The London-based bank Standard Chartered was among 50 banks and corporations that tested a project that was meant to digitize letters of credit. This is the document issued by banks that assures exporter that they would be paid immediately their exports leave the port or based on any other condition agreed upon with the importer.

A recent release by Standard Chartered stated that the bank has concluded a deal between an Australian mining company, Rio Tinto and the Chinese steel giant Baosteel. This is a milestone for Standard Chartered because the Letter of Credit involved was based on the distributed ledger technology also known as blockchain.

This is the second time Baosteel is using a blockchain-based LC in transaction. The Chinese giant had earlier had a similar deal with a mining company, BHP.

The Chinese yuan based LC ensured that the deal between the two corporations were guaranteed by the bank.

Contour, the company involved in the technology had earlier gone into partnership with Standard Chartered to provide the technical support necessary for the seamless delivery of the technology.

The CEO of Contour speaking on the company’s service said,

“Trillions of dollars in commodities, products and services are transacted daily, but the sector is still characterized by slow, duplicative and expensive processes.”

He further stated that the opportunity cost in trade financing is huge.

Traditional LCs are known to not meet up with the demands of international trade since there are times that speed is off essence in trade deals. Also, updates may be lacking since these documents can be slowed by the bureaucratic processes involved in issuing them.