Digital Gold Provide the Benefits Of Physical Gold?

Monday, February 26, 2018
By Paul Martin

By: GoldCore
GoldSeek.com
Monday, 26 February 2018

– Digital gold and crypto gold products claim to combine efficiencies of blockchain with value of gold
– They are yet to provide the same benefits or safety as owning physical gold
– National mints jumping in on the ‘sexy blockchain’ act
– BOE declares bitcoin ‘not a currency;’ Royal Mint launches blockchain gold product
– Digital gold, blockchain gold and crypto gold is frequently not fully backed, unallocated, pooled and unsecured gold holdings

At the beginning of last week Bank of England Governor Mark Carney claimed bitcoin was not a currency on the grounds that it is neither a medium of exchange or a store of value.

Scoffs aside about what this means for the British Pound, there are many out there who are trying to satisfy Mark Carney’s definition of a currency by backing digital tokens with gold.

The Royal Mint is one of them. They announced a new digital gold investment service entitled RMG back in December 2016. Interesting that a sister organisation to the Bank of England is looking at jumping into the crypto currency market by combining the blockchain with gold.

There are plenty of others doing the same thing. It is unsurprising given the recent volatility and negative press around the cryptocurrency market that there are many out there seeing opportunity in the interesting nexus that is blockchain and gold.

Is there value to be found in ‘digital’ money?

Is it possible to find ‘value’ in something which is as digital as fiat itself? For now, the jury is very much divided but there are some in the market who believe they can add value to cryptocurrency by backing it with gold (in some shape or form).

Many in the mainstream believe that this is bitcoin coming full-circle. Since its inception it has frequently been referred to as ‘digital gold’. Now, the backing of crypto currencies, or in fact just digital tokens, with gold has made the term come into its own.

Digital gold has, in fact, been around for many years. It is product offered by multiple online gold trading platforms. This involves buying ‘gold’ which is frequently pooled and the buyers locked into a closed-loop system with a single counter party. The owner does not own an actual physical gold coin or bar or coins or bars which are segregated and allocated in their name. They are captive to that particular platform with potentially poor liquidity, captive, monopoly pricing and counterparty risk exposure.

In the last few weeks there have been a plethora of announcements from both new and well-established organisations that have announced new digital gold products, either with a cryptocurrency, blockchain or just digital token angle. There is a serious danger that new investors believe they are getting decent exposure to this booming cryptocurrency market but with the security of the gold market to support them.

In truth, most of these new gold offerings are likely no better (and arguably worse) than the digital gold products that preceded them. As MoneyWeek’s Ben Judge concluded, last week, ‘my view is that so far, if you want exposure to gold, it’s better to stick with the real deal.’

Something not quite gold-standard about it all

The Rest…HERE

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