LBMA Ponders Blockchain Use for Gold Supply Tracking
An executive of the London Bullion Market Association has said that blockchain might be a great technology for tracking the gold supply.
A London Bullion Market Association (LBMA) executive hinted that the blockchain technology might be ideal for tracking gold so that the precious metal cannot be used for money laundering and terrorism financing. LBMA, which runs the largest over-the-counter (OTC) market for gold and silver trading, thinks that blockchain may be the right choice for tracking $200 billion worth of gold from the mines, through intermediaries and down to buyers around the world.
LBMA executive board director Sakhila Mirza told Bloomberg that “blockchain cannot be ignored,” adding:
“Let’s understand how it [blockchain] can help us today, and address the risks that impact the precious metals market.”
Monitoring gold supply is essential to ensuring precious metal that provides money for wars and conflicts does not come on the world markets.
“For us, it’s a question of where the gold comes from,” Mirza noted.
This is not the first time that LBMA has shown intentions to modernize the way trade is carried out. Until recently, trading activity was mostly conducted by phone auctions where the key benchmark rate for the market was established.
“Everything that ends up in an LBMA good-delivery refiner needs to be tracked in the supply chain, regardless of whether it ends up as a large bar in a London vault, a kilo bar shipped to the Far East, or a coin owned by a collector,” Mirza stated.
“A lot has been done already but it’s still very paper-based. We now want to formalize it through an efficient and possibly technologically based solution,” she added.
The gold market needs a technology that guarantees transparency, especially when the risks of money laundering are real. Last week, a former employee accused UK consultancy firm Ernst & Young of “unlawful, unprofessional and unethical” conduct in its relationship with Kaloti - a Dubai group allegedly linked to money laundering practices and buying gold from conflict zones.
Interestingly, the LBMA is not the only gold-focused entity looking into emerging phenomena like blockchain or cryptocurrencies. In September 2017, London-based gold dealer Sharps Pixley said that it was accepting Bitcoin as a payment method.
The LBMA has 119 members, among them the world’s largest bullion banks, gold dealers, mints, refiners, and jewelry companies.