Big names from the worlds of finance and technology such as Deutsche Boerse, JP Morgan, Cisco and IBM have come together to work on an open-source framework for using the "blockchain" technology that underpins the web-based cryptocurrency bitcoin.
The new technology works as a huge, decentralized ledger of every bitcoin transaction ever made, which is verified and shared by a global network of computers and is therefore virtually tamper-proof.
It has been drawing investment from banks and other financial players, who reckon it could save them money by making their operations faster, more efficient and more transparent.
The data that can be secured by the blockchain is not restricted to bitcoin transactions. Any two parties could use it to exchange other information, including stock deals, legal contracts and property records, within minutes and with no need for a central authority to verify it.
The new project will be run by the not-for-profit Linux Foundation, and will focus on building industry-specific applications, platforms and hardware systems to support business transactions.
The initiative will include Digital Asset Holdings, the blockchain start-up run by former JP Morgan executive Blythe Masters, who has become something of an ambassador for the nascent technology.
The initiative will also work with the blockchain consortium of banks run by financial technology firm R3, which on Thursday said it had added another 12 banks, including Santander and Nomura, and would soon include some of the world's biggest fund managers.
The Bank for International Settlements, the central bank for central bankers, said in a report last month that blockchain technology could reduce the role of intermediaries such as banks or other financial players.
But a senior executive at German exchange operator Deutsche Boerse, one member of the new Linux initiative, told Reuters in a recent interview that it does not see itself being made irrelevant by the new technology.
Deutsche Boerse is actively involved in discussions with several fintech firms and financial institutions that are developing distributed ledger technology, said Ashwin Kumar, who took up his role as global product development head at Deutsche Boerse on Sept. 1.
"The blockchain technology won't make market infrastructure providers obsolete," he said. "(But) ignoring it would be like saying: 'Why do we need email instead of regular mail?'."
He said blockchain looked promising in addressing some problems such as settlement delays but it also faced constraints such as a lack of scalability and the potential for conflict between transparency and the confidentiality of information.
Other collaborators on the new project include international payment network SWIFT, Accenture, Intel, State Street, Wells Fargo, and the London Stock Exchange.