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By Jemima Kelly
LONDON, Sept 15 (Reuters) - Nine of the world's biggestbanks including Goldman Sachs and Barclays havejoined forces with New York-based financial tech firm R3 tocreate a framework for using blockchain technology in themarkets, the firm said on Tuesday.
It is the first time banks have come together to work on ashared way in which the technology that underpins bitcoin - acontroversial, web-based "crytocurrency" - can be used infinance.
Over the past year, interest in blockchain technology hasgrown rapidly. It has already attracted significant investmentfrom many major banks, which reckon it could save them money bymaking their operations faster, more efficient and moretransparent.
The new project, the result of more than a year's worth ofconsultations between R3, the banks and other members of thefinancial industry, will be led by R3 CEO David Rutter, formerlyCEO of electronic trading at ICAP Electronic Trading,one of the world's largest interdealer brokers.
"We held several roundtables...to deeply consider what thepossible implications of the blockchain were, and what it couldpossibly do to save money, and time, and to create a betterparadigm for the world of Wall Street and finance," Rutter toldReuters on Tuesday.
The other seven banks that have signed up to the initiativeso 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 ofevery bitcoin transaction ever made that is verified and sharedby a global network of computers and therefore is virtuallytamper-proof. The Bank of England has a team dedicated to it andcalls it a "key technological innovation".
The data that can be secured using the technology is notrestricted to bitcoin transactions. Two parties could use it toexchange any other information, within minutes and with no needfor a third party to verify it.
Rutter said the initial focus would be to agree on anunderlying architecture, but it had not yet been decided whetherthat would be underpinned by bitcoin's blockchain or anotherone, such as one being built by Ethereum, which offers morefeatures than the original bitcoin technology.
Once that had been agreed on, Rutter said, the first use ofthe technology might be the issuance of commercial paper on theblockchain.
"I think that these technologies will probably bepost-trade," he said. "I think savings are in the settlementside, in post-trade, in issuance, but not in exchange trading orOTC trading any time in the near future." He added that R3 willsoon announce a few more banks joining the project.
"These new technologies could transform how financialtransactions are recorded, reconciled and reported - all withadditional security, lower error rates and significant costreductions," said Hu Liang, Senior Vice President and head ofEmerging Technologies at State Street, in a statement. (Reporting By Jemima Kelly; Editing by Hugh Lawson)
