Eleven major banks, including Commonwealth Bank of Australia, UBS and HSBC, say they have tested a system that could make trading much faster and cheaper, using the technology that underpins crypto-currency bitcoin.
The banks are part of a consortium of 42 major lenders, brought together last year by New York-based software company R3 to work on ways blockchain technology could be used in financial markets - the first time so many have collaborated on using such systems.
A blockchain is a huge, decentralised ledger of every bitcoin transaction, verified and shared by a global computer network, that can also be used to secure and validate any exchange of data, including real assets, such as commodities or currencies.
Banks reckon the technology could save them money by cutting out middlemen and making their operations more transparent. But analysts caution it is early days - bitcoin was invented just six years ago and blockchain experiments are still under way.
For this test, R3 used a Microsoft platform, which runs on a blockchain built by Ethereum, a non-profit organisation.
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The 11 banks in the simulation, operating across four continents, each used their own computer, or "node", and transferred "Ether" to each other - Ethereum's equivalent of bitcoin, R3 said.
They were able to settle the transactions almost instantaneously, it added. That compares to settlement times of days or even weeks, depending on the asset class, under the current systems used by banks.
R3 Managing Director Charley Cooper said the technology could be used by banks to transfer real assets within the next one or two years.
"Rather than just talking about what we might do, we've moved into a new phase, which is actually executing these plans and demonstrating how this technology might work in practice," said Tim Grant, who runs R3's test labs.
The other eight banks involved in the experiment were Barclays, BMO Financial Group, Credit Suisse, Natixis, Royal Bank of Scotland, TD Bank, UniCredit and Wells Fargo - all members of the R3 consortium.
