by Joseph Young
CME Group, the world’s largest gold futures exchange in North America via COMEX, is at its final stage of blockchain testing which will allow investors to trade gold on a platform inspired by Bitcoin. In collaboration with the U.K.’s Royal Mint, CME Group plans to launch a distributed ledger-based gold exchange for the public market toward the end of 2017.
Royal Mint is a government ministry of the U.K. permitted to produce gold coins. Operated by Her Majesty’s Treasury, Royal Mint is under an exclusive contract to supply all of the U.K.’s coinage.
Structurally and conceptually, the joint blockchain initiative of CME Group and Royal Mint is similar to Digital Currency Group’s Bitcoin Investment Trust. Using its blockchain platform, Royal Mint will introduce a crypto asset called RMG, which stands for Royal Mint Gold. Each RMG token will be equivalent to one gram of gold secured in the vault and gold reserve of Royal Mint.
Bitcoin Investment Trust of Grayscale, a subsidiary of Digital Currency Group, operates like Royal Mint’s RMG in the sense that each share of Bitcoin Investment Trust in the OTCQX market represents one tenth of bitcoin.
With the use of blockchain technology, Royal Mint will offer up to $1 billion of its gold reserve secured in its vault in the form of RMG tokens. Traders or investors who are willing to purchase gold from Royal Mint can acquire RMG tokens through Royal Mint and CME Group’s blockchain-based gold exchange.
According to Igor Telyatnikov, president and CEO of AlphaPoint (a blockchain solutions provider which is in charge of developing the gold exchange with multi-signature technology and blockchain firm BitGo), the utilization of blockchain technology as the base platform of Royal Mint’s exchange will allow traders and investors to track their ownership of the government-funded company’s gold reserve with a greater level of transparency.
"There is a higher level of traceability and audit that comes with blockchain technology because participants are provided with a permanent, immutable record of ownership and chain of ownership and custody."
Sandra Ro, head of digitization at CME Group, further emphasized the importance of Royal Mint’s blockchain-based gold exchange and its implication to the global blockchain and gold markets. Ro stated that the joint blockchain project represents the first institutionally targeted gold product that is co-developed and launched by a government entity:
"This is the first digital gold product that is institutionally targeted - and the first to work with a government entity - to be currently in a live testing state. An RMG is a digital representation of real gold sitting in the Royal Mint vaults.”
Upon the launch of Royal Mint and CME Group’s blockchain-based gold exchange, traders and investors internationally will be able to purchase an ownership of Royal Mint’s gold reserve without the necessity of strict requirements or government authorization.
The involvement of a major government institution in the development of blockchain technology demonstrates the UK government’s optimistic perception of the technology. Over the past few years, London has transformed into one of the world’s most active digital currency and blockchain hubs due to the efficient and practical regulatory frameworks established by the UK government.