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Global Banking Sector Runs Test Gold Settlements on the Blockchain

A group of global banks have confirmed successful tests for gold trading settlement over the blockchain, using technology that could become the norm in future for international transactions.

The pilot program, which centered on gold transactions, processed some 600 trades successfully, relying on a platform devised by blockchain startup Paxos and settlement group Euroclear. Member institutions participating in the test included Citi, Scotiabank and Societe Generale, among others.

The project aims to develop a cost-effective infrastructure for trading in unallocated gold through the London bullion markets, and with initial trials proving successful over the latter half of 2016, this could be applied to a number of other tradable assets and markets in future.

The pilot program is just the latest move among clearance houses and financial companies, as they race to develop applicable technologies for gold and other asset trading. By limiting the cost and increasing transactional accountability and security, it is hoped that a blockchain-driven infrastructure could represent a more efficient way of handling these transactions when it is finally brought to market.

Application to the London bullion market alone could account for as much as $20 billion in trading volumes every month, on a reduced cost, distributed basis. With an ever growing number of startups teaming up with banks, regulators and other stakeholders, it now looks to be only a matter of time before the technology is rolled out further.

A spokeman for Euroclear said that trial, completed earlier this week, held significant potential to reduce the security risks and costs associated with gold transactions.

"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 of product strategy and innovation at Euroclear.

The next phase of the project will see a drive for feedback from users of the system, and from other stakeholders engaged in the processing of gold and other assets. A final development phase will commence from there, which it is hoped could help take the technology to the point of a wider rollout.

This is just the latest in a line of moves from central banks, governments and financial institutions in pursuit of commercial applications for the blockchain. At this rate, 2017 looks set to be another important year for the development of these technologies.