CME Group, one of the industry’s largest derivatives marketplaces, has teamed up with The Royal Mint to build a gold market using nascent blockchain technology which is set to transform the way market participants will be able to trade, execute and settle gold.
The new product is set to launch in 2017 and will see the state-owned Royal Mint issue a digitised gold offering called Royal Mint Gold (RMG) as a digital record of ownership for gold which will be stored at its highly-secure on-site bullion vault storage facility.
CME will develop, implement and operate the product’s digital trading platform to provide a new service that will offer an easier, cost-effective and cryptographically secure alternative to buying, holding and trading spot gold.
Supplying gold on a blockchain has been on our minds for some time.
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Commenting on the partnership, David Janczewski, Director of New Business at 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, but only after partnering with CME Group did we feel we had the right fit and proposition”.
Digital Trading Platform
CME will launch a digital trading platform which will operate 24 hours a day, 365 days a year. Unlike the traditional physical spot cost model for investing in gold with management fees and ongoing storage charges levied, RMGs will offer ownership of the underlying gold with the option for conversion to physical gold by The Royal Mint with zero storage cost.
The initial amount of RMG at launch could be up to $1 billion worth of gold. It will be offered through investment providers. Further RMG will then be issued based on market demand.
Julie Winkler, Senior Managing Director, Research, Product Development and Index Services at CME Group, added: “Developing a digital gold trading platform will help ensure that CME Group’s current product offerings meet the evolving needs of the global marketplace. As we continue to expand our global footprint and develop new products, this platform will help set standards for digital assets in financial markets.”
The Royal Mint already has in the region of 20,000 customers on its online marketplace for gold coins, which was launched two years ago. The new venture has been announced as CME prepares its new London gold and silver contracts, which will launch early next year in competition with ICE and the London Metal Exchange.