On 26TH September, the US BAFT (Bankers Association for Finance and Trade), Shearman & Sterling, and R3 have released a technical paper, ‘Code Is Not Law: The Legal Background for Trade Finance Using Blockchain’, which examines the paths to securing legal recognition for “electronic negotiable instruments”. The introduction says that, despite general recognition that blockchain technology promises to be the basis for major improvements in the efficiency of trade financing, the absence of US regulations and laws applicable to “electronic negotiable instruments” is an obstacle to the deployment of blockchain technology. Most notably, while it has become technologically possible to execute transactions using negotiable instruments registered via blockchain technology, existing US law recognises negotiable instruments only if they are on paper and signed, which hinders the advancement of blockchain-based trade finance. The paper outlines 3 paths to overcoming this challenge. It recommends that a viable, and swift solution is the creation of a rulebook that applies existing law to electronic instruments.
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