-based HDBank also signed a similar MoU with Contour to use its trade finance services. This has become necessary as their clients have seen the role the new technology could play in improving efficiency in logistics and finance.
Standard Chartered Conducted Successful Blockchain Transaction Testing
Standard Chartered was rumored to have invested an undisclosed sum in the Contour project. The bank was also among dozens that participated in a global beta launch that involved 50 banks and corporations.
Interest in a blockchain-based letter of credit has soared. This is mainly due to the fact that traditional LC hardly meets the demand of international trades and shipping. They essentially are documents issued by banks that give exporters guarantee that they would be paid for their commodity.
The Standard Chartered’s Global Head of Documentary Trade Samuel Matthew said that the digitization of the bank’s letter of credit is an important step towards increased efficiency in the management of trade.
“[This] is undoubtedly a significant milestone in our journey towards transforming documentary trade. In particular, we look forward to introducing our smart guarantee capabilities, announced in 2018, into Contour” he said.
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