By
Mayowa Adebajo
March 12th, 2024
The market will be underpinned by up to $1bn in gold bars, or around two tonnes at current prices.
A new partnership appeared in the sphere of blockchain. The cooperation between Royal Mint and the markets operator CME Group aims at the creation of a gold market based on the revolutionary technology. The initiative is expected to broaden London’s appeal as a place to buy and sell bullion. CME Group enters this partnership just as it prepares its new London gold and silver contracts, which will launch in the new year in competition with ICE and the London Metal Exchange.
According to Telegraph, Royal Mint is planning to start accepting trades from the middle of next year on its Royal Mint Gold platform, where all transactions will be logged using blockchain. The technology was initially known in connection with bitcoin. However, financial institutions have been demonstrating a strong interest in it lately as it can considerably contribute to the various transactions advancement.
Both CME and the Royal Mint have been involved in the study and adoption of the blockchain. They have spent around a year striving to adapt the technology to the gold market, where the methods of physically buying and selling the commodity have remained largely unchanged for hundreds of years.
“We were looking for a solution that was efficient in handling trading. We didn’t set out with blockchain in mind but we wanted to address the problem that it costs money to vault gold. This is a digital solution to physical gold trading,” said David Janczewski, director of new business at the Royal Mint.
Royal Mint and CME will have to decide who will have access to the blockchain, and the companies are talking to financial intermediaries they hope will sell the gold to customers. Royal Mint will allow buyers to store their gold for free.
Blockchain technology will enable avoiding the need for intermediaries and the trades on the new platform will be made directly between dealers, without an exchange in the middle.
Not so long ago, the CME Group unveiled an initiative to publish Bitcoin prices as both a real time spot price index and a reference rate by traders, investors, and the public. This is the first time that a large asset exchange implements such a measure. Hopefully, the initiative will contribute to bitcoin legitimization as a financial asset.
The CME CF Bitcoin Reference Rate (BRR) and the CME CF Bitcoin Real Time Index (BRTI) will be a standardized reference rate and spot price index with independent oversight. These tools are expected to boost the professionalization of bitcoin trading and hereafter establish digital assets as a new asset class.