CME and Royal Mint to launch blockchain-based gold trading

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The exchange operator and the UK government-owned Royal Mint are eyeing a mid-2017 launch for the digitised product – Royal Mint Gold (RMG) – they said in a November 29 statement.

Distributed ledger technology will be used specifically to facilitate the transfer of ownership of digital gold. Royal Mint will put gold bars into its secure vaults, the equivalent amount of so-called digitised gold will be created, with ownership to be assigned on the blockchain. The digital gold will then be traded on a platform to be created and run by CME Group. One RMG will equate to one gram of gold.

More digital RMG can be issued depending on market demand, with CME and Royal Mint expecting to issue up to $ 1 billion worth of gold at launch.

The move is the latest example of the collaborative approach being favoured by a variety of market participants when it comes to blockchain, the technology that underpins digital currency bitcoin.

FN reported on November 28 that Germany’s central bank, the Deutsche Bundesbank, and Deutsche Börse have worked together on a blockchain prototype for settling securities.

Carl-Ludwig Thiele, a member of the Bundesbank executive board, noted in a November 21 speech the wide range of participants in new initiatives and co-operation agreements on blockchain, including the Bank of England, stock exchanges in the US, Australia and Japan, and commercial banks.

The new digital gold will be available to buy and sell through several intermediaries and trusted parties, according to David Janczewski, director of new business at Royal Mint, who told a press call on November 29 that there would not be reliance on any sole market-maker.

By using blockchain to track ownership of the underlying physical gold, CME and Royal Mint want to unleash a digital trading platform without the management and storage fees associated with investing in the traditional physical spot model.

Sandra Ro, digitisation lead at CME, told reporters that using a digitised product to represent physical gold was significant. She also highlighted the implications for improving the levels of transparency in traditional markets, not only in terms of price discovery but also record of ownership.

“This is something where a blockchain has significant attributes, which is the fact that you can record, track, and have audibility around records,” Ro said.

Royal Mint CFO Vin Wijeratne likened the product to “pay as you go” in mobile phones: “unless you physically buy or sell the product itself there’s no charge or ongoing charge for actually holding it”.

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