The Royal Mint, a 1,000-year-old institution owned by HM Treasury, has teamed up with derivatives marketplace CME Group to launch a digitised gold offering called Royal Mint Gold (RMG), heralding a new way for traders and investors to trade, execute and settle gold.
The new product, launching in 2017, will see The Royal Mint issue RMG as a digital record of ownership for gold stored at its highly-secure on-site bullion vault storage facility.
CME Group will develop, implement and operate the product’s digital trading platform.
The new service will provide an easier, cost-effective and cryptographically secure alternative to buying, holding and trading spot gold.
Vin Wijeratne, chief financial officer of The Royal Mint, says: “The Royal Mint has a unique history and a trusted reputation earned over many centuries trading in gold but until now, there hasn’t been a way to digitally trade physical gold.
“Developing a trading platform with CME Group will satisfy customer demands for faster, cost effective and secure ways to buy, hold and sell gold and complement our existing products. This landmark partnership allows us to combine the world’s leading mint, the best futures trading platform globally and best in class technology.”
David Janczewski, director of new business at The Royal Mint, says: “Distributed ledger technology is a game changer and supplying gold on a blockchain has been on our minds for some time, but only after partnering with CME Group did we feel we had the right fit and proposition.
“We’re now inviting the wider market to participate in this project alongside us and CME Group and we look forward to engaging with interested parties in the days ahead. Participation will enable us to develop the platforms to be able to connect to the CME network and trade gold.”
CME Group will launch a digital trading platform which will operate 24 hours a day, 365 days a year. Unlike the traditional physical spot cost model for investing in gold with management fees and ongoing storage charges levied, RMGs will offer ownership of the underlying gold with the option for conversion to physical gold by The Royal Mint with zero storage cost.
The initial amount of RMG at launch could be up to USD1 billion worth of gold. It will be offered through investment providers. Further RMG will then be issued based on market demand.
Julie Winkler (pictured), senior managing director, research, product development and index services at CME Group, says: “Developing a digital gold trading platform will help ensure that CME Group’s current product offerings meet the evolving needs of the global marketplace. As we continue to expand our global footprint and develop new products, this platform will help set standards for digital assets in financial markets.”
Sandra Ro, digitisation lead at CME Group, adds: “Innovation is at the heart of CME Group’s business, and the work we have done on RMG with The Royal Mint is testament to CME Group’s progress on the application of digital assets and distributed ledger technology to financial markets. By collaborating with The Royal Mint, we have set a new milestone in the digitisation of value.”