Blockchain Technology for Letters of Credit and Escrow Arrangements

(2018) 135-2 Banking Law Journal pp. 89-103

20 Pages Posted: 1 May 2020 Last revised: 15 Oct 2021

See all articles by Koji Takahashi

Koji Takahashi

Doshisha University Law School ; For a full bibliography with links to full text not listed on ssrn, see https://www1.doshisha.ac.jp/~tradelaw/index.html

Date Written: November 30, 2017

Abstract

In this article, the author considers the implications of the blockchain technology for trade finance, in particular the letter of credit transaction and the escrow arrangement.

The blockchain technology was invented to create the Bitcoin cryptocurrency around 2009. Since then, various types of blockchains have been developed. In common to all of them, the technology generates, via a chain of blocks, append-only ledgers, which are distributed on an online network and maintains them in sync with each other without the involvement of any trusted intermediary.

This article consists of five sections. The first section, “Two Aspects of the Blockchain Technology,” will highlight two particular aspects of the blockchain technology that are relevant to the subsequent analysis. The second section, “Blockchain for the Letter of Credit Transaction,” will then examine the implementation of the technology for trade finance, looking in particular at letter of credit transactions and, in the third section, “Blockchain for the Escrow Arrangement,” escrow arrangements. This analysis will explore the question of whether the blockchain technology with its ancillary functionality brings about any advantages over the current practice. Before concluding in the fifth section, “Recapitulation,” this article will consider in the fourth section, “The Potential of the Multisig-Fortified Escrow Service for Making an Inroad into the Market of the Letter of Credit,” whether an escrow service fortified with the blockchain technology has the potential of making an inroad into the market of the letter of credit and other methods of payment.

Keywords: blockchain, trade finance, letter of credit, escrow, multisig

Suggested Citation

Takahashi, Koji and Takahashi, Koji, Blockchain Technology for Letters of Credit and Escrow Arrangements (November 30, 2017). (2018) 135-2 Banking Law Journal pp. 89-103, Available at SSRN: https://ssrn.com/abstract=3566840

Koji Takahashi (Contact Author)

For a full bibliography with links to full text not listed on ssrn, see https://www1.doshisha.ac.jp/~tradelaw/index.html ( email )

Karasuma-Imadegawa Kamigyo
Kyoto 602-8580
Japan

Doshisha University Law School ( email )

Kyoto
Japan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
639
Abstract Views
2,218
Rank
89,369
PlumX Metrics