Digital Trade Instruments

The ITFA Digital Negotiable Instruments Initiative

Digital Trade Instruments

Promissory Notes and Bills of Exchange

Before diving into their use cases as digital instruments, one must first understand what exactly promissory notes (PNs) and bills of exchange (B/Es) are. 

A B/E is defined as a written order to a person requiring the person to make a specified payment to the signatory or to a named payee. Similarly, a PN is defined as a signed document containing a written promise to pay a stated sum to a specified person or the bearer at a specified date or on-demand.

Both are independent payment undertakings (debt obligations) made from one person to another that are codified in English law under the BoE 1882, which has since been developed and interpreted by courts. The documents typically contain all the terms pertaining to the indebtedness, such as the principal amount, interest rate, maturity date, date and place of issuance, and issuer’s signature.

A B/E differs from a PN in the sense that it is transferable; this means that one party can be obligated to pay another party who was not involved in the creation of the instrument. A B/E is usually issued by one party and endorsed by another. As it has been endorsed or there is an agreement to pay, there is little risk of non-payment.

An important characteristic of B/Es and PNs is that they are totally independent. If they are contingent on other instruments, such as purchase agreements or other underlying transactions, they are generally not accepted. In essence, this makes them irrevocable and unconditional promises to pay, with no defence to non-payment, to a holder who is free to transfer it to another party as they see fit.

Digital trade instruments

The ITFA Digital Negotiable Instrument (DNI) initiative has created a functionally equivalent instrument that operates in the same way as the B/E and PN, delivering the benefits of an eNI under English law. This solution, hereafter referred to as an ePU, is an important step towards achieving full applicability under English Law, specifically the BoE 1882. The ePU delivers a digitally native irrevocable, unconditional, and independent payment undertaking that fulfils all requirements of a traditional NI, albeit subject to contract law rather than common law.

Access trade, receivables and supply chain finance

We assist companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.
Get started

Download our free 2021 publication



Contents

Access trade, receivables and supply chain finance

We assist companies to access trade and receivables finance through our relationships with 270+ banks, funds and alternative finance houses.
Get started

Latest News

18May

Why the Queen’s speech is about to accelerate the acceptance of digital trade documents into English law

0 Comments

If a new trade bill is passed during the current UK parliamentary term, digital paperwork could be legalised under English… Read More →

18May

It’s not you, it’s KYC: declining correspondent banking relationships harms developing economies

0 Comments

Correspondent banks are a key part of cross-border payments facilitating the flow of trade between different jurisdictions. … Read More →

18May

Conflict in the West – What this means for the European economy

0 Comments

TFG talked to Erik van der Marel, chief economist at the European Centre for International Political Economy (ECIPE), about his… Read More →

16May

Balance is key: new BAFT VP Deepa Sinha on payments and fighting financial crime

0 Comments

TFG’s Deepesh Patel interviewed the new VP to learn what led her to BAFT, her view on fighting financial crime,… Read More →

10May

Electronic trade documents coming to the UK: Enigio looks at the impact of digital legislation on bills of exchange

0 Comments

During the Queen’s Speech on 10 May 2022, Prince Charles, standing in for the Queen, announced that the Electronic Trade… Read More →

09May

UK levies £1.7bn of new sanctions against Russia, Belarus

0 Comments

The UK Department for International Trade (DIT) has announced the country’s latest round of sanctions against Russia and Belarus following… Read More →

09May

Stablecoins: a critical upgrade to trade finance infrastructure

0 Comments

Stablecoins are a class of cryptocurrency that seeks to provide stability for its users by maintaining its value by pegging… Read More →

05May

RELEASED: Trade Finance Talks – Trade on a knife’s edge

0 Comments

The latest issue of TFG’s Trade Finance Talks, ‘Trade on a knife’s edge’, is out now!… Read More →

27Apr

Editors note: commodity trade finance on the knife’s edge

0 Comments

TFG’s Deepesh Patel highlights the key themes in commodity trade finance for commodity trading week in London…. Read More →

21Apr

PODCAST: URDTT 1.0 – David Meynell discusses the new rules for digital trade transactions

0 Comments

In our latest podcast, TFG’s Deepesh Patel spoke to David Meynell to discuss the new rules for digital trade transactions…. Read More →

About the Author

Gabrielle Ann Vilda is an author at Trade Finance Global

Back to Top