Question

write a journal entry about negotiable instruments and banking in the digital age for a few minutes (250 words minimun) . tell how you might use this in thr business world or how this concept moght present a legal problem to be solved by a business. this is an EIA.

Answer 1

Ans : First we need to understand about negotiable instrument

A Negotiable instrument is a document containing a payment order or undertaking, given that:

1. It is capable of being transferred from one holder to another by delivery (or endorsement and delivery) so that the holder of the instrument may sue on it in his name. If the instrument is payable to a bearer, it may be transferred by delivery to the transferee. If the instrument is payable to a specified payee or his order, it must be endorsed (means it must be signed on the back by the transferor) and delivered to the transferee.
2. It gives the bona fide purchaser for value legal title to the instrument free from any equities or defects of title of the transferor and any other prior holder of the instrument, as long as the purchaser had no notice of any such equity or defect in the title before the transfer being made.

There are three types of negotiable instruments, bill of exchange, promissory notes, and checks. Bill of exchange & promissory notes are the most widely used in trade transactions.

Negotiable instruments are well-established antiquated tools that have been invented to facilitate trade between parties instead of carrying money.

Blockchain technology has been described as a game-changer in trade finance for its capacity to digitize the most complicated sector. But legal challenges hamper the transformation process, as current outdated laws in most countries and jurisdictions do not recognize the digital version of the negotiable instruments.

It is complicated to force all participant to use blockchain technology or other digital networks, one of the main characteristics of a negotiable instrument that it could be transferred by delivery to any sub holder who may don’t use a digital platform.

If we want to use digitized negotiable instruments then all the parties (e.g. carriers, corporates, and banks) must agree to the same (Legal) rules and the title registry, we can use this structure all over the globe, regardless of the underlying Laws in the respective countries.

Technology will always be faster than law, and both are existing to serve and protect the people and businesses, therefore, lawmakers should keep an eye on the technology applications and set a mechanism to make sure that the regulations don’t consider as an obstacle against the business and people’s needs.