The Royal Mint engraver Jody Clark poses with his portrait of Britain's Queen Elizabeth following its unveiling at the National Portrait Gallery in London. Reuters/Suzanne Plunkett LONDON, Nov 29 (Reuters) - Britain's Royal Mint and leading U.S.-based derivatives exchange CME Group have teamed up to create a blockchain-based digital platform for dealing in gold in a drive to cut the costs involved in trading the precious metal.

The platform, due to launch in 2017, will see the Royal Mint - the Treasury-owned body that is permitted to strike British coins - issue "Royal Mint Gold", or RMG. This will be traded via a platform created and run by the CME Group.

The Royal Mint will put gold bars into its on-site secure vault, which will then be digitised to create RMGs whose ownership will be recorded on the blockchain. Traders will then be able to trade in and out of RMGs between themselves.

Blockchain - or distributed ledger - technology keeps track of and authenticates a continuously growing list of transaction data, which is secured by a global network of computers and is virtually impossible to be tampered with or revised.

Blockchain first emerged as the technology underpinning digital currencies such as bitcoin, but is now being adapted for use in more traditional financial tasks.

Gold bars are seen at the Kazakhstan's National Bank vault in Almaty Thomson Reuters

One RMG will represent one gramme of gold, which is currently worth around $42.

"While things have improved in terms of gold trading over the centuries, it's our view that it still remains difficult and relatively expensive as a commodity to invest in ... Gold is known in the industry as a negative-return investment," said David Janczewski, director of new business for the Royal Mint.

"What we're trying to do with the announcement of Royal Mint Gold - or RMG - is to really address this issue and offer a better way to invest in solid digital gold."

The platform will operate 24 hours a day, 365 days a year. Unlike the traditional model for investing in gold, with management fees and storage charges, RMGs will offer ownership of the underlying gold with the option for conversion to physical gold by the Royal Mint at zero storage cost.

The Royal Mint said it would issue up to $1 billion worth of RMGs initially, with more added later, subject to demand. It will be offered through both retail and institutional investment providers.

"We spent the greater part of this year with the Royal Mint working through the fact they wanted to launch a digital gold product and looking at all the available technologies that were out there. This is not about just applying blockchain just because it is blockchain," said Sandra Ro, executive director of digitisation at CME Group.

"This is about looking for what the best delivery mechanism is that could also help us to scale at a global level over time."