UK's Royal Mint To Launch Blockchain-Based Bullion Trading Platform

Josh O'Neill

30 November 2016

The , a government-owned body which produces all of the UK's coinage, is set to launch a digitised gold trading platform using blockchain technology, in a bid to boost London's appeal as a place to buy and sell bullion.

The institution has joined forces with CME Group, a Chicago-headquartered markets operator, as it seeks to provide new ways in which market participants can trade gold.

Blockchain technology, a virtual distributed ledger of transactions shared peer-to-peer, can record ownership across a public network of computers rendered tamper-proof by advanced cryptography. It is already known as the platform for the controversial digital currency bitcoin.

The nascent technology is currently causing a stir within the financial services sector as its supporters believe it could reduce hidden expenses in the financial system by ousting inefficiencies across areas such as payments, syndicated loans and equity clearing. It would appear, however, that it is piquing investors' interests on a much broader scale as large institutions continue to embrace the disruptive technology.

Titled Royal Mint Gold, the new platform will see the Royal Mint issue a digital record of ownership for gold stored at its on-site bullion vault in a similar way to how blockchain records ownership of virtual currency. CME Group will develop, implement and operate a digital trading platform to coincide with the digital ledger to provide an “easier, cost-effective and cryptographically secure alternative to buying, holding and trading spot gold”, the Royal Mint said in a statement.

Although London's streets may not be paved with gold, there is nonetheless a vast amount stored beneath them inside seven vault systems. The Bank of England holds three-quarters of London's gold, or 5,134 tonnes out of a total 6,500, according to the BBC. However, the official reserves of the UK Treasury reportedly account for less than a tenth of this.

The new offering will operate round the clock and unlike the traditional physical model for investing in gold, which sees management fees and ongoing storage charges levied, an option to convert ownership of underlying gold into physical gold will also be offered at no charge.

Up to $1 billion worth of gold will initially be offered through investment providers upon the platform's launch and further gold will then be issued based on market demand, the Royal Mint said.

“Distributed ledger technology is a game changer and supplying gold on a blockchain has been on our minds for some time,” said David Janczewski, director of new business at the Royal Mint.

Vin Wijeratne, chief finance officer of the Royal Mint, added: “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. Developing a trading platform with CME Group will satisfy customer demands for faster, cost effective and secure ways to buy, hold and sell gold.”

This publication is tracking ongoing developments surrounding blockchain technology and will continue to provide coverage accordingly.

Pershing, a subsidiary of BNY Mellon, earlier this week launched a new means of gold investing.