When the Australian brains behind the world’s most widely used stock market surveillance system turned their attention to blockchain, crypto exchanges and commodities, the results were bound to be worth watching closely.
The Rozetta Institute, formerly the Capital Markets Cooperative Research Centre, has not disappointed with the release on Friday of the Perth Mint gold token. This is the equivalent of digitised gold backed by the West Australian government.
This is a financial product that can be traded on the Ethereum blockchain.
The aim is to win over investors buying and selling US dollar-backed stablecoins which have attracted about $US2.3 billion ($3.4 billion) of investment this year. Stablecoins are crypto-currencies with average daily trading volumes across all crypto exchanges of about $US15 billion.
Before going into the details of the Perth Mint digital gold tokens issued by the Rozetta Institute spin-off, InfiniGold, it is worth exploring the broader implications of using blockchain to trade assets.
Mike Aitken, Rozetta Institute’s chief scientist, said if the Perth Mint product takes off the next step would be to launch digital tokens for other precious metals, starting with silver.
He said there were other applications for the technology which, if applied successfully, could disrupt many industries.
For example, the Rozetta Institute has been working on digital tokens for unlisted real estate investment trusts, which have total assets in Australia of about $200 billion. Aitken sees a big opportunity here because turnover on exchanges is usually about seven times the amount of the asset pool.
Aitken said the issue of digital tokens for trading REITs would unlock liquidity and allow the unlisted entities to avoid the heavy costs of a stock exchange listing. He said the creation of digital tokens for REITs would focus market attention on the real time settlement of transactions rather than the conventional two-day settlement period involved in buying and selling shares.
Aitken helped develop the SMARTS stock exchange surveillance system which was bought by NASDAQ and is now the most widely product of its kind.
Potential for scams
Anything to do with blockchain and crypto exchanges warrants scepticism given the potential for bad actors to exploit weaknesses in anti-money laundering protections.
The Perth Mint gold token has found a neat way to deal with this. Last year, it released an app called GoldPass in partnership with InfiniGold. The app allows users to buy and sell gold from the Perth Mint on their smartphones.
Users of the GoldPass app must be residents of Australia and pass an extensive identity verification test in order to abide by the anti-money laundering and anti-terrorism financing rules policed by AUSTRAC.
The Perth Mint digital gold tokens issued by InfiniGold are ERC-20 compatible, which means they can traded on the Ethereum blockchain.
Perth Mint chief executive, Richard Hayes, said the digitisation of gold via a public ledger was a natural progression for the global commodity markets.
“It will promote gold as a mainstream asset, enhance its accessibility, and offer greater liquidity, transparency and auditability of the real assets backing this type of digital token,” he said. Hayes believes the digital gold will offer institutional investors an alternative to traditional products such as gold exchange traded funds.
InfiniGold chief executive Andreas Ruf said InfiniGold makes its money from fees charged when people transact through GoldPass. If the Perth Mint digital gold token is successful it should drive more volume through GoldPass and boost profits.
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