Chinese Bank Uses Blockchain to Deploy Letters Of Credit
On July 27, 2017, Chinese CITIC Bank announced that it has established a system for the settlement of credit that uses an electronic transmission network backed by blockchain technology. The transmission network, referred as BCLC, improves the efficiency of credit operations by transmitting messages within seconds. Reports from Beijing indicate that this is the “first time the domestic banking sector block technology will be applied to the settlement of credit” and it is optimizing the traditional banking business model for a number of elements, such as opening letters of credit, pay orders, and acceptance messages.
BCLC uses blockchain technology combined with international business systems to connect buyers with banks on the network to complete tasks such as issuing, notifying, accepting, and paying with full transparency. By following each node, both buyers and sellers can track the letter of credit traffic and avoid mishaps like errors and fraud. Ultimately, the bank seeks to improve the user experience and optimize banking operations.
In October 2016, CITIC bank president Sun De-shun proposed that in order to accelerate practical application of blockchain technology, it was necessary to create an alliance between Chinese banks. As a result, CITIC partnered with Minsheng Bank to launch China’s first blockchain enabled credit application. In addition, the two agreed to institute common principles of cooperation, definitions of technical terms, overall standards, confidentiality, and legal provisions for blockchain technology.
As of July 21, 2017, CITIC Bank had utilized BCLC to administrate real domestic letter of credit business and trading volume of more than 100 million yuan. CITIC bank states that it will further improve the function of its blockchain-based system and expand the scope of blockchain applications by bolstering research into burgeoning technology.
Quote translated using Google Translate.