Tokenization of Assets in Trade Finance

To address these obstacles, the industry has been exploring the use of blockchain and tokenization which can help create more transparent, verifiable and machine-readable trade instruments capable of supporting straight-through processing. Yet activity has largely been confined to pilot programs, proof-of-concept work, and a limited number of early initiatives, with broader adoption remaining elusive. A key constraint was not always the technology itself, but the lack of legal and regulatory foundations needed to support wider use.

As lawmakers introduce clearer frameworks for controllable electronic records and digital transferable instruments, long-standing legal and regulatory barriers are being addressed. For proponents of tokenized trade finance, this raises a leading question: could the industry finally be approaching the point where digital-native trade instruments move beyond isolated pilots toward broader commercial adoption?

At the same time, financial markets are increasingly moving toward an always-on operating model, creating demand for more efficient, transparent and interoperable ways to move assets and information across the trade ecosystem.

The Real Bottleneck is Manual Processing

Paper documentation remains a major inefficiency in trade finance. Physical documents are slow to transfer, difficult to authenticate and challenging to track across jurisdictions, creating friction throughout the trade lifecycle. Many of these challenges persist even when paper is replaced by electronic files such as PDFs. While documents might move digitally, they often still require manual review, validation and processing, introducing potential delays, increased operational costs and opportunities for error.

Another potential consequence is heightened fraud exposure. The International Chamber of Commerce (ICC) estimates that up to 1% of all trade finance transactions annually – worth over $50 billion – are susceptible to fraud.¹  Paper documents can be duplicated, altered and presented multiple times against the same underlying asset, making double-financing a persistent and costly risk.

These challenges extend beyond operational efficiency and fraud prevention. Whether documentation exists in paper form or as electronic files, trade finance information often remains fragmented across institutions, systems and jurisdictions. This limits transparency into underlying transactions and makes it difficult for banks and investors to access the consistent, standardized data needed to assess exposures with confidence. The result is a market where trade assets can be difficult to distribute, constraining investor participation and contributing to the $2.5 trillion global trade finance gap — the shortfall between the demand for trade finance and the amount of financing made available by banks and investors.²

The Case for Tokenization and Blockchain

Trade finance relies on trusted financial institutions, legal frameworks and market infrastructure to facilitate the movement of assets across borders. As capital markets move toward an always-on operating model, tokenization and blockchain-enabled infrastructure have the potential to increase transparency, improve operational efficiency and enhance settlement certainty, while helping trade assets move more efficiently through the financial system.

Blockchain-enabled infrastructure has the potential to support the next generation of trade finance by creating trusted, verifiable and traceable records of ownership and transaction history. Rather than relying solely on bilateral records or paper originals, tokenization enables a shared, verifiable and traceable record of activity across participants, reducing operational uncertainty and improving transparency across trade finance workflows.

Building on this, tokenization enables traditional trade finance instruments, such as bills of exchange, receivables or letters of credit to be digitally represented as transferable tokens on blockchain networks. This effectively creates a digital representation of the underlying instrument, allowing control and related rights to be transferred electronically while preserving the legal and commercial characteristics of the original asset. 

The potential benefits are direct responses to the challenges outlined above. Tokenization can help improve transparency over ownership and transfer history, reduce the risk of duplicate presentation and support more efficient transfer of trade instruments. By creating more standardized, verifiable and transferable records, tokenized trade instruments have the potential to reduce manual processing, enhance settlement certainty and improve operational efficiency. Institutions piloting blockchain-based trade finance solutions have reported fraudulent transactions falling by as much as 42% and settlement times shortening by around 58%.³ 

Greater transparency, stronger control mechanisms and lower fraud risk combined can increase confidence in trade finance as an asset class. By making exposures easier to verify, monitor and distribute, tokenization has the potential to support broader investor participation and unlock additional sources of capital for trade finance markets.

Realizing these benefits will depend not only on tokenization itself, but also on interoperability between traditional financial infrastructure and emerging digital market networks.

The Emergence of Legal Frameworks as an Inflection Point

A major barrier to tokenized trade finance has been the legal treatment of tokenized trade documents themselves. In many jurisdictions, the legal frameworks underpinning global trade did not recognize key trade instruments in certain electronic or tokenized forms. This meant that even relatively simple digital representations, such as PDFs, often lacked legal certainty, let alone more advanced forms such as tokenization.

One recent advance for the tokenization of trade finance comes from the United States. New York State enacted UCC Article 12 on December 5, 2025, with the amendments taking effect on June 3, 2026.⁴ The changes modernize commercial law with respect to blockchain, tokenization and other digital assets, creating a legal framework for a new category of digital-native assets known as Controllable Electronic Records (CERs). The significance is that UCC Article 12 explicitly addresses the ownership, transfer and enforceability of certain digital-native assets, providing a more direct legal foundation for tokenization-based models and other forms of digital-native commerce.⁵ 

These developments build on a broader wave of legal reform that began with the United Nations Commission on International Trade Law's (UNCITRAL) Model Law on Electronic Transferable Records (MLETR), introduced in 2017. MLETR was designed to give electronic trade records the same legal standing as their paper-based equivalents, while providing a common, technology-neutral legal framework that jurisdictions could adopt and adapt.⁶  Subsequently, multiple jurisdictions have introduced MLETR-aligned legislation or related digital trade reforms, including Singapore, the U.K. and France, while other major markets continue progressing similar frameworks.⁷ 

Collectively, these developments represent an important shift for trade finance. For the first time, tokenized trade instruments can sit on increasingly recognized legal foundations. 

Bridging Traditional and Tokenized Trade Finance

The transition toward tokenized trade finance is unlikely to be rapid or universal. Even with stronger legal foundations emerging, scaling new operating models across the fragmented realities of global trade remains challenging. Trade transactions involve multiple participants, jurisdictions, systems and processes, making wholesale transformation difficult to achieve within a short period.

As a result, the most realistic path to adoption is likely to involve targeted implementations focused on specific use cases, participant groups and workflows, rather than attempts to digitize the entire trade ecosystem simultaneously. Such approaches offer a more practical route to moving beyond pilot programs and proofs of concept while demonstrating tangible commercial value.

For the near future, tokenized trade finance is therefore more likely to evolve alongside existing infrastructure than replace it outright. Traditional trade finance functions, including financing, risk management, compliance and settlement, will continue to play a central role, even as the underlying instruments become increasingly digital-native. 

As legal frameworks continue to mature, institutions with established transaction banking, payments, custody and settlement capabilities will have a first-to-market opportunity — working alongside specialist fintech and technology providers — to bridge traditional trade finance operations and tokenized markets.