Major Vietnamese bank HDBank has now become the first bank in the country to issue letters of credit, or L/C, using blockchain technology.
According to a Wednesday report by local media outlet Viet Nam News, the issuance, document presentation and successful payment of L/C on the blockchain marks a major milestone toward HDBank’s stated goal to become a “happy digital bank.”
The participants in the first transaction were a local fiber importer and a Taiwanese yarn manufacturer, along with the L/C advising bank in Taiwan.
Letters of credit are important documents in international trade, providing a guarantee from a creditworthy institution, such as a bank, that a buyer’s payment to a seller will be received on time and for the correct amount. In essence, the bank underwrites the payment.
Using blockchain technology for L/C has many advantages, such as offering a higher level of security and a permanent record of the transaction. It also reduces the time needed to process such transactions to a matter of hours.
HDBank joined the HSBC-backed Contour network for L/C back in May 2020. As Cointelegraph reported, the R3 Corda-based platform received a commercial launch in the second quarter of 2020 following a successful trial in 2019.