Barclays has announced the first live letter of credit (L/C) transaction using blockchain or distributed ledger technology.

The news follows a flurry of recent activity as different consortia announce progress applying the new technology in trade finance operations (DC World News, 22 and 30 August and 2 September 2016).

World first

Barclays with start-up company Wave have become the first organisations to execute a global trade transaction using blockchain technology. The L/C transaction between Ornua (formerly the Irish Dairy Board) and Seychelles Trading Company is the first to have trade documentation handled on the new Wave platform, with funds sent via the online messaging platform, Swift.

Landmark transaction

Barclays thinks this landmark transaction could herald a new era of simpler, safer and faster trade finance.

The new blockchain based system developed by Wave uses distributed ledger technology to ensure that all parties can see, transfer title and transmit shipping documents and other original trade documentation through a secure decentralised network, which the bank claims will eliminate many of the current inefficiencies in international trade.

Benefits

The new system could therefore, speed up trade transactions, reduce costs for companies around the world and reduce the risk of documentary fraud, according to Barclays. It says companies around the world stand to save significant costs and time, with the shipping industry and financial institutions expected to be some of the biggest beneficiaries.

Following the pilot, Barclays and Wave will be working with a select group of trade finance clients to develop the service further.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.