LONDON 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 "crytocurrency" - can be used in
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
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.
The other seven banks that have signed up to 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, decentralised 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 had been agreed on, Rutter said, the first use of
the technology might be the issuance of commercial paper on the
"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.