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Perth Mint offers tokenised access to physical gold

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Andreas Ruf, CEO of InfiniGold explains his firm’s approach to offering traditional gold products supported by blockchain technology.

Andreas Ruf, CEO of InfiniGold explains his firm’s approach to offering traditional gold products supported by blockchain technology.

What was the driver behind launching the gold digital token?

The idea behind PMGT was to make gold accessible to a new generation of institutional investors looking for a competitive alternative to traditional gold products, bringing superior liquidity, scalability and credibility to the commodity markets. By providing buyers with a convenient, cost-effective way to acquire and hold gold, we aim to promote the precious metal as a mainstream asset. It has already stood the test of time as the most reliable safe haven asset to help investors to hedge against traditional instruments and fiat currencies. Tokenisation creates a superior infrastructure for the safe storage and transfer of value. It enables individuals and institutions to store cryptographically-assured proof of ownership over a set amount of gold, held by the issuer in a vault, and transactions are made immutable and secure thanks to blockchain technology.

How does it work?

PMGT brings The Perth Mint’s GoldPass platform – which has been developed by InfiniGold for The Perth Mint since 2017 – onto the blockchain. The GoldPass certificates provide the 1:1 gold backing for PMGT. This means we are essentially tokenising already digitised gold, creating a unique two-tiered approach. Once on the blockchain, PMGT is implemented as an ERC20 standard compliant token that will be functionally compatible with most standard Ethereum wallets. Users can redeem their tokens via GoldPass for physical bullion, or their market value in fiat directly with the Perth Mint – unlocking liquidity for even the largest of trades and avoiding potential volatility on digital asset exchanges. If they decide to keep the gold in the vaults, they are not subject to any transfer, storage, or ongoing management fees.

What relationship will its price have with the gold price?

As PMGT is indirectly fungible and tradeable with traditional gold products, arbitrage forces will aid PMGT to closely track the price of spot gold. Our market makers have direct market access to both traditional financial markets and digital assets markets, which is the key enabler for trading arbitrage relationships in large size and ultimately ensuring that PMGT tracks the price of spot gold.

How can investors be certain their holdings are held securely?

Right from the inception of the project we have placed a strong emphasis on setting a new standard of trust, credibility, creditworthiness and asset protection within the blockchain ecosystem. As a result, we engaged the team at Ernst and Young to help us implement the appropriate risk controls required for effective management of digital assets risks, that go above and beyond regulatory requirements. EY have expertise in both blockchain technology and the development of large scale high value platforms. 

When users purchase PMGT, their physical metal is held and securely stored at The Perth Mint’s central bank grade vaults, with the weight and purity of every ounce guaranteed by the Government of Western Australia which holds a long-term AA+ credit rating (S&P).

Why did a gold refiner go for a digital token route, rather than just launching a gold miners and producers ETF?

One of the Perth Mint’s aims is to make gold more available and attractive to a new demographic of investor, so as to increase gold’s status as a mainstream asset. As traditional financial heavyweights, The Perth Mint appreciates the role of technology in enhancing their industry. They see PMGT as the natural progression from the GoldPass platform and a vital innovation. They recognise the need for gold-backed cryptocurrencies as a viable alternative to stablecoins, and they see this need as positive for the gold industry.

PMGT and gold-backed ETFs ultimately target different market sectors. While PMGT allows trading and holding of physical gold in the digital asset markets (i.e. the blockchain ecosystem), ETFs are traditional gold products embedded in traditional financial markets, as they are listed on stock exchanges and adhere to strict share market trading rules. As PMGT is based on blockchain technology, it allows for: 24/7 trading; multiple exchange listings peer-to-peer transfers; cross listings against all FIAT/ crypto listed on an exchange; instantaneous settlement on all transactions; easy access globally.  There are cost savings compared with issuing an ETF and investors profit as there are no ongoing fees. 

Why is this product within an ETF structure? What advantages did the ETF structure have and will it be liquid?

PMGT is simply ownership of gold, which is enabled through the convertibility of PMGT with GoldPass certificates. This allows holders of PMGT to have not only exposure to, but also entitlement over The Perth Mint’s physical gold. The real-time liquidity will be provided by global leading market makers who will trade PMGT against traditional gold products such as CME gold futures. This direct trading ability is enabled via The Perth Mint’s GoldPass platform where users can access the traditional gold liquidity pool and sell back to The Perth Mint. Or they can take delivery of their holdings by exchanging their GoldPass certificates for a range of the Mint’s gold products, from one ounce upwards, including LBMA London Good Delivery (LGD) bars which is the form of gold traded in the traditional institutional gold market.

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