ITFA releases the dDOC specifications to help digitize guarantees & negotiable instruments

ITFA kicked off the DNI Initiative in Q3 2019 in order to address an ambitious industry need: digitising negotiable instruments. The objective is to deliver new technology and legal options to digitise negotiable instruments whilst the underlying technology can be applied to any documentary flow (e.g., bank guarantees). During Q1 2020, ITFA finalised the first phase of the project and published the “Manual of Digital Negotiable Instruments – Issues and Implementation” in April 2020 which includes two key specifications:

(1) first, the technology principles for managing digital original documents in the most interoperable way following collaboration with the fintech members and advisors involved in the DNI Initiative, and;

(2) second, the definition of the electronic payment undertaking – known as ePU – to be used under contract law as an unconditional and irrevocable payment instrument.

The second phase of the DNI Initiative is already on-going through the TERA task force which aims to integrate digital negotiable instruments as part of common law by reforming the Bills of Exchange Act 1882 in the UK through the Law Commission working with the UK Government.

“As the leading trade finance association, ITFA encourages regulators to open up to new technologies such as cloud computing, digital signatures and distributed ledger technology. We publish today the dDOC specifications as a vendor-agnostic framework to digitise guarantees and negotiable instruments using a mix of advanced technologies. We are working with early adopter banks and with an initial set of regulators around the world to adapt policies to the digital practices.”, explains Sean Edwards, Chairman of the International Trade and Forfaiting Association (ITFA).

The dDOC (for digital document) specifications are designed around three building blocks:

(1) The digital container designed using “Ricardian” contracts and JavaScript Object Notation (JSON);

(2) the electronic signatures and stamps; and

(3) the shared public distributed ledger technology (DLT) acting as digital notary.

The combination of the above three pieces of technology produces portable original documents, i.e., compatible with any existing or future software capability and transport mechanism. The dDOC specifications embed blockchain but only where it is needed, as proof of the truth and not to store business data.

“Banks need technologies that integrate seamlessly with established ones such as back-office applications, front-office portals and communication channels (e.g. e-banking, SWIFT). This is what the dDOC specifications enable for digital original documents.”, adds André Casterman, Chair of Fintech Committee, ITFA. “SMEs will like it as they usually favor adopting technologies brought to them by their chosen banks. A low-hanging fruit for SME-focused originators is to digitise bills of exchange and guarantees via their proprietary e-banking portals. Any dDOC-compliant technology provider will help achieve this in a white-label way.”

Feel free to consult the dDOC specifications which are available in the ITFA Member Area, section Fintech. Also, we published recent blogs on the DNI Initiative entitled “DLT in action – Enigio’s trace:original digitizes guarantees and negotiable instruments, in the most pragmatic way” and “ITFA Fintechs join forces to digitize negotiable instruments using advanced document technology”.