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Digital Gold and the Latest Updates in the Industry

By Jeffrey Premer, CEO, Vaultex & Simon Sywak, COO, Vaultex

The term “digital gold” has been hurled about by pundits everywhere in reference to Bitcoin or even unbacked digital assets in general.

The term digital gold has only one legitimate definition: physical gold stored in custody and represented in digital form on cryptographically secure public or private ledgers. This is where one could digress into a discussion on the value of unbacked digital assets versus asset-backed digital assets, but I will leave that rabbit hole for another day.

Digital gold is nascent but growing and has shown it can be efficient in both trade and collateralisation. Digital gold tokens are popular on major cryptocurrency exchanges. These “stablecoins” can be used during volatile down swings in the digital asset markets by traders to quickly align their portfolios into an asset-backed token that is less volatile than cryptocurrency but still not pegged to a government-backed currency. Digital gold tokens can also be “staked” on decentralised lending platforms, creating a revenue stream for the token owner through lending yield. Not all digital gold tokens are equal, and due to differences between them, some flourish, and some seem relegated to obscurity. We will ignore the obscure issuances and focus on the successful ones.

PAX Gold (PAXG) was issued by Paxos, a US-based licensed custodian and trust company. PAX Gold has issued over US$600 million in gold-backed tokens since its founding in 2019. PAX Gold is redeemable for an LBMA good delivery gold bar or cash settlement from the issuer on demand. PAX Gold’s success can be partially credited to the reasonable pricing and its strong ecosystem partners like Brinks for storage, StoneX for bullion supply, and popular cryptocurrency exchanges that have listed PAXG. Trading volume and demand are primarily retail buyers and traders. PAXG has seen daily trading volume as high as US$315 million per day.

Token Market Cap (total issued) Highest daily trading volume Recent daily trading volume
Tether Gold (Gold) $477,000,000 $33,000,000 $33,000,000
PAX Gold (PAXG) $600,000,000 $315,000,000 $26,000,000

Digital Gold – 1 Year Market Cap

Source: CoinMarketCap

Tether Gold (GOLD) is issued by TG Commodities Ltd., affiliated with the Hong Kong company Tether Limited, which in turn is controlled by the owners of Bitfinex. Tether USD, a popular USD-backed token issued on the Ethereum network, has seen many allegations of fraud and paid millions in regulatory fines for misrepresentation. Regardless, retail cryptocurrency enthusiasts and traders do not seem fazed by the tainted history and have bought nearly US$477 million from Tether Gold, which trades on various exchanges at a US$33 million trading volume per day. Considering Tether’s past, trading or holding Tether Gold was not an attractive option for institutional investors.

As previously mentioned, one attractive aspect of digital gold is that they can provide yield to token holders who lend them out via smart contracts on decentralised lending platforms. This staking of digital gold produces yield for any amount of time in a secure manner as the token return is guaranteed through the smart contract and is essentially a risk-free carry income.

In addition, digital gold can be used as collateral on decentralised lending platforms to speculate on unbacked digital assets. The collateralisation is also done through smart contracts and, although always at risk of a margin call, in the event of a market loss, a good trader would be able to profit from this ability and still retain his original gold position. We will surely see new and innovative decentralised platforms that create opportunities for the digital gold holder.

But the real opportunity for blockchain and gold is institutional.

Currently, the presence of an institutional secondary market for the tokenisation businesses is developing. The technology behind such a market needs to be very modular and scalable, allowing expansion into other asset classes in the future and streamlining the secondary market infrastructure.

Gold in Asia is just the beginning. The value of tokenised gold will only be realised when institutional investors like retail consumers can deploy capital via a regulated secondary market working with a public distributed ledger (blockchain).

Singapore is well-positioned to be the regulated Asian secondary market to provide services to the ecosystem in tokenisation of precious metals and other commodities and workflows in the future.

A solution for tokenising institutional financial market securities

New capital markets need faster trading options to improve settlement risk management and custody and, from a regulator’s point of view, are technology-neutral.

