By Jemima Kelly
LONDON, March 3 (Reuters) - Forty of the world's biggestbanks, including HSBC and Citi, have tested asystem for trading fixed income using the technology thatunderpins bitcoin, fintech company R3 CEV said on Thursday.
The banks are part of a consortium of 42 major lenders,brought together last year by New York-based R3 CEV to work onways 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 transactionsthat can be used to secure and validate any exchange of data,including real assets, such as commodities or currencies.
Bitcoin's blockchain was the first, but others have sincebeen built that offer additional features and can be programmed.That means the technology can enable so-called smart contracts:agreements that are automatically executed when pre-determinedconditions are met.
For this experiment, the banks tried five differentblockchain-technology providers to test trading fixed income:Ethereum, often considered the most advanced and ambitious,Chain, Eris Industries, IBM and Intel.
"We have raised the bar significantly with the sheer numberof global financial institutions, distributed ledgertechnologies and cloud providers working together ... todemonstrate how this nascent technology can be applied to ... anactively traded asset class," said the head of R3'sCollaborative Lab, Tim Grant.
Banks reckon the technology could save them money by cuttingout middlemen and making their operations more transparent. Butanalysts say it is early days - bitcoin was invented just sixyears ago and developers are still working on the technology.
Indeed, the G20's Financial Stability Board said on Saturdayassessing the systemic implications of fintech innovations wouldform part of the task force's core policy work this year andglobal regulators could propose rules to prevent them fromdestabilising the broader financial system.
Chain's CEO Adam Ludwin said: "R3 is further acceleratingthe adoption of blockchain technology by demonstrating, insteadof simply asserting, the commercial advantages of this emergingapproach to financial services."
(Reporting by Jemima Kelly; Editing by Alison Williams)
HSBC Holdings (HSBA)