The World Gold Council is seeking to launch a digital form of gold, a transformative concept designed to enhance how the precious metal is owned, traded, and utilised.
In partnership with Linklaters and Hilltop Walk Consulting, the council has released a discussion paper detailing a “pioneering vision” to transform the global gold market through the introduction of Wholesale Digital Gold.
Presently, gold trades in the wholesale market are settled in two main structures. The first is allocated gold. This involves direct ownership of specific physical bars but is operationally complex. The second is unallocated gold, which has higher liquidity and lower costs, but may expose investors to the credit risk of the institution where the account is held.
The World Gold Council is proposing a new way to settle gold, bridging the gap between these two structures. Pooled Gold Interests (PGI) combines the best of both by providing physical ownership – like allocated gold – but with new benefits to investors.
This includes broader and simplified use of the yellow metal, including as collateral; easy and secure transfer of gold interests between parties; and ownership of an interest in a pool of vaulted gold bars – even in small, fractional amounts.
The Wholesale Digital Gold ecosystem is designed to be technology-neutral. It also seeks to optimise regulatory compliance and capital efficiency.
To support this innovation, a new legal framework has been developed by Linklaters. This framework underpins the issuance and transfer of interests in a pool of vaulted gold bars, “ensuring beneficial ownership of the physical gold held in custody”.
Global Head of Market Structure and Innovation at the World Gold Council, Mike Oswin, says the vision is to transform the way gold is owned and traded.
Core participants in the ecosystem would co-own the underlying pooled gold and issue digital fractional ownership interests in the gold, maintaining transparency.
“As the world’s leading gold trading hub, with the Loco London market clearing an average of 20 million ounces daily, the UK is well positioned to lead the way in improving the way gold is traded and cleared to the benefit of all market participants,” Oswin says.
“Introducing a robust legal structure and innovative technology for gold ownership and settlement, will only reinforce London’s role in the global gold market.”
Richard Hay, Partner and UK Head of Fintech at Linklaters, says the structure will provide legal certainty and support operational flexibility essential for innovation in precious metals trading.
“By enabling secure, transparent and efficient digital ownership of fractional interest in gold, we are helping to unlock new opportunities for market participants and reinforcing London’s leadership as the world’s preeminent gold trading hub,” says Hay.
The gold price continues to remain high. At the time of writing the spot price was US$3,560 ($5,454) per troy ounce.
The World Gold Council is a membership organisation that champions the role gold plays as a strategic asset, driving industry progress, shaping policy, and setting the standards for a perpetual and sustainable gold market.
Write to Adam Orlando at Mining.com.au
Images: Stock & World Gold Council
