Euroclear and Paxos Break Up over Blockchain Project

Euroclear had announced that it was partnering with blockchain startup Paxos during the 2016 Sibos conference in Geneva, where it said that it would be developing a system designed specifically for post-trade processes in precious metals trading.

The platform was designed to reduce the cost of settlement for gold bullion and minimize associated risks. A few days later, on October 11, consultancy Ernst & Young joined the project, and on December 19, a beta version was announced as ready. Over the next two weeks, 600 over-the-counter bullion trades were tested.

Euroclear declined to elaborate on why it abandoned the project, with a spokesperson telling WatersTechnology that the partnership was dissolved for “a number of reasons.” Euroclear will continue to invest in other innovation projects for the bullion market, the spokesperson adds.

However, Paxos is clear that it will continue developing the platform without Euroclear’s involvement—the Bankchain, a spokesperson for the company clarifies, is a Paxos product. The platform has undergone numerous tests throughout the year and it will be launched sometime within 2018. Paxos adds that the termination of the partnership was mutually agreed with Euroclear.

Sell-side firms such as banks and central securities depositories have been actively exploring blockchain’s potential in the settlement space. Proponents believe that the technology can have a major impact on streamlining post-trade processes, by effectively removing the need for reconciliations and by automating highly manual elements of the post-trade lifecycle.

However, precious few have put systems into production, despite hundreds of millions of dollars in investment over several years, and the technology is still regarded as being in its infancy.

Despite the dissolution of the Paxos partnership, Euroclear has continued to explore use cases for blockchain, also known as distributed-ledger technology (DLT). On July 10 it announced the formation of a working group that will examine fund distribution models in France, and how DLT can be applied to enhance processes in that market. Luc Vantomme, head of product innovation at Euroclear, also said in June 2017 opinion piece that DLT had “enormous potential”.

Other blockchain projects in precious metals such as gold have attracted media attention in recent months. The UK’s Royal Mint, for example, announced in November 2016 that it would be partnering with the Chicago Mercantile Exchange Group to develop a blockchain-based platform for trading gold bullion.

News of the project’s cancellation was first reported by Reuters.