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Derivatives trading company CME Group and The Royal Mint are planning to use blockchain technology in gold trading to cut the cost and increase the security.
This is the latest use case for blockchain in the financial services sector, where the technology is best known for underpinning the Bitcoin cryptocurrency.
In 2017, the two organisations will introduce Royal Mint Gold (RMG), which will be issued as a digital record of ownership of the gold it stores. CMG will operate the 24-hour trading platform for the RMG, each of which will be worth one ounce of spot gold, which is the current value.
Trading gold is already done electronically but blockchain has not been used to date. Blockchain is a database that can be shared, which keeps a permanent and tamper-proof record of transactions. As a result, it is easier to distribute and secure information.
David Janczewski, director of new business at The Royal Mint, said: “Supplying gold on a blockchain has been on our minds for some time, but only after partnering with CME Group did we feel we had the right fit and proposition.”
The Royal Mint wants the wider market to participate in the project. “Participation will enable us to develop the platforms to be able to connect to the CME network and trade gold,” added Janczewski.
RMG worth $1bn will be included when it launches and more will be issued depending on demand, according to The Royal Mint.
Financial services firms worldwide are trying out blockchain for different processes. In March 2016, a consortium including Barclays, RBS and HSBC completed cloud-based tests of five different blockchain technologies. Working with IT supplier R3, the banks tested trading using blockchain and cloud technology.
Also in the United Arab Emirates, Abu Dhabi Securities Exchange recently announced it is providing controlled access to the annual general meetings documents of its listed firms to mobile devices through a blockchain-based electronic voting system.