Blockchain in race to remake one of the world's oldest markets

The blockchain revolution is gunning for the gold market.

Public online ledgers that emerged from the explosive markets for bitcoin, a virtual currency, already have drawn the attention of businesses from banks to retailers who see blockchain systems as a revolutionary way to verify and record transactions. Now, companies including exchange owner CME Group, IEX Group spinoff TradeWind Markets and financial technology firm Paxos are rolling out similar platforms to bring gold into the digital age.

About $US27 billion ($34.1 billion) of gold changes hands every day in over-the-counter markets where settlements can sometimes takes days, leaving price risk for buyers and sellers. Using blockchain promises more transparency, security and speedier deals. It also could attract new participants at a time when investors are souring on gold-backed exchange traded-funds, a key source of growth in physical demand over the past decade.

“Digital gold would take market share away from other gold instruments: futures, physical gold bullion, gold ETFs,” Ebele Kemery, head of energy investing at JPMorgan Asset Management, said in a phone interview Aug. 9. Using the technology to trade the precious metal would create “another avenue for where investors can look to find value,” she said.

Bitcoin, the first instrument to use blockchain, has more than quadrupled in 2017 to more than $US4,000. The crytocurrency this year surpassed the price of gold for the first time.

CME Group, the world’s largest exchange owner, teamed up last year with the UK’s Royal Mint to create a bullion product called Royal Mint Gold. CME, according to its website, worked with blockchain security company BitGo to provide a “fast, cost-effective and cryptographically secure method” of buying, holding and trading the precious metal.

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Source: Blockchain in race to remake one of the world’s oldest markets | afr.com