London’s $930 billion gold market is facing a major disruption, and it’s coming straight from the top.
On Wednesday, the World Gold Council (WGC) announced its plan to introduce a digital token called the Pooled Gold Interest (PGI).
This new token would be backed by real gold bars sitting inside London’s vaults, and for the first time, traders could own pieces of a massive 400-ounce bar without needing the entire thing. It’s legally enforceable, tradeable, and can even be used as collateral.
“This is a way to be able to get into the market, hold a digital representation of gold with full legal entitlement, with full confidence that the gold is there,” said Mike Oswin, the WGC’s global head of market structure and innovation.
He told CNBC that it could be used for simple investments or as collateral. The council believes this kind of token will bring in new players and give them more ways to use gold, especially in a market where prices have been breaking records this year.
WGC wants digital gold to function as real collateral
Right now, the gold market operates in two main ways, allocated and unallocated. Allocated gold means investors directly own a specific bar or coin. Unallocated gold gives them a claim to a certain amount of metal, but not a specific bar. This second type is the most common globally.
The problem? If the institution storing the gold fails, investors might lose their claim.
That’s one of the core issues the WGC is trying to fix with PGI tokens. Oswin said the main goal in the first stage is to make gold easier to use as collateral.
Allocated gold is technically accepted in many financial markets as a backing asset, but moving the physical metal around is such a hassle that it rarely gets used that way. Bonds or cash get picked instead.
Oswin said, “We want to place gold as a financial asset alongside those types of collateral. So pledging gold will become just as simple as pledging a kind of digitally native bond or cash.”
He added that once this is in place, the token could open up more uses in the future. When asked whether these digital tokens could eventually be used to settle futures contracts, Oswin said it wasn’t the main plan, but it could happen.
“In a future state, one could look and say, if the PGI is flowing freely around the market as collateral being exchanged between parties… would it be a huge step to say that there could be futures contracts that use this as the actual settlement mechanism?” he asked.
WGC eyes global expansion while critics raise doubts
The PGI launch is focused on the UK for now, but they’re not staying local for long. Oswin confirmed they are already looking into how this model might work in the U.S. and other markets. The council also published a white paper this week describing its long-term vision.
According to WGC data, the Loco London gold market, which refers to actual bullion stored in UK vaults, stood at 8,776 tonnes of gold worth $927.5 billion as of June 30. That market alone sees about 20 million ounces of gold traded every single day. But the council’s vision doesn’t stop at daily volume or token access. Oswin made it clear they’re building something that can expand far beyond Britain’s borders.
Still, not everyone’s buying the hype. Russ Mould, investment director at AJ Bell, said some traditional investors might not care for this digital version of gold at all.
“The WGC may feel this is an important development, as it seeks to maintain relevance for itself and the precious metal in a world where cryptocurrencies and stablecoins are currently in favour,” he said.
He pointed out that hardcore gold investors, often called gold bugs, aren’t interested in fancy tech. What draws them to the metal is its physical form and the fact that it doesn’t just appear out of thin air like fiat money.
KEY Difference Wire: the secret tool crypto projects use to get guaranteed media coverage
Source: https://www.cryptopolitan.com/gold-backed-tokens-londons-dollar-market/
