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Euroclear's blockchain gold settlement venture with Paxos dissolved

NEW YORK, July 27 (Reuters) - A partnership between Euroclear and U.S. startup Paxos to develop a blockchain-based service for the London gold market has been dissolved, a spokeswoman for the Belgium-based settlement house said on Thursday.

The joint venture, which had been announced in June 2016, aimed to develop a new system to settle London bullion by using Paxos' Bankchain technology.

Euroclear, one of the world's largest settlement houses, will no longer be working with Paxos on the project, Christine Vanormelingen, global head of communications and investor relations at Euroclear, said in an interview.

"Not all of the startup collaborations come to a conclusive end, that is part of how you develop an innovation strategy," she said. "We remain committed to offering a solution to the London bullion market."

Paxos could not immediately be reached for comment.

It is unclear whether Paxos, formerly knows as itBit, will proceed with a gold settlement project on its own.

The joint system has already been tested with at least 16 market participants including Citigroup Inc , Societe Generale, Scotiabank and INTL FCStone Ltd.

The project aimed to make settlement of unallocated gold less capital-intensive for banks and other market participants by using blockchain technology.

Blockchain, which first emerged as the system underpinning cryptocurrency bitcoin, is a distributed record of transactions that is maintained by a network of computers on the internet without the help of trusted third party.

Financial institutions have been investing large sums of money and partnering with startups globally to test whether the technology can be used to simplify some cumbersome processes such as securities settlement.

The Euroclear and Paxos pilot was one of the most ambitious projects announced.

While excitement around blockchain has not abated on Wall Street, the technology has yet to be deployed at scale in mainstream financial markets, with skeptics warning that its potential may have been hyped.

Proponents say the technology is still in its early days and that its major challenge in financial markets is getting groups of large institutions to agree to significant changes in their processes. (Reporting by Anna Irrera; Editing by Paul Simao)