Several major banks including JP Morgan Chase and Citigroup have tested blockchain. The results are encouraging as the technology proves to work well in the field of credit-default swaps (CDS).

Keeping track of the multiple over-the-counter (OTC) products is complicated, reads a Dow Jones Business News article. The test showed that the complex processes such as payments, amendments and novations currently done by the banks can be managed through a peer-to-peer network.

Participants of the test included Bank of America Corporation, Credit Suisse, JP Morgan, Citigroup, Markit, DTCC, and a technology firm Axoni which provided necessary software.

In early March, 85 test cases were conducted to assess lifecycle functionality, integration with external systems, network resiliency, and data privacy, reads the company’s website.

“This collaboration in CDS illustrates how smart contracts can facilitate higher levels of automation in OTC markets. The success of this initiative reinforces our commitment to continued development of blockchain technology in CDS, other asset classes and financial industry processes more generally,” said Brad Levy, managing director and head of Markit’s Processing division.

But it still remains a question when, if ever, the blockchain technology will be implemented in real CDS management. Some think that the disruption of the existing, well-tested system might be harmful, notes the Dow Jones article. Others may fear that blockchain can cut their market share. In addition, besides dramatically reducing costs in the settlement sphere, blockchain is likely to eliminate 2 million jobs in banking, a recent Citigroup report forecasts.

Credit-default swaps are contracts that pay off if a bond goes bad. They involve the transfer of credit risk from one party to another and are in a way similar to insurance because they provide the buyer of the contract with protection in case certain negative “credit events” such as bankruptcy occur.

The banks involved in the test have been keen on blockchain in the recent months. JP Morgan, Citigroup and Bank of America are all members of the R3 consortium aimed at designing blockchain for banking. In an effort to investigate the possible implications of the technology, Citigroup has invented its own cryptocurrency, Citicoin.

Andrew Levich