BNP Paribas and HSBC Singapore have completed Singapore's first fully digitised end-to-end letter of credit (L/C) transaction between two different companies.

The deal involved Rio Tinto selling a bulk shipment of iron ore originating in Australia to China to its trading customer Cargill.

It represents a move that will take the digitisation of trade finance a step closer to becoming a commercial reality, according to BNP and HSBC.

Digital L/C management

As part of the transaction, BNP issued an L/C over the blockchain on behalf of Cargill to HSBC Singapore acting on behalf of Rio Tinto.

Both BNP and HSBC enabled a transfer of electronic bill of lading (eBL) over traded goods using a digital L/C for the first time in Singapore, by integrating the Voltron trade finance solution (through R3's Corda blockchain platform in the back-end) with Bolero's eBL system.

System benefits

The banks say the benefits of the system include faster, simpler and more efficient digital rather than paper-based transactions to ensure trade flows. The L/C issuance was completed in less than two hours compared with one to two days for traditional paper-based L/Cs.

The banks also say that more counterparties were engaged in this transaction, compared to previous blockchain transactions with full digital integration, indicating there is increased interest across the industry to digitise cross-border transactions.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.