Publisher’s Note: Folks, as you read the following piece, note that this may be new (and exciting) news in London, but it is already well underway in Australia.
By Ranjeetha Pakiam, Eddie van der Walt, Rupert Rowling
The gold market could be using the technology behind cryptocurrencies to track an almost-$200 billion supply chain as soon as next year.
The London Bullion Market Association last week closed an invitation for submissions of ideas for how to track the metal as it’s dug out of remote mines, traded by middlemen and sold on to buyers scattered around the world. While the LBMA didn’t stipulate what form the system would take, most of the 25 respondents incorporated distributed-ledger technology in their proposals.
“The outcome will involve the use of technology to help the market to mitigate potential threats to the integrity of the global precious metals market,” the association, which oversees the world’s biggest spot gold market, said in an emailed response to questions. “A decision of which solution to implement will be made in the first half of 2019.”
Markets in commodities from crude oil to diamonds and even tomatoes are looking at using the technology that underpins cryptocurrencies like bitcoin — known to some as “digital gold” — to track ownership. Tracing gold supply is key to preventing metal that funds armed conflict from entering world markets, identifying owners and maintaining security from mine to vault. It’s the latest step to try to modernize an industry that until a few years ago relied on phone auctions to set key benchmarks.
The rocketing value of bitcoin has sparked a raft of me-too initiatives, including initial coin offerings and rebranding of obscure microcap firms hoping to make a killing by adding ‘crypto’ to their names. While markets for other goods have considered tracking solutions that use blockchain, few outside the diamond industry have actually implemented it.
The LBMA hasn’t made a decision yet on whether it will use blockchain technology.
“It’s about getting it right — doing something efficient, practical and credible,” LBMA Chief Executive Ruth Crowell said at a conference in Singapore this week.
Submissions came primarily from the technology sector, the LBMA said. A few were combined bids, for example between a technology provider and gold refiner, and from firms who have links to logistics companies and non-governmental organizations.
The LBMA oversees a list of refiners approved to supply the London market. Its London Good Delivery List sets global standards for large gold and silver bars. The association has previously struck off firms suspected of money laundering and more recently, it removed the Ekaterinburg Non-Ferrous Metals Processing Plant, which is linked to a Russian tycoon sanctioned by the U.S. government.
This article was provided by Bloomberg News.