Standard Chartered says it has issued the first blockchain-based international letter of credit (LC) transaction using China’s national currency, the yuan.
The London-based bank said earlier this week the transaction, for a deal between Australian mining giant Rio Tinto and Chinese steelmaker Baosteel, was carried out over the blockchain trade finance network Contour.
LCs are particularly useful in international commodities, acting as sureties for the seller that goods will be paid for when they eventually arrive.
Contour’s first successful LC transaction was between two major petrochemical companies, also in the Asia region, in August, when the firm was known as Voltron. Standard Chartered, which was involved in the initial pilot, invested an undisclosed sum in the trade finance network back in January.
The Contour platform is built using Corda technology from R3, the enterprise-focused blockchain software firm.
This is the second time Baosteel has used Contour. The steelmaker concluded a similar LC transaction, worth more than 100 million yuan ($14.1 million) with the world’s largest listed miner, BHP, on Tuesday. Last week, Vietnam-based HDBank also signed up for Contour membership, eyeing a move away from paper-based LC transactions and the resulting cost and time benefits.
“The opportunity cost in trade finance is huge,” Contour CEO and former R3 Asia head Carl Wegner said in January. “Trillions of dollars in commodities, products and services are transacted daily, but the sector is still characterized by slow, duplicative and expensive processes.”