- The head of the World Gold Council wants to use blockchain to modernise the trading system
- The new plans would see a tokenized system replacing swapping of actual bars
- The plans have been resisted however, with many not wanting to swap physical ownership for virtual
The head of the World Gold Council wants to use blockchain technology to modernise the ancient system of physical movement of gold. David Tait, who heads council, which is the main lobby group for miners of the metal, believes that the two-decade old system currently in place, which depends on a network of high-security vaults located underneath London, is ripe for change, and he believes blockchain has the answer. But, as Bitcoiners have found out to their cost, those in the gold industry are not keen on modernisation.
Gold Trading System Needs Modernisation, Says Tait
Speaking to Bloomberg, Tait revealed that the need to modernise the gold market is more pressing than ever. Banking reforms are affecting gold this year, especially since market participants were unable to prove that the asset could easily be traded in stressful times. This is hardly a surprise given that they come in the form of heavy blocks, and the new rules essentially made it more expensive for banks to hold bullion.
Tait told Bloomberg that digitisation will make a wider range of investors comfortable holding the metal, claiming that there is a “plethora of industries, let alone institutions out there, who haven’t gone near this product in the past” but who would if it could be modernised.
Traders Don’t Want to Swap Physical for Digital
Tait envisages a tokenized system where gold ownership is represented by a stablecoin, with the stablecoin traded on the market rather than the gold itself. This would be based on a blockchain ledger that would track gold bars and could help reassure buyers of their origin and purity, while also helping to fight money laundering.
Early proposals have met with a blunt ‘no’ however, partly because gold traders value its physical attributes – they don’t want to own a representative token instead. However, these same traders agree that the current system is outdated and, especially with the easily tradable Bitcoin becoming the investment of choice for the new generation, gold needs to do something to make it more appealing, and blockchain could represent the answer – if they’re willing to embrace it.