Perth Mint gold cryptocurrency launched, backed by government-guaranteed gold
What makes this different to other gold-backed stablecoins? And what makes it different to old fashioned digital gold?
China is the world's largest gold producer, with a total output of 400 tonnes a year. Australia is second-largest, with an output of 310 tonnes per year.
Within Australia, Perth Mint refines more than 92% of Australia's annual gold production and has about $3.5 billion of gold and other assets in its vaults.
It's wholly owned by the government of Western Australia, and all the gold in its vaults is fully guaranteed by the government of Western Australia, which holds a long term AA+ S&P credit rating.
That guarantee extends to the GoldPass digital certificates the Perth Mint has been issuing since October 2018. Those GoldPass digital certificates are now backing Perth Mint Gold Token (PMGT), a cryptocurrency project announced in early 2018 and just released now.
Each PMGT token is an ERC20 standard (Ethereum-based) cryptocurrency token, backed 1:1 by GoldPass certificates and issued by InfiniGold in collaboration with Perth Mint.
PMGT vs cryptocurrency
In crypto parlance, the PMGT is a new gold-backed stablecoin. These cryptocurrencies are designed to remain relatively steady in price, tied to some other asset. In this case that other asset is gold.
It's an old idea by crypto standards, and gold-backed cryptocurrency tokens are a dime a dozen (proverbially). But there are several factors distinguishing the PMGT from all other gold-backed cryptocurrencies.
Firstly, its underlying assets are backed by a Western Australia government guarantee, in contrast to other cryptocurrencies with less-certain backing.
Secondly and thirdly, it gets real-time liquidity provided by market makers and enabled with the GoldPass app. PMGT is convertible into GoldPass digital certificates for KYC'd customers with the Perth Mint, and those certificates can be traded for gold products, including gold ETFs, CME gold futures and physical XAU.
The end result is an especially-reassuring stablecoin.
"The involvement of The Perth Mint as the largest refinery in the world and a leading exporter of gold, ensures that the product offers both the scalability and credibility that the market clearly needs," said project adviser and chairman of TCM Capital Steve Bellotti. "InfiniGold's PMGT is perfectly positioned, via the blockchain, to complement the current institutional gold market."
PMGT vs gold
Compared to physical gold, PMGT is a lot easier to carry but not as nice to look at.
But how about digital gold? We already have GoldPass digital certificates stacked on top of physical gold, and now we're stacking PMGT tokens on top of GoldPass. What does blockchain bring to the table when the underlying asset (the GoldPass certificate) is already digital?
This is an interesting question.
Functionally, GoldPass certificates are cryptographically minted on InfiniGold's servers, and contain information on ownership of the physical gold stored at the Perth Mint. Basically, all of the data that connects GoldPass with physical gold is in those computers. When someone sends or receives a GoldPass, the updates all occur inside those InfiniGold servers.
By tokenising GoldPass on the blockchain, what you're basically doing is adding a second layer of digital infrastructure on top of the first. Now you can do some uniquely blockchain things with that second layer that you can't do with the first alone.
On this layer, for example, ownership and transfers can be completely transparent. This blockchain layer is also where a lot of other assets and applications live, for your gold to interact with. You can program your gold with smart contracts and intertwine it with a wide range of other applications.
You can set up and customise your own conditional PMGT transfers, you can use your government-guaranteed gold as highly-liquid collateral for a loan without actually entrusting it to a third party, trade it directly with a wide range of assets in an open market, ensure that it's easily auditable, divide it into pieces as tiny as you want, use it to margin trade on gold prices, trade it safely with untrusted parties either through instant settlement or trustless escrow services, and much more.
"The digitisation of gold via a public ledger is 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," said Richard Hayes, CEO of the Perth Mint.
Disclosure: The author holds BNB, BTC at the time of writing.
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