Bank of America Merrill Lynch (BAML), the corporate and investment banking division of Bank of America, is reportedly developing a blockchain-based experiment for trade finance transactions.

Several banks are also reported to be looking at blockchain technologies to sit alongside letters of credit (L/Cs) in their trade finance departments.

Methodology

A blockchain is a public ledger of executed transactions that constantly grows as 'completed' blocks are added to it. The blocks are added to the blockchain in a linear, chronological order.

Each computer connected to the blockchain performs the task of validating and relaying transactions and receives a copy of the blockchain, which is downloaded automatically upon a new address being established on the network.

Keeping record

Addresses work rather like email addresses and are disclosed to counterparties so that transactions can take place.

The blockchain has complete information about the addresses and their balances right from the very first block to the most recently completed block.

SWIFT interest

BAML's blockchain pilot is being developed with another, unnamed bank for possible testing later this year, according to the bank's head of innovation for global transaction services, Jason Tiede.

Global messaging platform SWIFT is also reportedly looking at blockchain technologies to help manage correspondent banking relationships.

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