Spot Gold Gets ‘Chained’
The Royal Mint and the CME Group have begun live testing their jointly developed gold bullion trading platform with financial firms.
“Traditional gold markets are quite opaque in the OTC market regarding price, liquidity, and transaction transparency,” said Mike Belshe, CEO and co-founder of digital wallet vendor BitGo and whose company is participating in developing the trading platform.
The new offering is not a futures contract, but a spot product, added Igor Telyatnikov, president and COO at AlphaPoint and whose company is participating in the platform’s development.
However, the new offering provides for physical delivery of the gold, according to Belshe.
“Instead of being just a contract, the Royal Mint 100 percent backs all of the gold in its vaults in the United Kingdom,” said Telyatnikov. “They’re planning on issuing up to $1 billion in the initial issuance.”
Trades on the platform will be measured in Royal Mint Gold units, and each RMG will correspond to one gram of gold.
All transactions on the platform will be settled on its distributed ledger, with each token representing ownership of the bullion that can be redeemed at the Royal Mint.
“Trade settlement is not going to happen in real time due to performance issues, but all movements in and out will be done on the blockchain,” explained Belshe.
The Royal Mint and the CME Group plan to run the new market 24 hours a day every day of the year, according to company officials when they first announced the project in November 2017.
A CME representative declined to say how many financial institutions are participating in the testing phase.
During this latest phase, The CME Group, The Royal Mint, and their partners will refine how users sign up for the platform, connect to it, and use it, said Belshe. “There’s a lot of work as we go into the phase where we address real customers, understand their concerns, and cross off those off the list once we’re done,” he said.
Real-time settlement is the key benefit of blockchain-based processes.
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