Cross-Border Blockchain Letter of Credit in Bangladesh
HSBC Bangladesh has made history by completing the country’s first cross-border blockchain-enabled Letter of Credit (LC) transaction. This milestone demonstrates how blockchain technology can make international trade faster, safer, and more transparent.
What is Blockchain?
Blockchain is a secure, shared digital ledger that records transactions in a way that’s transparent, tamper-proof, and trusted by everyone involved. Shared Copies of records are stored on multiple computers worldwide, not just by one person or organization. Once a transaction or record is added, it’s sealed and linked to previous records. Any attempt to change a record is immediately visible across all copies.
What is a Letter of Credit (LC)?
A Letter of Credit is a written guarantee from a bank that a seller will receive payment once the required shipment or delivery documents are verified. LCs play a crucial role in international trade by ensuring trust between buyers and sellers.
What is a Blockchain LC?
A Blockchain LC is simply a Letter of Credit processed digitally on a blockchain network. Compared to traditional LCs, it’s faster, more transparent, and reduces paperwork. In the Traditional LC, Banks manually verify documents, often taking 5–10 days. But in Blockchain LC, all parties upload and verify documents on a shared blockchain network. Once a record is added, it can’t be changed. Transactions can be completed in hours instead of days.
How HSBC Used Blockchain in Bangladesh?
In this landmark transaction, HSBC Bangladesh issued an LC for United Mymensingh Power Limited to import 20,000 metric tonnes of fuel oil from Singapore. By using the Contour blockchain platform, powered by R3’s Corda technology, HSBC reduced the processing time from several days to under 24 hours.
Here are some Key Benefits: Here, Processing is faster, and Documentation and approvals were streamlined, that why it saves time. In Blockchain LC Transparency is guaranteed because all parties could view the same tamper-proof documents in real-time. Moreover it is Cost Savings and reduced paperwork and manual intervention lowered operational costs.
How It Worked
-
LC Issuance & Documentation:
HSBC issued the LC and uploaded all relevant documents (invoices, shipping papers, certificates) to the blockchain. -
Verification via Blockchain:
The platform ensured everyone accessed the same records. Smart contracts could automatically flag compliance issues or confirm LC terms. -
Payment Settlement:
Once verified, payment was processed through traditional banking systems like SWIFT. Blockchain did not replace the money transfer, but it streamlined the LC process, reducing errors and delays.
Why It Matters
This achievement positions HSBC Bangladesh as a leader in digital trade finance. It shows how blockchain can modernize traditional banking practices, making cross-border trade faster, more secure, and transparent.
Looking ahead, HSBC plans to expand blockchain applications across more trade finance products, collaborating with banks and industry stakeholders to unlock the full potential of digital LCs in Bangladesh and beyond.
In my view, blockchain LCs are the future of trade finance in Bangladesh, but banks and businesses need proper training to maximize the benefits.
HSBC drives Bangladesh’s first cross-border blockchain LC transaction
Letters of Credit in 2025: The Ultimate Guide to Digital LCs, Blockchain and Compliance Updates