Increasing the Efficiency of Letters of Credit with Private Blockchain Technology and Smart Contracts and Comparative Assessment of Compliance with the Rules
Masoumeh ZAMANIAN (Master in Islamic Jurisprudence and Law, Al-Zahra University(
Zahra VATANI )Assistant Professor, Imam Khomeini and Islamic Revolution Research Institute(
Abstract
Letters of credit are one of the most successful solutions for large and international business players in the field of increasing security and reducing transaction risk, where the buyer opens a letter of credit with a reputable financial institution such as a bank, thus assuring the seller. That is the amount promised and delivered. This process, which was based on paper and involved a lot of risks, still requires a lot of time and money, despite the many advantages of electronic systems. Therefore, any attempt to reduce time or cost increases credential efficiency. The purpose of this article is to explain the possibility of transferring letters of credit procedures from previous methods to the blockchain platform and creating smart contracts as model proposals, using the descriptive analysis procedure to coordinate and evaluate the steps in both procedures. Deals in this area and its compatibility with block chain technology and smart contracts. The results of this study show that implementing a Letter of credit on the block chain platform as a system that is highly secure and uses smart contracts (self-execution) increases transaction security and the likelihood of retaining provided documents, resulting in human resources involvement and the process from beginning to end credit makes documents shorter, faster and low cost. Usance LC on the block chain platform is also based on smart assets, eliminating the need to comply with Swift and FATF rules, including issues such as the lack of direct lines between banks in different countries.