The increasing development of international trade and the complexities prevailing in global markets have exposed traders to numerous risks, including non-payment of transaction price and non-delivery of goods on time or correctly. In the meantime, "letters of credit" as one of the most reliable payment methods and financing instruments play a vital role in international trade transactions. However, the multifaceted legal nature of this institution, the way in which the precise principles governing it are applied, and emerging challenges such as the issue of fraud and the transition to electronic documents, bring significant legal ambiguities and challenges. The main issue of this research is how the legal structure of letters of credit can ensure the legal and economic security of cross-border transactions while creating a balance between the interests of the buyer and the seller. Accordingly, the aim of this article is to conduct an in-depth study and legal explanation of the validity, nature and various functions of documentary credits in the field of international trade, focusing on modern banking regulations and procedures. This research was conducted using the descriptive-analytical research method and citing library resources, international conventions, legal doctrine and commercial procedures. The key findings of the research show that the unique function and efficiency of documentary credits are absolutely dependent on two e of independence plays a vital and deterrent role against commercial abuses. Also, studies indicate that the Uniform Rules for Documentary Credits (UCP 600) have contributed significantly to the unification of banking procedures worldwide by eliminating many ambiguities and conflicting interpretations in previous versions; however, in the current era, the development of electronic documentary credits requires further synchronization of domestic laws with modern international procedures (such as eUCP) to ensure maximum validity and legal security.