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The London Bullion Market Association (LBMA) is creating a set of blockchain-based gold monitoring standards, as well as a supervisory board for the approval and monitoring of technology providers.
Ethical sourcing is becoming essential in a sector of such high value as precious metals. It will become even more important as reserves of metals such as gold diminish and scarcity develops.
Demonstrating the origins of gold could prevent smuggling from developing countries where mining practices can threaten human lives and harm the environment. It ensures that all those involved in the supply chain, including miners, are rewarded and reassure buyers and consumers of gold that both people and the environment are protected.
Tracking gold ingots from its origin through its cycle of ownership and use could prevent theft. It could also prevent illegal sales, smuggling and use of conflict financing and terrorism. Blockchain technology represents a way to remove illegal or immoral gold from the markets.
Get a credible blockchain solution
The LBMA is a global authority for gold and the international trade association for the OTC market. Its members include the biggest gold miners, refiners and gold traders.
The LBMA has asked its members to submit proposals in March 2018 on how to track gold and prevent counterfeiting. Second Reuters reporting, the LBMA received 26 proposals, including presentations from technology startups and also from IBM. Of the 26 proposals, 20 have incorporated blockchain technology.
The authority will now create a set of standards for services, while understanding what a "credible blockchain solution" is, said Sakhila Mirza, LBMA's executive director, who added:
Once these have been appropriately established, the result would be a selection of service providers that meet the minimum standards.
Tracking a trillion dollar sector
The selection of service providers is likely to occur in 2019. The successful blockchain developer would be responsible for a system that provides traceability and transparency to a one trillion dollar industry.
London is the largest hub in the world for trade and OTC gold clearing. The wholesale trade of gold through the five London precious metals clearing banks, supervised by the LBMA, has reached a value of $ 6 trillion in 2017.
The estimate of the implicit market capitalization for gold is over $ 7 trillion. It is an implicit capitalization as it includes gold already mined, in circulation and potentially still in the ground. The golden days of London contain around 8,000 tons of gold bullion, second only to gold held by the US government.
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