LONDON, Dec 20 (IFR) - The first pilot for a new London
bullion settlement service, Euroclear Bankchain, has been
completed by the international securities depository and
financial technology firm Paxos.
The service, which combines Euroclear's settlement
activities with Paxos' blockchain platform, is one of a wide
range of planned product launches that aim to minimise risk,
drive efficiency and reduce balance sheet constraints for gold
The pilot saw more than 600 over-the-counter test bullion
trades settled over a two-week period. Participants included
Scotiabank, Societe Generale, Citigroup, MKS PAMP Group and INTL
Settlement of unallocated gold is a capital-intensive
process and the platform aims to reduce capital charges for
market participants through instant settlement and simultaneous
delivery versus payment.
"This is a real first step in bringing a new settlement
capability to the London bullion market that will help lower
risk and simplify the post-trade process," said Angus Scott,
director, product strategy and innovation at Euroclear."
Euroclear and Paxos will integrate feedback from the pilot
in the coming months. The next market simulation is planned for
early next year while the service is scheduled to go live during
"The pilot has been very useful in helping us further refine
the Bankchain platform," said Seth Phillips, Bankchain product
director at Paxos. "The level of engagement from market
participants was extensive and they were excited by settlements
enabled on a real blockchain for the first time and to see how
quickly their feedback could be incorporated into the platform."
Earlier this month, Royal Mint teamed up with CME Group to
create a new platform for investors to digitally trade physical
gold. RMG contracts are backed by gold stored at the Royal
Mint's bullion vault storage facility, while a digital record of
ownership is supported by blockchain technology. The contracts
are set to begin trading in 2017.
IEX Group, which recently began operating its newly approved
stock exchange, is planning a spinoff gold processing and
settlement venture, TradeWind Markets.
The London Bullion Association is also planning a gold
trading platform and trade repository, while the London Metal
Exchange will launch gold spot and futures contracts in 2017.
(Reporting by Helen Bartholomew)