The technology used to power Bitcoin has formed the basis for a groundbreaking transaction, two banks and a third firm say.

Commonwealth Bank of Australia and Wells Fargo have carried out what they said is the first global trade transaction between two independent banks involving blockchain technology, a sign of how the banking world is embracing such channels.

Blockchain technology, a virtual distributed ledger of transactions shared peer-to-peer, can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform for the controversial digital currency Bitcoin.

The transaction used a distributed ledger to coordinate a shipment of cotton on behalf of Brighann Cotton from Texas, US, to Qingdao, China, according to a statement issued by Sydney-headquartered Commonwealth Bank of Australia.

The blockchain technology is one of the fintech developments seen as revolutionising banking and other services where there is a need for rapid, safe and auditable exchange of information, whether it be about monetary transactions, legal documents or other data. There has been a flurry of commentary in the wealth management space about how blockchain technologies could affect how the industry operates in the next few years.

The CBA/Wells Fargo/Brighann Cotton transaction involved an open account trade, which mirrored a traditional letter of credit, through the use of a private distributed ledger between the seller (Brighann Cotton US), the buyer (Brighann Cotton Marketing Australia), and their respective banks: California-based Wells Fargo and Commonwealth Bank of Australia.

A physical supply chain trigger was introduced to track the location of the goods while in transit and to subsequently allow for the payment to be released from escrow once delivery was confirmed.

The tracking feature adds a new dimension by providing all parties involved with greater certainty compared with traditional open account and trade instruments, such as letters of credit, Commonwealth Bank of Australia said in a statement.

It also claimed that the use of blockchain technology improves the level of transparency between the buyer and seller, as well as creating a higher level of security, while “accomplishing in minutes what used to take days”.

“This proof of concept demonstrates how companies around the world could benefit from these emerging technologies,” said Michael Eidel, executive general manager of Commonwealth Bank’s cash flow and transaction services.

“We strive to stay at the forefront of disruptive technologies to understand how they can be used to enable greater efficiencies and solve the real world challenges our customers face,” he added.

“The combination of these emerging technologies could eliminate many inefficiencies currently experienced in international trade,” said Cameron Austin, general manager of Brighann Marketing. “The benefits of lower costs and improvements to security through reduction of errors, risk and time enable a company to achieve greater efficiency and have more predictable working capital.”

Chris Lewis, head of international trade services for Wells Fargo, also recognised the potential of blockchain technology, but stressed that it could face regulatory scrutiny in future.

“This marks another step in evaluating technology that, over time, could support the evolution of trade finance. While significant regulatory, legal and other concerns remain to be addressed with the technology, we are committed to engaging with our partners to explore potential applications within trade finance,” he said.