Blockchain

Gold: Sourced Digitally, Ethically And Via Blockchain

Can blockchain help improve transparency of — and even the ethics surrounding — the gold supply chain? Emergent Technology Holdings helps track where the yellow metal came from and where it’s headed, and, according to Chief Commercial Officer Mitch Davis, helps boost liquidity for traders and investors, too.

In the age of blockchain, all manner of physical assets are making the leap to bits and bytes. Blockchain can track transactions of all sorts and create a connected record — and that blockchain is rapidly cleaving from the cryptocurrency clamor to which it was once inextricably linked.

When it comes to supply chains, proponents say blockchain — specifically, distributed ledger technology (DLT) — holds promise. Writ large, some observers say blockchain has the potential to disrupt the way business is done, as goods are sourced and brought to market, especially where logistics are concerned. After all, it stands to reason that the more links there are in the supply chain (spread out, and even global in nature), the harder it is to deliver absolute confidence in production methods, quality of products, transparency of payments and regulatory compliance.

To that end, gold or, in this specific case, the activities of gold mining and marketing — the production and procurement of the yellow metal that has been coveted and used as currency for centuries — is also finding a niche via blockchain.

Emergent Technology Holdings (EmTech) has developed blockchain technology that tracks where gold came from and where it is going, and has introduced a digital token known as G-Coin, a digital title of ownership of physical gold tracked on EmTech’s blockchain. Think of it as blockchain logging every stage, from mining to end market to digital wallets.

That’s the big picture, as Chief Commercial Officer Mitch Davis at EmTech explained. The end result is a transformation of processes that stretch back centuries, in an effort to ensure both efficiency and ethics.

Davis stated that one distinguished key characteristic for EmTech is the company’s move to embrace what is known as “responsibly sourced” gold, where demand and premiums for gold mined under such practices are on the rise. It’s easier said than done, though, to ensure that gold is indeed what it claims to be, in the quantity and quality stipulated, as well as mined and refined in a manner that conforms with stringent environmental, human rights, industry, financial and legal standards.

“There are a lot of players participating in the gold supply chain,” Davis told PYMNTS, taking note of the miners, refiners, transportation conduits and buyers out there, where currencies and the metal itself cross borders. “And you need to provide buyers — whether they are investors, individuals, institutions or manufacturers — with an absolute guarantee that the gold is responsibly sourced.”

Davis continued, “The industry can benefit from an end-to-end solution that automatically tracks provenance and custody to create a permanent record,” adding that record-keeping efforts are all too often done by manual means, conducted among thousands of participants.

How It Works

A cryptographic seal (CryptoSeal) is used to track the precious metal at each step of the supply chain, from beginning to end  across initial mining, onto logistics, through the refining process and beyond. The CryptoSeal is scanned using an Android device, Davis said.

“When you scan the gold, you are creating both a public and a private key,” he said, and the keys in turn become part of a permissioned blockchain. The record is immutable and irrefutable at every step of the process, and fully auditable. As a result, Davis noted, all stakeholders are able to ascertain that the gold has been sourced responsibly and is 99.99 percent pure.

He added, “At the end of the Responsible Gold supply chain process, we mint G-Coin tokens, which are digital certificates of title for the physical gold. The tokens are fully redeemable. At any time, you can request that the physical gold is shipped to the address that you nominate.”

The California-based company has struck relationships with key gold industry leaders  including Yamana Gold, Valcambi sa and Asahi Refining  to create G-Coin tokens, structured so that each token is equivalent to one gram of gold.

The technology, spanning blockchain and G-Coin tokens, is built to foster liquidity in trading — and it should be noted that, traditionally, gold has been among the most illiquid of investments, with high transaction costs and a spread between bid/ask. G-Coin, Davis said, can handle thousands of concurrent transactions with finality of settlement, and with trades done 24/7 and in real time.

There is a full know your customer (KYC) onboarding process too, he said, which extends to whether participants are buyers or sellers, and all participants must establish digital wallets dedicated to trading G-Coin tokens. EmTech announced this week that it is introducing identity and biometric hashing technology into KYC processes across all its platforms.

The combination of real-time payments, asset-backed securities and immutable records may attract investors from emerging markets, sovereign wealth funds and manufacturers.

New Use Cases

Davis said that G-Coin tokens may foster more use cases within the realms of currency and trading, as it can protect against the vagaries of politics and economic downturns. Volatility has marked the Argentinian peso and the Turkish lira in recent months, and in times of extreme stress and inflationary pressures, the value of some currencies can plunge 30 percent to 50 percent.

“We see an opportunity for G-Coin tokens in emerging markets as an alternative to local currencies, and as a superior store of value with greater liquidity,” Davis said, adding that some countries, like Nigeria, are already embracing digital coins and cryptos. However, he cautioned that G-Coin tokens are not, in fact, cryptocurrency, due to their asset-backed nature and the fact that “we are regulatory compliant in every country in which we operate and will operate.”

He also said the ecosystem should prove attractive to B2B transactions, which are on track to exceed $210 trillion in the near term. Firms eyeing cross-border transactions can conduct commerce with greater speed and transparency, said Davis — especially valuable in places where traditional conduits, such as wire transfers, can take days to settle.

“We are expanding the traditional buying base for gold,” he told PYMNTS. “With the G-Coin B2B wallet, corporations can move G-Coin tokens across borders in real time, without transaction fees. Treasury departments can hold G-Coin tokens, rather than volatile local fiat currencies, and cash out as needed on their own timelines, based on overall float management across liquidity pools. Our ecosystem is built to power greater cross-border efficiencies, with the security of a real and redeemable asset behind it.”

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