Innovative technology addresses the issues in secondary market infrastructure
  1. Identity Securities issuance and transfer require a known identity, but most chains are built for pseudonymity. Therefore, an institutional-grade customer due diligence process is required to ensure all actors on the chain are verified and transactions are authored by permissioned entities.
  2. Compliance Solutions built on top of general-purpose blockchains struggle with processing the complex logic needed to comply with regulations. Participants will need an ability to build compliance into the chain, enabling faster processing and lower protocol fees that can scale as demand and complexity of regulation grow.
  3. Confidentiality Most market participants need their position and trades to remain confidential, but anyone can see and view the holdings on blockchains. Hence, the solution needs to engineer a secure asset management protocol that enables confidential asset issuance and transfers.
  4. Governance Contentious forks in the chain present significant legal and tax challenges for tokens backed by real assets. Therefore, participants need to adopt an industry-led governance model to prevent hard forks and guide the chain evolution.
  5. Finality of settlement The distributed ledger serves as an immutable golden record for asset ownership. Digitalisation by creating assets at the protocol layer can provide a simplified approach to transfers and deterministic finality using a distributed ledger technology whilst complying with regulatory developments.

Benefits of creating a secondary market

Improved liquidity
A secondary regulated market is a venue to allow institutional liquidity and access.

Less complexity and better operational efficiency
It is also an architecture to simplify workflows in complex and legacy market infrastructure whilst maintaining the current ecosystem and incorporating a digital ledger. By using modular technology, it will be able to reduce cost and increase efficiencies using current and future technologies to develop an advanced secondary market structure.

Faster, cheaper transactions
The token holder’s rights, legal responsibilities and record of ownership can be embedded into the market ecosystem using distributed ledger technology.

Greater transparency and broader access
An accredited and regulated secondary market establishes access for more institutional investors to a previously unaffordable or insufficiently divisible asset class, only available to retail clients through unregulated and unsecured platforms, using best-in-class technology. It also assists and enables regulatory bodies greater transparency and monitoring through access via the ledger layer and enhances the providence of the capital market structure.

Summary

In conclusion, as emerging technologies continue to evolve and regulation develops, IT and business partners need to remain closely aligned on their digitisation strategies. The establishment of a regulated secondary market will enhance the existing infrastructure ecosystem through digitisation and tokenisation. However, firms that struggle with adoption or do not fully embrace and invest in digitisation won’t have the ability to adapt and seize new opportunities in the future. Therefore, digital gold and other asset classes offered by Vaultex are an obvious starting point for this process via its secondary market infrastructure.

JEFFREY PREMER is the founder and CEO of Vaultex Pte Ltd., a Singapore based allocated spot gold and commodities exchange launching this fall. Jeffrey has extensive experience as an entrepreneur, team builder and company scaler in a variety of industries, including finance, software and electronic hardware development, supply chain management, telecom and infrastructure. Jeffrey has been advising companies, venture funds and family offices in Asia for over 25 years.

SIMON SYWAK is a founder and COO of Vaultex Pte Ltd. Simon has extensive experience in commodities markets and electronic trading strategies and infrastructure obtained within both investment and asset management firms. Simon has been working within banks, investment funds and family offices in Asia and Europe for over 25 years.

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Singapore Bullion Market Association Secretariat-Lee-Jia-Yi

Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

SECRETARIAT SBMA-Emily-Oh

Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

SECRETARIAT SBMA Clara-Chang

Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

SBMA Committee-Photo-john-levin

Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

SBMA Secretariat-Fabian-Lew

Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

SBMA-margare-secretariat

Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

SBMA-Albert-secretariat

Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

SBMA-Shaokai-Fan

Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

SBMA-Committee-Alan-Liew

Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

SBMA-Committee-Nikos

Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

SBMA-Committee-khun nuttapong

Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

SBMA Committee-Photo-Raman-Walia

Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

SBMA Committee-Photo-Andrew-Clarke

Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

SBMA Committee-Photo-Kazuya-Naoki

Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

SBMA Committee-Photo-Vinh-Nguyen

Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

SBMA Committee-KL-Yap

Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.