(ECNS) - Bank of Shanghai and China Construction Bank signed an agreement to launch China's first blockchain-based Letter of Credit on Tuesday.
Bank of Shanghai also entered a strategic cooperation arrangement with Jiangsu HopeRun Software, a leading IT solutions and service provider, to officially unveil a platform using blockchain, the technology behind digital currencies such as Bitcoin.
In trade, an LC is basically a commitment by a bank guaranteeing a buyer's payment to a seller will be received on time and for the correct amount. Traditionally, the paper-based LC can be slow and vulnerable to error as various documents need to be presented to facilitate the payment.
Since Blockchains are ledgers of digital transactions maintained by a network of computers without a centralized authority, once entered, information cannot be altered or tampered with. So, the Blockchain-based LC has the potential to speed up the documentary process and minimize security risks.
Bank of Shanghai will make it a priority to develop Supply Chain Finance by applying Big Data and Blockchain to establish an open, win-win financial service system and assist small-and-medium-sized companies to raise funds.
