Negotiable payment instruments and documents of title have been key to the provision of cross-border finance for centuries and are, unsurprisingly given their long history, still predominantly paper-based.

In recent years, use of letters of credit has declined, and an increasing proportion of international trade is settled on open account terms. In essence, the trend towards open account settlement has demonstrated that exporters are prepared to sacrifice the benefits of such trade instruments, which provide easier access to finance coupled with effective risk mitigation, in exchange for enhanced operating efficiency.

Limitations of paper

The root of the relative inefficiency of the traditional payment instrument is its inherent nature as a paper document. As we know, paper documents, although universally ‘readable’, recognised in law and capable of being transferred by delivery from one party to another, suffer from significant disadvantages.

Paper documents are susceptible to fraud, error and delay and are expensive to produce, process, store and transport. Every action involving paper also has a negative environmental impact. The dependence on paper documents has been thrown into even sharper focus in recent months as a consequence of the global pandemic; couriers have struggled to deliver key documents and banks have struggled to process them as so many of their staff have been forced to work from home.

Certain documents, such as invoices, are easy to digitise and a simple electronic record containing the required data serves the required purpose quite effectively. Where a document confers title or other rights upon the holder and is transferable by delivery (i.e., is negotiable), however, a simple electronic record is not sufficient under the current laws of almost all jurisdictions. The functionality and legal enforceability of a payment instrument cannot, therefore, be replicated in a simple electronic record.

Limitations of closed systems

In pursuit of a digital solution that addresses the finance and risk mitigation needs of trading companies without the inefficiencies associated with paper documents, we have seen the emergence of numerous trading platforms and consortia. These are closed ecosystems where members can record transactions and payment undertakings digitally, most often using a permissioned blockchain. 

The proliferation of platforms and consortia has, however, given rise to two new challenges. First, the benefits can only be realised by those prepared to subscribe to a platform or join a consortium (for a fee) and sign its rulebook. The electronic records are, consequently, subject to contract law and have no legal validity beyond the consortium itself. Given the complexity of global supply chains and the number and diversity of parties involved, the need for all parties to be members of the same platform or consortium is likely to inhibit adoption. Second, there is a clear need for interoperability between platforms and consortia to replicate in digital form the ‘free negotiability’ of traditional trade instruments.

With this objective in mind, there are two approaches currently being attempted within the industry: creating universal standards of data, and creating universal interoperable technologies used to transmit such data between parties.

The two approaches discussed in this article are conceptually quite different but are, in fact, potentially highly complementary. The approaches are driven by a common goal which is the removal of paper to increase efficiency, security and simplicity whilst also lowering risks of error and fraud associated with handling traditional paper documentation. This article highlights the recent effort by Enigio to create a solution by combining these approaches and reaping the benefits of both.

Distributed Ledger Payment Commitment (DLPC) – developed by BAFT (Bankers Association for Finance and Trade)

DLPC defines best practices and identifies industry-wide specifications facilitating interoperability for distributed ledger payment commitments usable in a wide variety of trade transactions. In essence, standardized instruments to be used  on platforms.

trace:original – developed by Enigio

trace:original is a technical solution through which a digital original document can be created and freely transferred between parties using distributed ledger technology solely for the purposes of validation, verification and recording ownership. An advanced digital document that operates without a closed platform or ecosystem.

Although these solutions are perfectly workable on a stand-alone basis (as intended by their respective creators), the opportunity exists to leverage the integration of the trace:original technical solution with the DLPC framework. This combination would remove the need for business data to be stored directly on a distributed ledger, while still providing the benefits of the DLPC industry standardisation.

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trace:original and DLPC working together 

trace:original is a technical solution that enables the essential properties of an original paper document to be replicated in the digital world. In the context of a transferable payment undertaking, the essential properties are:

  • the ability to distinguish between an original and a copy;
  • the concept of ‘possession’ (i.e., the original is held by a specific holder); and,
  • the ability to transfer possession by delivery.

The above-mentioned properties are created in a trace:original document through the use of a private key linked to the corresponding public key found in the digital document and on a public ledger. The solution was devised and constructed to comply with applicable law, where the law governing payment instruments is technologically neutral.

The trace:original solution itself is agnostic regarding the document content and choice of digital signature, allowing the creator of each document to ensure that legal requirements in relevant jurisdictions are complied with.

Use of a trace:original document does not require membership of a closed ecosystem and users are not required to sign an associated up-front agreement or ‘rulebook’ (as is the case with the various platforms and consortia that have emerged in recent years). As such any user can manage an unequivocally original document. The original document creator requires a trace:original license but the resulting digital original document itself is then freely transferable without the need for a license or special software. The only requirement for a party to receive and subsequently transfer a trace:original document is access to a computer and an internet connection.

Amongst SMEs in particular, where the appetite to invest in costly platforms or join fee-based closed ecosystems is very low, trace:original’s inherent interoperability and minimal investment hurdle are significant contributors to their financial inclusion. 

Regarding platforms and consortia, it will be appreciated that members of the respective closed ecosystem have the ability to create, receive, manage and transfer an electronic record created within the system’s technology infrastructure. A payment undertaking created in a closed ecosystem has no legal enforceability beyond its membership. These limitations are completely avoided with trace:original and the DLPC.

