



Perth Mint's digital gold threatens $122bn in gold-backed ETFs

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The Perth Mint's release of digital gold certificates for trading, holding and transferring physical gold could have profound consequences for the $US98 billion ($122.5 billion) in gold-backed exchange traded funds.

The technology underpinning the digital gold certificates could have other uses such as the clearing and settlement of equities.

At this stage the digitisation of gold ownership by the Perth Mint is only available to institutional investors, such as banks, who can then offer it to retail customers.

Richard Hayes, chief executive officer of the Perth Mint, says digital gold certificates will generate stronger demand for Australian gold.  Carla Gottgens

But it is likely that the Perth Mint will overcome the difficult regulatory obstacles to direct retail ownership such as the know-your-customer rules and anti-money laundering regulations.

When that occurs the Perth Mint's digital certificates could become a genuine challenger to gold-backed ETFs, which now own about 2362 tonnes of gold, according to the World Gold Council.


Perth Mint is using technology supplied by, a Sydney-based company backed by the Capital Markets Research Centre, to create gold certificates that can be traded on a smart phone.

The supplier of the certificates is a company called InfiniGold, a joint venture between and Digital Access Australia. Steve Belloti, the former head of global markets at ANZ Banking Group controls Digital Access Australia.

Andreas Furche, who is chief executive of, says the Perth Mint's digital gold certificates will have at least two advantages over gold-backed ETFs.

The first is that they will be cheaper to own.

Perth Mint's digital certificates could become a genuine challenger to gold-backed ETFs. LUKE MACGREGOR

He said the cost of holding a digital gold certificate issued by Perth Mint will be less than the 30 to 40 basis points charged by ETFs. The world's largest ETF, the SPDR Gold Shares, charges 40 basis points of the net asset value each year. The fund has a market capitalisation of $US36 billion.

The second advantage is that the digital gold certificates provide direct ownership of the gold which is held in the vaults at the Perth Mint. While ETFs are backed by physical gold held in vaults and warehouses they also interpose a third party between the investor and the bullion.

This creates the risk that the counterparty, such as a fund manager, will not be able to meet their obligations to supply the physical gold. Another way of looking at a gold-backed ETF is to think of it as a promissory note for the delivery of gold.


The Perth Mint says its digital gold certificates differ from other digital gold products as they offer investors surety that the gold backing the certificates is ethically sourced and its purity and weight are guaranteed by the West Australian government.

Digital gold certificates have a distinct advantage over the Perth Mint's existing mechanism for buying gold and having it stored at the mint. Currently you can buy physical gold and store it at the mint but selling it involves transferring ownership into someone else's name.

A digital certificate can be traded with immediate transaction and settlement.

Perth Mint's chief executive Richard Hayes said that working with InfiniGold would enable the mint to grow its network of distributors to generate greater international demand for Australian gold.

It is noteworthy that Perth Mint did not opt for a blockchain-related solution to its digitisation of physical gold as happened at the Royal Mint in London.

The Royal Mint partnered with the Chicago-based CME Group to create a product called Royal Mint Gold using technology supplied by BitGo and using a "permissioned blockchain protocol" which restricts those who can validate blockchain transactions.

This approach is similar to the blockchain software architecture being adopted by the ASX to replace the CHESS settlement and clearing system over the next two years.

The ASX blockchain is a permissioned distributed ledger which provides a single source of truth for equities transactions. Its technology is supplied by Digital Asset Holdings in New York.


The original blockchain which underpins Bitcoin and other digitial currencies is not regarded as being suitable for clearing and settlement because of the time taken for a trade to occur.

In bitcoin's blockchain the only way to guarantee a confirmed trade or transaction within 10 minutes (the average number of transactions in a block is about 2000) is how much you pay the bitcoin miners in transaction fees.

Currently that's about $US110 for each transaction and the price is rising. In other words, someone who paid $US10 might wait days or weeks to have their transaction confirmed on the blockchain.

The technology being used by the Perth Mint allows pre-settled transactions through the creation of digital certificates issued by a central registry.

The Perth Mint exports about $18 billion in gold bullion each year. It also manages more than $3 billion worth of metal held on behalf of 30,000 investors.

Furche said was about one month away from finding a solution to the regulatory issues stopping Perth Mint's digital gold certificates being trading on crypto exchanges around the world. The primary regulatory issues are the know-your-customer rules and anti-money laundering laws.

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Tony Boyd is The Australian Financial Review's Chanticleer columnist. Tony has more than 35 years experience as a finance journalist. Connect with Tony on Twitter. Email Tony at
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