Euroclear is best known for being one of the world’s biggest settlement houses in the financial sector. After taking a close look at blockchain technology, the company announced their first product trial: a new settlement system for the London gold market will be created.
This announcement comes in the form of a partnership between US startup itBit and Euroclear. With over €27bn in various assets belonging to customers flowing through this settlement house, modernization is the primary objective. Given the growing interest in blockchain technology by financial players, it makes sense to look at distributed ledgers for a proof of concept.
Euroclear Skeptical of Blockchain Tech
Bitcoin enthusiasts will know the itBit name as the company is actively working on blockchain-based clearing and settlement. In fact, the startup has created its own network, called Bankchain. Through this partnership with Euroclear, this technology will be making its way to the settlement of gold shortly.
It has to be said that Euroclear has been rather skeptical of using blockchain technology up until this point. However, the company has been keeping an eye on this technology throughout the past few years. Modernization in the financial sector is direly needed, and itBit’s Bankchain seems to be a perfect fit.
Euroclear Director of product Strategy and Innovation Angus Scott stated:
Settlement of unallocated gold is capital-intensive for banks and it is a market that was in need of modernising. 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.
Applying a blockchain-based technology to real markets remains a challenge. The recent debacle that occurred with The DAO goes to show how this technology is not entirely understood just yet. However, itBit is confident their bankchain technology will be secure enough to be of great value to the gold settlement industry.
Distributed Ledger Network for Settlements
As a result of this partnership, both companies are in talks with various banks and broker-dealers. In the end, the goal is to create a blockchain network for clearing, tracking, and settling trades in real-time. With gold being a huge market on a global scale, using a distributed ledger can have an immediate impact.
While the technology used by itBit is referred to as being a blockchain, it is very different from Bitcoin and Ethereum. The Bankchain solution is a permissioned and private solution that is not open to everyone in the world. Bitcoin and Ethereum, on the other hand, present a permissionless and open environment of which anybody can be a part of.
What are your thoughts on Euroclear partnering with itBit for this gold settlement solution? Let us know in the comments below!
Source: Financial Times
Images courtesy of Euroclear, itBit, Shutterstock