Digital Gold Wave Prompts Swiss Trader MKS PAMP to Revive Token
(Bloomberg) — Swiss precious metals giant MKS PAMP SA is relaunching a gold token to capitalize on growing interest in digital bullion, six years after an initial attempt faltered.
MKS PAMP — which owns refineries, trading operations and retail platforms around the world — said a growing desire to trade gold, from newly rich crypto investors to institutional funds, encouraged the firm to revive the digital asset.
“If you’ve made your money in crypto, you’re very keen on, for example, having tokenized gold, because what you don’t want is simply this gold sitting in a safe,” Chief Executive Officer James Emmett said in a interview. “You actually want to be able to utilize it in one form or another, and want to be able to stake it or to leverage it,” he said.
The potential benefits of tokenizing gold have long excited many in the bullion industry, who see the easy transfer of ownership over gold in order to borrow against it as a key advantage. Various gold tokens have launched in recent years, including Tether Holdings SA’s XAUT, Paxos Inc.’s PAXG, as well as efforts from banks such as HSBC Holdings Plc.
The precious metal’s record-breaking rally against a backdrop of trade, fiscal and geopolitical uncertainties has piqued the interest of retail investors as a safe haven asset, leading to a surge of inflows into bullion-backed exchange traded funds this year. Unlike ETFs, tokenized gold generally confers direct ownership over the bullion to the holder.
Still, bullion-backed tokens have yet to make a meaningful dent. The biggest, Tether’s XAUT, has issued units equivalent to just over $2 billion worth of gold, a minnow in the market compared to the more liquid ETFs, the largest of which holds over $130 billion in bullion.
“We think it’s the right time, because of the double momentum of gold on the one hand and real-world-asset tokenization on the other hand, it is the perfect storm,” said Kurt Hemeker, chief executive officer of Gold Token SA, which MKS PAMP has acquired to relaunch its digital bullion. “It’s the way the world is moving. Investors want gold in digitized form that is available 24/7 with instant settlement and the ability to trade in open markets.”
MKS PAMP was one of the actors which initially launched the token, called DGLD, in 2019, in a consortium that also included CoinShares International Ltd.
That timing was “too early,” according to Emmett, and the token had gone mostly dormant in the intervening years. The relaunch will involve the company’s trading arm itself purchasing tokens, and providing liquidity on exchanges.
MKS PAMP will only issue DGLD to accredited institutions, who can then sell them on secondary cryptocurrency exchanges, much the same way as other gold tokens function. Tokens can be redeemed for a corresponding amount of physical gold, in amounts as small as 1 gram, according to the company.
One challenge with operating a gold stablecoin is figuring out how to charge the holders for the cost of vaulting. Most have solved this by charging buyers for issuing new tokens, and again when they redeem them to withdraw bullion, although MKS PAMP says it will not do so initially.
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