The world’s first government-sponsored gold crypto token has been launched by Australia’s state-owned The Perth Mint, as part of a wider campaign to digitise its gold inventory.
Precious metals digitisation company InfiniGold, a spinout from Rozetta Ventures and part of the RoZetta Group, has announced the launch of the Perth Mint Gold Token (PMGT), a digital token backed by GoldPass certificates already being issued by the Perth Mint – currently the world’s largest refiner of newly mined gold.
The PMGT will be the first digital gold token on a public blockchain backed by government-guaranteed gold with hopes of complementing the existing institutional gold market.
Perth Mint chief executive officer Richard Hayes has hailed the move to digitise gold via public ledger as “a natural progression for the global commodity markets” ex.
“It will promote gold as a mainstream asset, enhance its accessibility, and offer greater liquidity, transparency and auditability of the real assets backing this type of digital token,” he said.
Gold production going digital
At a national level, China is the world’s largest gold producer with a total output of 400 tonnes per year, but Australia isn’t far behind given its colossal gold mining operations in Western Australia producing around 310tpa.
In its own right, The Perth Mint counts as one of WA’s largest exporters distributing around $18 billion in pure gold, silver and platinum bars and coins to investors in more than 100 countries.
The Perth Mint was Australia’s biggest exporter to Germany, with around $500 million in sales of coins and minted bars last year.
Given Australia’s gold market position internationally, the move to create a crypto gold token has been long anticipated with The Perth Mint gradually introducing digital alternatives to traditional gold-buying including its GoldPass digital certificates.
The state-backed entity has been issuing them since October 2018 and has voiced its intentions of extending its foray into fully-fledged cryptocurrencies for over two years.
Small Caps first reported on The Perth Mint’s plans in early 2018 with today’s announcement confirming its commitment to become a one-stop shop for gold investors and traders.
As a proof of concept, InfiniGold launched its GoldPass smartphone app at the Precious Metals Investment Symposium in Perth last year enabling investors to securely buy, store and sell gold via digital certificates. The app allows users to “instantly” transfer gold to other GoldPass app users.
However, the latest move to create its gold token raises the stakes and means the WA government has effectively become the world’s first issuer of a gold “stablecoin”, an Ethereum-based cryptocurrency token underpinned by blockchain technology and a digital fiat unit of exchange, backed by WA’s long term AA+ S&P credit rating.
Stablecoins are cryptocurrencies that are collateralised to the value of an underlying asset, intending to mitigate volatility that arguably holds back the potential adoption of cryptocurrencies for everyday payment purposes.
The PMGT provides a unique alternative to USD-backed stablecoins which have attracted inflows of around US$2.3 billion (A$3.4 billion) so far in 2019 and generate average daily trading volumes in excess of US$15 billion (A$22.15 billion).
According to PMGT issuer InfiniGold, the token offers owners “superior transparency, credit quality, risk diversification and hedging against market volatility” because it is tied on a one-to-one basis to physical gold, which has historically been considered as a stable and future-proof store of value.
The company is incorporating its proprietary technology to issue digital certificates giving investors “guaranteed ownership” of physical gold stored in the Perth Mint.
The PMGT will be portable, valuable and fungible allowing investors to buy and sell gold in real-time, based upon the spot price of gold at The Perth Mint.
Moreover, PMGT will be stored within a digital vault on the owner’s mobile device and will only be accessible by the wallet owner, whilst being verifiable against the Mint ledger at all times.
The Perth Mint’s release of digital gold certificates for trading, holding and transferring physical gold could have profound consequences for the US$98 billion (A$144 billion) in gold-backed exchange-traded funds (ETFs).
The move creates an effective competitor to the gold ETF sector and provides investors with a novel new method of gold investing.
However, despite all the guarantees, the PMGT will effectively be a digital fiat asset that still requires investors to put faith in the issuer. The hope is that the WA government will be trusted to a greater degree than private-sector companies or banks.
According to research published by blockchain analytics firm Blockdata, 24 stablecoin projects have closed down and ceased operations with close to 70% now-defunct stablecoins being backed by gold reserves.
Gold-backed assets must consistently prove that gold exists and is actually stored somewhere securely – something the Perth Mint thinks it can accomplish courtesy of its government-backed status and extensive gold market operations.
By launching the PMGT, InfiniGold and The Perth Mint say they want to “lead the field” in transforming gold into a multi-billion-dollar digital asset.
According to InfiniGold, real-time liquidity of the PMGT will be provided by market makers and enabled via The Perth Mint GoldPass platform, where users can sell back to The Perth Mint, or take delivery of their holdings by exchanging their GoldPass certificates for a range of the Mint’s gold products, including LBMA London Good Delivery bars.
“Subject to final regulatory consultation, this will make PMGT directly tradable against traditional gold products, including gold ETFs, CME gold futures, and physical gold,” the company said.
“We’ve been looking forward to unveiling PMGT, an exciting result of our collaboration with The Perth Mint – the preeminent precious metals institution in the world.”
“With The Perth Mint as custodian of the underlying physical gold that backs PMGT, buyers will be able to access a secure and reliable token representing the strongest asset class to date – gold,” InfiniGold chief executive officer Andreas Ruf said.