Göran Almgren, CEO, Enigio, said: “We have spent quite some time understanding and working with BAFT’s excellent DLPC practices identifying industry-wide specifications for distributed ledger payment commitments. We are very happy to conclude that our trace:original solution can add an additional and very important dimension. This, by providing a freely transferable digital document that can contain the data fields laid out in the specifications. We are confident that this will greatly increase adoption of the DLPC, increase the number of relevant use cases and most importantly, interoperability in the digital world.”

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Distributed Ledger Payment Commitment (DLPC)

The DLPC is a solution that allows companies to register digital representations of payment commitments on a distributed ledger. As such, DLPC seeks to address the challenge of interoperability across multiple closed ecosystem-based platform solutions.

The DLPC specifications include 13 data fields detailing in the ledger the parties, amount due and other terms regarding a promise to pay, with only the permissioned parties having access and the potential to alter the instrument’s state. In this way each party will have an additional source of trusted data to complement internal data silos within their respective systems. This construction is further supported by a set of business and technical ‘best practices’ published by BAFT, providing industry standards to be used across any distributed ledger that utilises DLPCs. The main objective as set out in the Business Best Practices is to reduce the reliance on paper found in international trade by creating a legally viable alternative.

Stacey Facter, Senior Vice President, Trade Products, BAFT commented: “We are delighted that Enigio recognizes BAFT’s Distributed Ledger Payment Commitment (DLPC) as an important tool facilitating digitized payment commitments to be used together with their trace:original as well as more comprehensively across multiple trade products. The marketplace recognizes the significance of the development of an open-sourced versatile industry standard aiding in trade finance’s ongoing quest to move away from paper – especially in a post-pandemic world.” 

The legal aspect of DLPC is key, as the construction does not attempt to fit into differing national legislations but rather uses a specific set of laws to ensure that each payment instrument is fully compliant. The DLPC is constructed with the addition of an agreement to incorporate the law of Delaware in the United States as the law governing the payment commitment (as a Note under the Uniform Commercial Code of Delaware) and as the residual governing law. In this way the parties agree to be bound by the instrument as legally enforceable under the law of Delaware. 

The element of legal security and the best practices provides a second layer of security for corporates and financiers interested in utilising digital payment undertakings. BAFT’s open sourced and publicly available guidelines for a legally valid DLPC ( allows trade to take place with mutual understanding and recognition of the payment obligation as a negotiable instrument. Furthermore, as the DLPC acts as a standardised solution for digital representations of payment commitments it will allow a large number of industry participants to adopt the model quickly and harmoniously.

André Casterman, Chair of the Fintech Committee, ITFA and Member of ICC UK Legal Reforms Steering Group, told TFG: “The combined use of trace:original and BAFT’s DLPC is an example to follow. First, it keeps the legal framework independent from the underlying technology and second, it offers even more choice to banks and corporates given other similar developments. It is vital that technology providers come up with solutions that are compliant with ‘open banking’ practices. Trying to lock the whole market in proprietary and closed eco-systems will not work.”

DLPC and trace:original – a comparison

Enigio’s trace:original solution offers the ability to create a true digital original document that replicates the essential properties of a wet signature paper document without the latter’s well-known disadvantages. The solution is designed to work within existing operating models with minimal disruption to standard processes. As such, trace:original documents can easily be used where trading parties are not members of a network or are members of different networks. 

Similar to a paper document, a trace:original document is inherently interoperable and can be read without specialised technology by anyone given access to it. Unlike a paper document, however, a trace:original document can be read by both human and machine, facilitating easy integration into digitalized processes as is increasingly required. In a legislative framework which is neutral towards technology, a digital original that operates with functional equivalence relative to a wet-signature paper is equally enforceable in law.

The DLPC, on the other hand, is not a technical solution but defines structured payment commitments applicable to a large variety of instruments associated with payment undertakings. As noted previously, the DLPC is a highly innovative and effective solution where trade transactions and resulting payment commitments are evidenced on digital networks, providing a degree of interoperability across networks and a standardised legal framework ensuring enforceability.

DLPC and trace:original adopt different approaches to ensuring legal validity but attempt to achieve a similar goal; to create a legally enforceable negotiable instrument that can be traded internationally without the drawbacks of paper.

Whitman Knapp, Chairman, GTBInsights & Member, BAFT’s DLPC Working Group, said: “Using the BAFT DLPC as the payment element with Enigio’s trace:original provides the most up to date technology with the most comprehensive legal framework available. The BAFT DLPC has the singular advantage of providing a negotiable trade payment instrument.” 


By integrating the DLPC structure into trace:original documents, the benefits of a payment undertaking supported by BAFT’s best practices can be enjoyed while avoiding the potential drawbacks of a closed consortium. This collaboration highlights the possibility of further cooperative efforts in the future and demonstrates that differing approaches may still be compatible. Collaborative efforts within the industry may come to be vital for the widespread adoption of technological solutions, as well as bring further innovation to progress towards the common goal of eliminating the need for paper in international trade.