Mark your dates for 4th Asia Pacific Precious Metals Conference on 07-09 June 2020 at Mandarin Orchard, Singapore..., Mark your dates for 17th India International Gold Convention on 03-05 Sept 2020 at Radisson Blu Resort & Spa, Udaipur...
 You are here : Home > Expert Column
 
 

Blockchain, the most reliable way of enabling trust in all financial and asset supply chains

 

Bullion Bulletin team interviewed Mr. Abhinav Ramesh, Founder at Chainflux, a blockchain product’s company. He shared is view on how blockchain be a solution to transform the Gold Industry

 

 

As per the Niti Aayog reports on Make in India, Financialization of Gold, Gold Savings Scheme, Bullion Banking, Gold Spot Exchange and tax reforms, there are plenty of problems in the gold sector and across the entire supply chain. Can Blockchain technology solve some of these?

 

My mathematics professor used to tell me, “Verify, don’t trust”.

Blockchain is the most reliable way of enabling trust in all financial and asset supply chains.

 

With blockchain, the biggest benefit is proof of provenance. Information can be reliably connected to a specific item at the time of production - like gold - and logged into blockchain – securely and immutably - and traced in real-time as the item moves across the supply chain. There’s also the resulting efficiency gains, risk reduction, cost savings, and market development that can be unlocked by the successful deployment of blockchain for serving the need for both product ‘verification’ and ‘trust’.

 

To illustrate, if someone gives you 22-carat gold jewellery featuring a diamond of a certain cut, color, carat reading, you’ll possibly have to take this person’s word for its authenticity or have it tested for purity yourself. Should the gold and the diamond in the jewellery have their provenance markers on the blockchain, that claim of authenticity is near irrefutable. With blockchain, you can verify the authenticity of the information and the item without the need for third-party trust. Trust would just be an added layer.

 

Specifically to the Indian gold sector, to do right by the ideology of Make in India, the re-development of the Indian gold standard will need to happen along with amendments to tax reforms and revamping of the GMS. Make in India, as a movement, in fact, can be enhanced through blockchain by giving all Indian-made products a presence on blockchain - making every item fully traceable to their source. Indian gold standards would have to be set for each point in the supply chain.

 

Figure 1.

 

Let’s speak about specific use-cases for the gold sector. With regards to the financialization of gold and the Gold Savings Scheme, a blockchain platform can guarantee purity and quantity of deposit by enabling source-to-seller traceability, giving the customer great comfort in depositing gold.

 

Similarly, when it comes to bullion banking/spot exchange, blockchain can efficiently support the creation of a consortium network within which all gold imported/produced can be traded easily, making the process seamless through instant settlement, origin traceability, and data security.

 

With regards to tax reforms, a 15.5% arbitrage would bring about quite a bit of OTC trading, but with a closed network secured by blockchain for traceability, accountability, security, and instant transactions, this could be the first step in formalizing the gold industry, especially in countries like India.

 

How can the Blockchain act as a technology enabler in bringing out a goods delivery standard?

 

Blockchain is essentially a verifiable, immutable digital database on which any kind of data can be recorded. With regards to impacting goods delivery standards, blockchain can act as the technology backbone on which a delivery standard can be built. Supported by applications like smart contracts, automation of standard adherence can be ensured, along with real-time reporting on non-adherence. Blockchain creates a secure data layer for all delivery standard information which can be audited in real-time.

 

What are the costs of setting up a blockchain?

 

Blockchain is a foundational technology that can be set up blockchain on either an on-site server or on the cloud, and costs the same as an existing system. Where the costs reduce drastically is in the data security layer. Blockchain has “verifiable data security”, which means that anyone in the network can verify that the data therein is secured by cryptography. As a result, data security costs drop for companies looking to adopt blockchain technology. The major benefits, however, remains – a traceable, immutable database of all transactions related to an asset on a supply chain.

 

Figure 2.

 

 

What do you do and how are you looking to solve problems in the gold industry?

 

I’m the CEO of Chainflux, a Blockchain products company that is looking to solve some of the problems mentioned earlier by building traceability + bullion banking platform for a consortium-based blockchain network. The proposed members of this consortium would be:

 

Consortium members

Benefits

Regulators

Full transparency into all transactions; Measure adherence to gold standards in real-time

Banks

Opens up the local market; automated KYC/AML checks

Refiners

Open local market; transparent adherence to future gold standards; source traceability

Miners

Export Dore; more mines created due to Indian gold standards

Traders

Source traceability

Logistics providers

Track movement in real-time

Vaults

Track storage in real-time

Insurance providers

Data on source verification, KYC/AML

Jewellers

Source verification

 

Once this consortium-supporting platform is set up, we envisage all gold-based transactions to happen on this platform. A few years down the line, we’d like to expand this to all precious metals as well as to gold loan companies.

 

 

Disclaimer: Views are personal and not the views of the publisher.