Royal Mint Group launching gold-backed RMG coin

Britain’s Royal Mint, an 1,100-year-old institution, is joining the cryptocurrency movement. It is launching Royal Mint Gold (RMG), which it describes as “fine gold on a blockchain”.

But is it a flash in the pan, or could it be indestructible?

Just another play for today

According to the Royal Mint’s website, each RMG token is physically backed by one gram of gold. It says that 1 billion grams of gold will be available, and mentions some extra sweeteners to tempt investors too.

Investors in RMG will gain title to 1 gram of gold, meaning tokens can be redeemed for a gram of gold at the mint. Normally there are storage fees when buying gold stored in the mint, but unlike other derivatives such as Exchange Traded Funds (ETF), these fees don’t apply to the RMG token.

You’ve got the power to know

The Royal Mint say transactions will be recorded on its blockchain. The official FAQ page notes that the mint isĀ “responsible for adding the digital representation of the gold to the blockchain”. This implies that the blockchain may be private and possibly centralized instead of a truly decentralized open blockchain.

An open blockchain explorer site is available showing live transactions. The code appears to be based on a platform by partners BitGo, a blockchain development firm.

Royal Mint partnered with CME Group to build the blockchain market and will sell the token on its own platform. The Mint has also partnered with cryptocurrency Civic to provide KYC services.

After the rush is gone

Recognizing that RMG is potentially a huge opportunity, other gold mints are taking stock. ABC News reports that Australia’s Perth Mint is working on a gold-backed cryptocurrency of its own.

Perth Mint Chief executive Richard Hayes said: “These are very exciting developments. It’s cutting-edge technology.

“If you use precious metals to back something on blockchain or something that is allied to blockchain, it retains its intrinsic value, unlike the offerings from Bitcoin and Ethereum, which really rely on everyone believing that there’s something behind it.”

He said the need to trace gold from mine to processing and end consumer fitted well with blockchain principles. Hayes said that Perth Mint’s launch date hadn’t been set but that he expected the next 12 to 18 months would see significant movement in that direction.

Cryptocurrencies such as Singapore-based DigixDao offer a gold-backed blockchain solution already, and in both the January crash and the February dip performed well against Bitcoin. Both RMG and Perth Mint’s cryptocurrency will compete, which can only be a good thing for investors.

The No Bull response: If RMG starts to be listed on other exchanges this could be the stable coin the markets have been crying out for. This is also an incredible boost for Civic. Still, the mostly-private blockchain is a potentially major weakness. RMG could be usurped by more open offerings from players such as Perth Mint.