Royal Mint, CME Group To Offer Blockchain Gold Platform
(Kitco News) – The U.K.’s Royal Mint and exchange operator CME Group are collaborating to create a blockchain-based digitized gold-trading platform meant to cut the cost of trading the precious metal, the two entities announced Tuesday.
Under the new platform, scheduled to begin sometime in 2017, the Royal Mint will issue “Royal Mint Gold,” with a digital record of ownership for metal stored at its on-site bullion vault storage facility. CME Group will develop, implement and operate the product’s trading platform. This will allow market participants to trade RMGs between themselves, with some news organizations characterizing this as over-the-counter trading.
One RMG will represent one gram of gold.
A news release from the organizations says the new service will provide an “easier, cost-effective and cryptographically secure alternative to buying, holding and trading spot gold.”
A number of news organizations are describing the blockchain technology as transparent and tamper-proof, at least so far. This was the technology used to build bitcoin, some reported.
The Royal Mint is a 1,000-year-old institution owned by HM Treasury and permitted to produce British coins. CME group is a U.S.-based derivatives exchange.
“The Royal Mint has a unique history and a trusted reputation earned over many centuries trading in gold but until now, there hasn’t been a way to digitally trade physical gold,” said Vin Wijeratne, chief financial officer of the Royal Mint. “Developing a trading platform with CME Group will satisfy customer demands for faster, cost effective and secure ways to buy, hold and sell gold and complement our existing products.”
David Janczewski, director of new business at the Royal Mint, said that “distributed ledger technology is a game changer and supplying gold on a blockchain has been on our minds for some time.”
CME Group will launch a digital-trading platform that will operate 24 hours a day, 365 days a year. Unlike the traditional physical spot cost model for investing in gold that levies for management fees and ongoing storage charges, RMGs will offer ownership of the underlying gold with the option for conversion to physical gold by the Royal Mint with no storage cost.
The initial amount of RMG at launch could be up to $1 billion worth of gold, reported the Royal Mint and CME group. It will be offered through investment providers. Further RMG will then be issued based on market demand.
“Developing a digital gold trading platform will help ensure that CME Group’s current product offerings meet the evolving needs of the global marketplace,” said Julie Winkler, senior managing director, research, product development and index services at CME Group.
“As we continue to expand our global footprint and develop new products, this platform will help set standards for digital assets in financial markets.”