Bank of Canada Runs a Blockchain-based Pilot for a LOC Negotiation Platform

2018-10-23 15:59

CGI, Group Inc., a renowned IT, and business consulting firm, announced on October 21 a collaboration with the National Bank of Canada and Skuchain, a blockchain technology company aimed at optimizing the supply chain, in a pilot program to streamline and improve the process for negotiation standby letters of credit and guarantees.

Blockchain to Revolutionize Traditional Letter of Credit Settlement

According to the report, CGI will integrate its CGI Trade360 trade finance platform with Skuchain’s Contract Builder, to utilize smart contracts and record the whole lifecycle of the transaction in the distributed ledger.

Until today, negotiating standby letters of credit and guarantees had been a time-consuming process surrounded by opacity and inevitable errors, as communication was mostly conducted via email.

CGI’s contract negotiation tool will improve processing times and automate the coordination for the issuance of a standby letter of credit or guarantee, by leveraging pre-approved templates by the banks in the blockchain. As the negotiations process will be executed using smart contracts, all terms will be fully visible to all beneficiaries in real-time, in a secure environment guaranteed by blockchain technology.

All parties’ representatives expressed their enthusiasm for this pilot, recognizing the possibilities this collaboration unfolds. Patrice Roy, Vice President, Payments, Cash Management and International Solutions at National Bank of Canada, said:

“This pilot project is a great opportunity to leverage blockchain technology to simplify the process for negotiating standby letters of credit and guarantees while making it more transparent and secure. This will enable us to offer a simple, fast and efficient experience to our commercial clients which facilitates managing their business.”

Srinivasan Sriram, CEO at Skuchain, was particularly excited as the standby letter of credit contract builder is the first live implementation of the emerging DLPC standard. He added:

“This standard is the result of more than two years of work by the Distributed Ledger Payment Commitment (DLPC) Working Group at the Bankers Association for Finance and Trade (BAFT) which our VP of Technology Ranganathan Krishnan has been captaining.”

Frank Tezzi, Vice President of Trade and Supply Chain Solutions at CGI, highlighted the benefits of implementing blockchain technology in trade finance.

“The use of blockchain offers a shared ledger that serves as the single source of truth during pre-issuance negotiation and through issuance and re-issuance processes. This example provides certainty and transparency for beneficiaries regarding the guarantee process as they enter into a financial transaction.”

BoC Insists on Blockchain Technology Despite Past Negative Experience

Earlier this year, the Bank of Canada participated on another blockchain project, dubbed Project Jasper, for the instantaneous settlement of securities. However, the bank’s representatives were highly uncertain about the effectiveness of the blockchain technology in reducing operational costs. Hence, the collaboration with CGI and Skuchain could be indicative of Bank of Canada’s shift towards the distributed ledger technology, acknowledging that the adoption of state-of-the-art solutions will strengthen the bank’s relationships with its customers.

Bank of Canada Runs a Blockchain-based Pilot for a LOC Negotiation Platform was originally found on [blokt] - Blockchain, Bitcoin & Cryptocurrency News.

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