Using Blockchain Technology to Track Movement of Gold

On Friday (19 October 2018), Reuters reported that the London Bullion Market Association (LBMA) is "planning to help modernise and improve transparency in the industry with an approval process for companies using blockchain technology to track the movement of gold." The aim is to exclude from gold's global supply chain "metal that is illegally mined or traded or used to finance conflict."

For example, in March 2017, Miami Herald reported that three employees of NTR Metals (a subsidiary of Dallas-based Elemental), a Miami metals refinery, had allegedly been importing, between 2012 and 2015, $3.6 billion worth of gold from Latin American countries, refining it, selling it, and then wiring the proceeds back to drug traffickers. 

According to the Miami Herald report, the complaint (in federal court) by Homeland Security Investigations and the FBI mentioned that “Illegal gold, mined in violation of foreign law, is a significant problem throughout Latin America and particularly Peru, where illegal mining is responsible for the devastation of large swaths of rain forest", and that the "international gold trade has become a common method for the laundering of illegal mining, narcotics and other criminal proceeds.”

The London Bullion Market Association (LBMA) calls itself "The Global Authority for Precious Metals." It says that it has "some 150 members based in over 30 countries and they encompass every part of the journey in precious metals production."

Reuters says that in March 2017 the LBMA asked its membership, which includes "most of the world’s largest gold refiners, banks and dealers", for "proposals on how to track gold and prevent forgery." Sakhila Mona Mirza, Executive Board Director and General Counsel at LBMA told the news agency that the LBMA had received "26 proposals from companies ranging from start-ups to major technology firms", and that rather than "endorsing particular companies," the LBMA had decided on the following approach:

"We need to set up criteria and standards that help us understand what is a credible blockchain solution... Once those have been appropriately established, the result would be a selection of service providers that meet the minimum standards.”

Reuters adds that the LBMA "sought proposals not only to track gold from mines, many of them in far flung areas, through to bank vaults and jewellery shops around the world - a task made doubly difficult because metal must be physically tagged before it can be traced - but also for security features for gold bars to prevent forgery." 

Mirza said that the LBMA "did not insist on use of blockchain, but more than 20 of the 26 responses focused on supply chain tracking and incorporated the technology." She also says that "a first draft of the LMBA’s standards for tracking systems would be put to consultation in the first half of next year with the process to approve service providers to start later in 2019."

One U.S. company, headquarted in Santa Clara, California, that has a blockchain-based platform for supply chain management of gold is Emergent Technology Holdings. Its "Responsible Gold" platform focuses on tracking responsibly-sourced gold "from miner, to refiner, to vault." 

Featured Image Courtesy of the London Bullion Market Association