Letters of Credit vs. Stablecoin Settlement: Which Fits Your Trade?

A letter of credit has earned its place in trade finance. A bank promises to pay the seller if the seller presents the right documents. Both sides get protection, and a stranger in another country can ship goods with confidence.

That protection has a price in time and money. For businesses that trade repeatedly with known partners, the question is whether they are paying for protection they do not need. This comparison covers both options, including the cases where the letter of credit should stay.

How each one works

Letter of credit

The buyer asks its bank to issue a letter of credit in the seller's favour. The seller ships, presents documents such as the bill of lading, invoice and inspection certificate, and the bank checks them against the letter's terms. If the documents comply, the bank pays or commits to pay on the agreed date. Often a second bank confirms the credit, adding its own guarantee.

Stablecoin settlement

The buyer pays in local currency to a regulated partner. The funds are converted to a stablecoin, sent across borders on a blockchain network, converted into the seller's currency by a licensed partner and paid out. Detail on each step is in our guide to stablecoin settlement for cross-border trade.

Side-by-side comparison

Costs vary widely by bank, corridor, amount and counterparty. Compare quotes for your own trade rather than relying on typical figures.

What the waiting costs: an illustration

The point is the shape of the calculation. Every day of delay is financed at your cost of capital, whether you borrow or give up another use of the cash. Faster settlement reduces the balance in transit, and the financing cost falls with it. See the full method in The Float Tax.

Alternatives to a letter of credit

• Open account with credit insurance: the seller ships first, and insurance covers non-payment.
• Documentary collection: banks handle documents but do not guarantee payment.
• Advance or milestone payments: the buyer pays some or all of the price in stages.
• Bank wires: simple, but they can take days through correspondent banks.
• Stablecoin settlement: fast value transfer through licensed partners, best paired with a trading relationship you trust.

When a letter of credit is still the right tool

Faster does not always mean better. A letter of credit remains the right choice in several situations.

• You are dealing with a new counterparty you cannot yet assess, and a bank guarantee is what makes the deal possible.
• The deal is large or one-off, so the cost of the letter is small relative to the risk it removes.
• Your counterparty or its country is high risk, and you need a bank's credit standing in place of theirs.
• Your lender or insurer requires one, or the trade finance structure depends on it.
• The buyer's jurisdiction restricts virtual-asset flows, or its banks will not accept them.
• You need document-based performance protection, where payment depends on proof of shipment or inspection.

Stablecoin settlement is a payment rail, not a guarantee of the other party's performance. If the goods arrive late or short, the rail does not fix that. Many businesses use both: letters of credit for new relationships, faster rails once trust is established.

How to decide

1. List your repeat buyers and sellers and how long you have traded with each.
2. Price your current float using real balances, rates and days outstanding.
3. Check whether each corridor is supported by licensed partners and whether local rules allow it.
4. Keep letters of credit for relationships and deals that need a bank guarantee.
5. Move trusted, recurring flows to faster rails and review the results after a few cycles.

Everpay's enterprise solutions support settlement for operators with these flows, subject to KYC, corridor coverage and compliance review. See our AML policy and trust center for how we approach it. To test your own numbers, talk to our team.