Blockchain Could Track the Globe’s Gold Bullion by 2019
The London Bullion Market Association (LBMA) is to create a set of standards for blockchain-based gold tracking, as well as an oversight committee to approve and monitor technology providers.
Ethical sourcing is becoming critical in such a high-value sector as precious metals. It will become even more important as reserves of metals such as gold diminish and scarcity develops.
Proving the origins of gold could prevent smuggling from developing countries where mining practices can threaten lives and damage the environment. It ensures that everyone involved in the supply chain, including miners, are rewarded and reassures gold buyers and consumers that both people and the environment are being protected.
The tracking of gold bullion from its origin through its ownership and use cycle could prevent theft. It could also prevent illegal sales, smuggling, and use funding conflict and terrorism. Blockchain technology presents a way to remove illegal or unethical gold from the markets.
Achieving a Credible Blockchain Solution
The LBMA is a global authority on gold and the international trade association for the over-the-counter (OTC) gold bullion market. Its members include the largest gold miners, refiners and traders of gold.
The LBMA asked its members for proposals in March 2018 regarding how to track gold and prevent forgery. According to Reuters reporting, the LBMA received 26 proposals, including pitches from technology startups, and also from IBM. Out of the 26 proposals, 20 incorporated blockchain technology.
The authority will now create a set of standards for services, whilst understanding what a “credible blockchain solution” is, said LBMA’s executive board director Sakhila Mirza who added:
Once those have been appropriately established, the result would be a selection of service providers that meet the minimum standards.
Tracking a Trillion Dollar Industry
Selecting service providers is likely to occur in 2019. The successful blockchain developer would be responsible for a system that provides tracking and transparency to a trillion dollar industry.
London is the largest hub in the world for OTC gold trades and clearing. Wholesale gold trades across London’s five precious metal clearing banks, overseen by the LBMA, reached a value of $6.7 trillion in 2017.
The estimated implied market capitalization for gold is over $7 trillion. It is an implied capitalization as it includes gold already mined, in circulation, and potentially still in the ground. London’s gold vaults contain around 8,000 tonnes of gold bullion, second only to the gold held by the U.S government.