Bank of America Merrill Lynch (BAC) and Microsoft Inc. (MSFT) yesterday announced a partnership to collaborate on blockchain technology to establish frameworks and build new technologies for trade finance. In a press release announcing the venture, the two companies said the use of blockchain, which is the ledger system underlying the digital currency bitcoin, could shorten transaction settlement times through digitizing and also create a “host of potential benefits for businesses” by applying business logic to related data. Some of these benefits include operational efficiency and enhanced audit transparency. In an interview with Reuters, Percy Batliwalla, BAML’s head of global trade and supply chain finance, said the paper-based nature of trade finance made the partnership “a good way to streamline the way trade transactions are presented.” The partnership will use Microsoft Azure, the Redmond-based company’s cloud solution. (See also: Barclays: 1st Bank To Use Blockchain For International Transfers). 

While Bitcoin may have had its ups and downs, the use of blockchain technology has picked up momentum in the finance industry. For example, a Wall Street Journal story earlier this year reported on JP Morgan Chase & Co.’s (JPM) tests with blockchain. These tests involved the transfer of dollars between New York City and London using the technology. Reports from Goldman Sachs Group Inc. (GS) have also touted the benefits of implementing block chain technology into the financial system. “It has the potential to redefine transactions and the back office of a multitude of different industries,” the investment firm wrote in a report earlier this year, adding that a distributed shared ledger like block chain could make interactions quicker and less expensive. Another report by the same firm predicted savings of between $2 billion and $6 billion for capital markets on use of the technology. (See also: Bitcoin's Blockchain Technology Tested By 40 Banks). 

For its part, Microsoft has already participated in a number of blockchain-related projects. It released a template last week that lets users create their own ledger network with minimal knowledge of cloud or digital currencies. At the time of the project’s release, Marley Gray, principal of Azure blockchain engineering, wrote that the promise of blockchain on “how business and individuals trade value over the internet is staggering.” “The atom has been split, so now the race to take advantage of its begins,” he wrote.