Nine of the world’s biggest banks, including Goldman Sachs and Barclays, have joined forces with New York-based financial tech firm R3 to create a framework for using blockchain technology in the markets, the firm said on Tuesday.
It is the first time banks have come together to work on a shared way in which the technology that underpins bitcoin — a controversial, Web-based “cryptocurrency” — can be used in finance.
Over the past year, interest in blockchain technology has grown rapidly. It has already attracted significant investment from many major banks, which reckon it could save them money by making their operations faster, more efficient and more transparent.
The new project, the result of more than a year’s worth of consultations between R3, the banks and other members of the financial industry, will be led by R3 CEO David Rutter, formerly CEO of electronic trading at ICAP Electronic Trading, one of the world’s largest interdealer brokers.
“We held several roundtables … to deeply consider what the possible implications of the blockchain were, and what it could possibly do to save money and time, and to create a better paradigm for the world of Wall Street and finance,” Rutter told Reuters on Tuesday.
Those that have signed up for the initiative so far are JP Morgan, State Street, UBS, Royal Bank of Scotland, Credit Suisse, BBVA and Commonwealth Bank of Australia.
The blockchain works as a huge, decentralized ledger of every bitcoin transaction ever made that is verified and shared by a global network of computers and therefore is virtually tamper-proof. The Bank of England has a team dedicated to it and calls it a “key technological innovation.”
The data that can be secured using the technology is not restricted to bitcoin transactions. Two parties could use it to exchange any other information, within minutes and with no need for a third party to verify it.
Rutter said the initial focus would be to agree on an underlying architecture, but it had not yet been decided whether that would be underpinned by bitcoin’s blockchain or another one, such as one being built by Ethereum, which offers more features than the original bitcoin technology.
Once that has been agreed on, Rutter said, the first use of the technology might be the issuance of commercial paper on the blockchain.
“I think that these technologies will probably be post-trade,” he said. “I think savings are in the settlement side, in post-trade, in issuance, but not in exchange trading or OTC trading any time in the near future.” He added that R3 will soon announce a few more banks joining the project.
“These new technologies could transform how financial transactions are recorded, reconciled and reported -– all with additional security, lower error rates and significant cost reductions,” said Hu Liang, senior vice president and head of emerging technologies at State Street, in a statement.
(Reporting By Jemima Kelly; Editing by Hugh Lawson)
This article originally appeared on Recode.net.