The British Gold Mint, a millennium-old brand, announced that it will launch a blockchain-based digital gold product

The more than 1,000-year-old Royal Mint — the UK’s only licensed mint — has announced it will launch a blockchain gold product.

Faced with new 'technological and competitive' challenges, The Royal Mint has today published the results of an investigation into how it could digitise its business processes for the benefit of its partners and customers.

To advance the work, the Royal Mint (RM) has partnered with the Chicago Mercantile Exchange Group (CME Group) to create and launch a digital gold product that allows users to execute, settle and trade gold using a blockchain-based system.

David Janczewski, head of new business at the Royal Mint (RM), explained that the company is taking out 400-ounce bars of gold for the product launch and allocating ownership of these assets, allowing users to trade them peer-to-peer on a blockchain run by CME, thereby cutting costs.

Janczewski said:

“There is a link between the cost and storage of gold and physical assets. It is for this reason that gold is often referred to as a negative return investment. We intend to address this and provide a better value way to invest in physical gold.”

Sandra Ro, CME’s head of digital, added that the announcement represents the culmination of more than half a year of collaboration between the two firms.

Britain’s Royal Mint (RM) said it may eventually issue up to $1 billion of Royal Mint Gold (RMG) as part of its offering, but will first seek market feedback to assess demand.

CME did not elaborate on how the RM blockchain would be designed, saying only that details about the platform and the industry partners supporting the work would be released.

However, Janczewski insisted that RM had 'serious intentions' to bring the technology to market, saying it was 'more than just a proof of concept'.

CME further hinted that the project, like its existing products, would be available 24 hours a day, 365 days a year, while also allowing users to see the blockchain history of RMG digital assets.

Ro told CoinDesk:

“It’s a departure from traditional asset trading, but with some changes that will appeal to existing and new investors.”

The product will complement existing products such as the Sovereign and Britannia gold bars and coins.

Cost reduction

As for how products like RMG can cut costs, RM's CFO Vin Wijeratne said the product will eliminate the traditional friction that occurs when physical gold asset transactions are recorded in traditional ledgers.

Wijeratne said:

“Now, blockchain technology provides an efficient way to register ownership without making a huge difference, but it makes a big difference in maintaining accurate ownership registration.”

Those involved in the project said the efficiency of blockchain will allow RM to offer gold ownership an 'option to convert into physical gold' with zero storage costs.

For Investors

In interviews, those involved in the project also hinted that the project will provide a kind of historical continuity for the organization.

For example, Wijeratne noted that RM has ‘centuries’ of expertise in trading gold, and this digital gold product envisions how the institution intends to ensure its services will continue to perform well in the blockchain age.

RM said they intend to work with communities like retail broker dealers and investment advisors to ensure the quality of this service.

Ro also sought to differentiate the service from other projects launched by gold industry players to exploit blockchain efficiencies post-trade, describing it as unique among all current attempts by traditional financial institutions.

She emphasized:

“This is a digital asset that is being put on the market, a digitized gold product. We are talking about an investment product.”