In a press release on August 7, 2019, U.K.-based Standard Chartered Bank, revealed it had successfully executed a pilot of the first cross-border Letter of Credit (LC) on blockchain for companies in the oil industry, including PTT Group, a Thailand state-run oil and gas company, PTT International Trading Pte Ltd, and IRPC Public Company Limited (IRPC).
Successful Pilot of LC on Blockchain
Per the press release, Standard Chartered Bank has successfully carried out conducted the pilot phase of the first cross-border Letter of Credit (LC) powered by the Voltron blockchain platform, for PTT Group, PTT International Trading Pte Ltd and IRPC Public Company Limited.
For the uninitiated, LC is short-term trade finance in the form of a letter from a bank guaranteeing that a payment from a buyer to a seller will be made on time and for the exact amount.
The process of manually documenting the LC is usually cumbersome and takes as long as five days before the documents are delivered.
On the contrary, the digital transfer of LC using blockchain during the pilot eliminated these pain points.
How it Worked
According to the team, the pilot began with a transfer of an oil product from Thailand to Singapore.
With the use of the Voltron blockchain network, the bank was able to digitize and simplify the transfer of trade information such as advising, issuance, and negotiation of LC between participants in the transaction.
Participants were able to view the updates in real-time as the documents were being transferred on the blockchain.
As such, it significantly reduced the processing time to 12 hours, slashed processing cost, and brought about transparency among all parties across the supply chain.
Voltron is built upon R3’s blockchain platform and it seamlessly facilitated the creation, issuance, and approval of letters of credit.
With the successful pilot test, the team firmly believes the platform will greatly simplify the entire process of issuing letters of credit, speed up settlement times, amongst other potential benefits.
Wittawat Svasti-Xuto, Chief Technology and Engineering Officer of PTT while making comments about the pilot said PTT believes it’s the right time to take advantage of the revolutionary blockchain technology, not only to enhance its petroleum and petrochemical business operations but to adapt to changes and create opportunities for trades among the entire PTT Group.
Similarly, Noppadol Pinsupa, President of IRPC said the pilot transaction of LC on the blockchain is one of the company’s advancement into the utilization of the nascent technology.