Citi Treasury and Trade Solutions has announced the creation and piloting of Citi Token Services (CTS) for cash management and trade finance.

The CTS solution can serve the same purpose as letters of credit (L/Cs) and bank guarantees in the trade finance ecosystem.

Pilot programme

Citi says it worked with Maersk and a canal authority in successful test pilots for the guarantee solution using digitised tokens and smart contracts. The pilots demonstrated programmable transfer of tokenised deposits that provided instant payments to service providers via smart contracts.

"The innovative solution has promising applications for trade finance," according to regional treasury manager for the Americas at Maersk, Marie-Laure Martin.

The technology used in the pilot provided a completely digital process to both buyers and sellers with instant payment capabilities, which is expected to reduce transaction processing times from days to minutes.

Practical usage

One example provided by Citi to the Bloomberg news agency of how the CTS solution could provide an alternative to L/Cs contemplates how carriers refuel vessels.

When a carrier refuels, the shipping company hands that fuel provider an L/C from Citi. The fuel provider then takes that to Citi and asks to be paid.

With smart contracts, which automatically execute a contract when prearranged terms and conditions are met, that transaction could be processed much faster, without requiring cumbersome paperwork.

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