Friday, 28 April 2017
Last updated 5 hours ago
Jun 21 2016 | 7:01pm ET
Global settlement giant Euroclear and blockchain technology specialist itBit have announced a collaboration that will explore next-generation settlement services for the London gold market.
The move will look at ways to modern technology to bring greater efficiency to the settlement of physical gold, which is a very capital-intensive process. Accordingly, Euroclear and itBit are working with relevant market participants to develop a service to significantly minimize risk, leading to lower capital charges, true DVP capability and lower balance sheet constraints.
Core to the effort will be itBit’s proprietary blockchain-based infrastructure and flagship product, named Bankchain, which is a private network of trusted participants that clears, tracks and settles trades in close to real-time.
The collaboration is one of many underway on Wall Street seeking to leverage the inherent advantages of blockchains over traditional back-office processes. The original and largest blockchain is associated with the digital currency bitcoin and is essentially an open-source, massively distributed, cryptographically secure transaction ledger that cannot be forged.
Private blockchains such as itBit’s Bankchain, however, solve a number of deficiencies in the basic Bitcoin blockchain by creating closed systems populated by a select group of verified actors that creates trust and reduces risk.
“Euroclear is pleased to be working with itBit on this initiative,” said Angus Scott, director of product strategy and innovation at Euroclear, in a statement. “As an open and resilient infrastructure, our strategy has been to work with relevant industry stakeholders. We have also created an advisory group, which recently convened to discuss the building of the new service with the ambition to make the London bullion market more efficient.”
“We are excited to be partnering with Euroclear to develop a trusted digital infrastructure for gold,” added Chad Cascarilla, CEO of itBit. “Precious metals are the first use case for Bankchain, and London bullion is a market in which a distributed ledger can have an immediate benefit."
Cascarilla and itBit were the subject of an in-depth article in FINalternatives’ sister service, Modern Trader, back in April (see Bankchain & itBit: Settling on the Blockchain).
Euroclear Group provides settlement, safekeeping and servicing of domestic and cross-border securities for bonds, equities and derivatives to investment funds. The company settled the equivalent of €675 trillion across 191 million domestic and cross-border securities transactions last year. The company holds €27.5 trillion in assets for clients.
itBit is using blockchain technology solutions to redesign the post-trade business across traditional capital markets. The company has established itself as an innovator in the blockchain industry with the development of Bankchain, a permissioned distributed network that expedites and secures the clearing and settling of assets.