LGR Crypto Bank of Switzerland is mulling new automated letters of credit (L/Cs) that harness digital smart contracts as part of its efforts to provide trade finance services for deals between Silk Road countries and more than 65 other countries.

Silk Road countries stretch from China to Turkey and trade and investment along the historic route and particularly between China and the EU is expected to increase as the they accelerate negotiations towards concluding a China-EU investment agreement.

Internet of Things

Chief executive of LGR Crypto, Ali Amirliravi, says the bank is looking at how digital smart contracts can be used in trade finance to create new automated L/Cs and suggests this holds great potential if 'Internet of Things' (IoT) technology is incorporated.

"Our system is able to trigger transactions and payments automatically based on incoming data from the supply chain. This means, for example, that we could create a smart contract for an L/C which automatically releases payment once a shipping vessel reaches a certain location," he says.

Document trail

Amirliravi suggests as a simpler example, payments could be triggered once a set of compliance documents is uploaded to the system and verified by LGR Crypto.

Ali says L/C related documents can be shared with different trading partners on a blockchain platform which he says would improve transparency and reduce trading risks.

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