Financial institutions around the world have been fascinated by Bitcoin not because of the volatile virtual currency itself, but because it introduced a new way of executing and recording financial transactions without a central authority.

All Bitcoin transactions take place on a global financial ledger known as a blockchain, which is maintained and updated by a network of thousands of computers around the world, similar to the way that Wikipedia is kept up by diffuse volunteers rather than by a single company.

Wall Street has been drawn to the blockchain concept because it allows information to be recorded in real time without the bottleneck that central authorities generally introduce. The decentralised nature of the technology also makes it harder for attackers, or hackers, to take control of the network.

The DTCC project will not use Bitcoin's blockchain. Instead it is building something similar to a blockchain, known as a distributed ledger, which multiple financial institutions can update and view at the same time. Unlike Bitcoin's blockchain, the DTCC ledger will be open only to invited participants.

Mr Bodson said the basic promise of a distributed ledger is that it provides "one version of the truth that everyone shares and everyone utilizes."

The new ledger will replace an existing database, known as the Trade Information Warehouse, that records information about every credit default swap trade that comes through the DTCC. Credit default swaps, which played a major role in the 2008 financial crisis, are essentially bets on the success of bonds.

The DTCC oversaw about $US11 trillion ($15 trillion) in credit default swaps trading last year, or 80 per cent of all trades in the global market. Banks rely on the Trade Information Warehouse to determine when payments are due and what size they will be.

Because the database will be edited in group fashion, the hope is that it will provide a more streamlined and reliable source of information.


Mr Bodson said that if the database was successful, the DTCC could use the technology to move money rather than just record information.

Over the past few years, most banks have announced efforts to explore the potential utility of blockchain technology. This has gone to the highest levels, with some central banks talking about moving their own national currencies onto some sort of blockchain.

But while there have been endless announcements about tests and proofs of concept, almost no one has disclosed plans to actually use a blockchain or distributed ledger in the real world.

Until now, the most discussed announcement came from the Australian stock exchange, which said in early 2016 that it had hired a US software company, Digital Asset Holdings, to build a distributed ledger for its back-end systems. The Australian exchange, though, has said it has not made a final decision on whether it will move to the new technology.

The DTCC has been talking publicly about its interest in the blockchain for a while, and last year it announced it had successfully completed a test of a distributed ledger database in its credit default swaps trading business. Mr Bodson said that since then the DTCC had determined a distributed ledger would be cheaper to run than its existing system.

The DTCC tests were done using a distributed ledger technology created by a startup, Axoni, that will also be involved in the project, along with R3, a consulting firm working with dozens of banks on blockchain projects, and IBM.

"The fact that they are taking this as seriously as they are is indicative of the broad-felt sense in the financial community that this technology is here to stay," Charley Cooper, a managing director of R3, said of the DTCC.

The New York Times