Singapore Bullion Market Association

Article List

Article List

Bridging Gold and Cryptocurrency

By Richard Melbourne, Head of Member Services, Kinesis Money

Published on June 4, 2018

Since the global financial crisis of 2007–2008, the world has become increasingly disenchanted with governmental monetary policy and the banking system at large. So strong were these feelings of betrayal and mistrust, that a very talented few started the crypto revolution by developing mechanisms that empower the larger populace to actively pull away from the traditional banking and financial systems.

Many of these alternative currencies are fantastic in theory and principle; however, it has become evident that there are significant obstacles that have prevented the global adoption of such a neo-monetary system. Both volatility and intrinsic valuation are two major issues that must be addressed to achieve this dream of a true alternative currency.

Why gold?

With unpredictable volatility and questions surrounding valuations being an ongoing concern within the crypto space, investment-grade physical gold bullion has arguably the polar opposites of such issues. Gold is a tremendous, historically proven store of value. An ounce of gold has bought the same amount of bread throughout history, meaning gold has protected purchasing power as the cost of goods and services inflate in price. This preservation of wealth sees gold achieving lower price volatility when compared against select financial investment instruments, and various cryptocurrencies (Figure 1).

Figure 1: Gold’s volatility compared to major cryptocurrencies

Cryptocurrencies as safe haven asset?

So, will cryptocurrencies become the next precious metals-esque asset? This topic has been covered at large by both internationally respected global bullion associations, as well as crypto and blockchain heavyweights. Is Bitcoin the next gold, or, Ethereum the next silver? Perhaps Ripple is the next platinum? Some say yes, they believe that certain cryptocurrencies are indeed the next gold.

With the technical scarcity of some cryptocurrencies, combined with the human-driven “value” of such an asset, many come to the conclusion that cryptocurrencies are indeed digital gold. Some say no; 1’s and 0’s will never replace the surety of holding cold, hard physical bullion. There is no historical precedent that digital currencies will provide any store of value, especially when compared to the likes of golds historical performance. Perhaps a healthy medium should be sought here; something that takes the best of both cryptocurrency and gold to deliver something that addresses the fundamental issues with each.

What if there was a cryptocurrency which is: 1) backed by physical gold at a 1:1 ratio to provide a proven store of value and intrinsic value, and 2) has an entire monetary system built around it to promote an efficient medium of exchange and encourage users to engage in a true alternative cryptocurrency?

Kinesis’ gold-backed cryptocurrency is designed to address the uncertainty of volatility (Image: Kinesis)

The Kinesis solution

Kinesis has developed exactly this: a stablecoin designed to address the uncertainty of volatility and to give back the power of choice to the people by building not only a currency but also an entire monetary system. It gets even better: for the first time in history, physical allocated gold can now become an income-producing asset.

The Kinesis gold-backed currency is designed for use in everyday life as a high-velocity alternative currency. Participants of the Kinesis Monetary System and its suite of currencies (there is also a silver-backed currency) are entitled to a share of the transaction fees generated when the currency is spent or traded between participants within the Kinesis Monetary System.

This hybrid of cryptocurrency, safe-haven asset, and a yield-producing monetary system creates a truly unique, internationally fungible alternative currency that is backed by a proven store of value with real intrinsic value. Theoretically, the price of each of these precious metals-backed cryptocurrencies should not fall below the spot price of the underlying precious metal. In fact, the Kinesis suite of currencies is anticipated to consistently trade at a premium to the face value of the underlying backing due to the unique yield-producing factor. Furthermore, if a participant should ever want to redeem their currency for physical gold (or silver), they can easily do so. Kinesis has set out to deliver a rewarding and empowering monetary system that provides participants with surety, transparency, and integrity; we believe we have achieved this.

The features of the Kinesis Monetary System are vast and have been designed to deliver an honest monetary system. The Kinesis currencies offer a near instantaneous settlement with its custom Kinesis blockchain, which also protects participants with the multiple security features built in. There are also debit card payment facilities attached to the suite of Kinesis currencies that promotes convenience for day-to-day use. The low transaction fees associated with the Kinesis suite of currencies not only encourages cost-efficient, international payments; it also means lower transaction costs for merchants who embrace the Kinesis Monetary System. Kinesis believes this system will empower everyone, including the world’s unbanked populace, as it provides a borderless, low-cost and efficient medium of exchange, backed by assets that are historically proven excellent stores of value.

Learn more about Kinesis at

Richard Melbourne is Head of Member Services at Kinesis Money and the Allocated Bullion Exchange (ABX). The Kinesis Monetary System is an evolutionary step beyond any monetary system available in the world today. It enhances money as both a store of value and a medium of exchange and has been developed for the benefit of all. Aside from offering the greatest store of value and striving to provide the most efficient medium of exchange, Kinesis is a monetary system focused on: minimising risk; maximising return; stimulating velocity and maximising the rate of adoption.

Disclaimer: The views and opinions expressed in this article belong solely to the author, and do not reflect the view of BSE.