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With Blockchain Technology, Interesting Time Ahead for the Precious Metals Industry

Matthew Keen, MD, Responsible Gold Trading DMCC,speaks about how Blockchain technology can do wonders to precious metals industry. The technology has already tackled the top end of the supply chain, challenge is there to integrate the supply chain further down. He believes that foundation of the technology has already been established, it is possible to connect entire supply chain right from mine site to the end user of gold. Excerpts…

In your recent article published in Bullion Bulletin, you have written that it is possible to integrate the technology into the entire supply chain. I have two questions here. First, how can it be done and secondly, can you integrate artisanal gold, which is normally informal, to legitimize the sector through blockchain technology?

First of all, it can be done. We already have blockchain that is already running. It is taking gold from mine sites. As soon as gold comes out of the ground, it is first converted into dore bar which is tracked then all the way to logistic companies through to the refinery. Refinery then under supervision refines and put kilobars together which have provenance all the way back to the mine. This is happening already. We are working at present with companies we know already operating in a high level. These companies are adhering World Gold Council conflict free standards; refiners are accredited by LBMA. So, we really have tackled the top end of the market

Now, on second question bringing this technology down to artisanal miners, I must say there is a challenge because, for example, resources that these small miners have can not match a big miner. We have great aspirations to bring this technology to Latin America, Africa where not only we need to bring gold into the system at a good price point, we also need to integrate our supply chain technology with the small countries because ultimately these are the best practices that the established mining community is following. If we can do anything to raise the bar, it is good for the market and simultaneously, good for us. How long will it take to reach the artisanal miners it is difficult to tell. There are whole lot of additional challenges we face. This is a brand-new technology which requires doing one step at a time. We are happy way we managed to integrate the top tier of the market.

When gold bullion is manufactured and then is distributed into downstream supply chain and converted into jewellery, is it possible to maintain the track through this technology?

As we go more downstream in the supply chain, more challenges will come. As of now, we have not gone into that level. At present, we can provide gold bullion to wholesalers as provenance. Once that gold leaves our ecosystem, then we can’t really continue to track that. However, we have been approached by the tax officials of many countries who want to bring VAT into jewellery onto the supply chain system. So, applications are immense. From our perspective, we are just a small company and we can tackle upto certain extent. But, my feeling is the first challenge is industry’s adoption of the system, and then what can be done from the application, the scope is really broad and exciting. There are lot of challenges in the downstream channel like jewellery scrap, but technology is there and is supported by all industry players and it is upto the participants to develop the applications based on the foundation that is already built. Through this technology, everything can be connected right to the level of mine site.

Will this technology help central bankers to check the source of gold without extensive verification about the origin?

There are two things. First, if you are buying gold through our processes, you are getting provenance and secondly, blockchain can help you chain of custody. It will show who has held the particular gold in various points. Another big benefit of this sort of technology is that there can be one owner at a particular point of time; if we think some of the problems we have in the industry, for example double pledging of assets, that can not be happened with this kind of technology. If I am a lender and if I want to lend money against your gold stock which you are pledging to me, I will be much happier as a lender if I am part of this eco system, because I am absolutely sure that gold that you are pledging is owned by you. Even when one is buying gold, he knows exactly who owns the gold and there is absolutely no counterparty risk.

How did you enjoy the conference?

I really enjoyed the conference. I am big fan of Albert Cheng. He has such good connections that enable him to bring people around the region and all around the world. This is definitely a regular standing event in the calendar.


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