What Britain can teach Perth Mint about its cryptocurrency plans

Rhys Muter 25 January 2018

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Will cryptocurrencies backed by gold find a place in the market?

As crypto finder reported earlier today, Perth Mint has announced plans to begin working on a gold-back cryptocurrency, due to appear some time in the next 12 to 18 months.

The Perth announcement was scant on details, but we can get a sense of its likely approach by looking at another major national mint which has also been dabbling in cryptocurrency: the British Royal Mint.

Perth Mint CEO Richard Hayes told the ABC that the project was "in some senses a world first", especially because of the use of gold to back the cryptocurrency. However, the British Royal Mint has been working on a similar project since 2016, and it provides some interesting clues as to likely future directions for the Perth Mint plan.

The British Royal Mint announced its plans for a gold-backed cryptocurrency, known as the RMG, on 29 November 2016. No release date has been announced yet for RMG and its state of development hasn't been made public.

What is known about RMG is that its blockchain, which is called Prova, will be a permissioned protocol based on the proof-of stake model, common among ERC20-compliant tokens such as Ripple's XRP.

In terms of convertibility, one RMG will be converted at the rate of one gram of pure gold. One interesting consequence: this would move gold away from imperial measurements to the metric system.

The mint's partners include the Chicago Mercantile Exchange, which has become the second United States securities exchange to issue a bitcoin futures contract; Alphapoint, which is assisting in the development of the trading platform; and BitGo, which is building distributed ledger technology aimed at physical commodity assets like gold.

Whether Perth Mint will adopt a similar model remains to be seen. CEO Hayes was clear that he sees asset backing as important, telling the ABC it was hard to "see bitcoin stacking up as a long-term alternative to gold because there is nothing actually backing it." However, the benefits of blockchain in making it easier to track gold assets in a single system could bring major benefits.

Providing over $23 million in revenue for the Western Australian government the Perth Mint is aiming to increase its revenue as investors diversify away from gold, according to its annual report. Its $80.7 million turnover produced by the company has been slightly strained by the rise of decentralised cryptocurrencies like bitcoin.

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Picture: drake2UK/Shutterstock

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