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The growing number of abandoned blockchain gold projects, and even the recent administration of gold e-money provider Glint, highlights why SendGold has focused on getting the legal, regulatory, and technology architectures right before scaling.
Given gold is a physical asset, and will always be, the legal, regulatory, and technical architectures underpinning a prudent digital gold offer is complex. We would then add governance and audit to this list, but we will cover these two in another post.
At SendGold, we have invested years of work understanding the global legal foundations of asset ownership. We have analysed multiple regulatory regimes across multiple jurisdictions and taken legal counsel in this regard from top global law firms. And we have performed extensive due diligence on technology architectures.
These three main elements – legal ownership, regulatory, and technology – combine in-market to form the complete offer. If any of these three legs is shaky the entire stool falls over.
Legal ownership of the gold
On the legal side at SendGold, we determined that the most secure legal ownership structure for our customers was outright individual ownership of physical, gold metal. Full stop. This form of asset ownership is battle-tested by decades of legal precedent and supported by many judgements in settled case law around the globe.
It’s not clear to us the extent to which Glint provided this level of gold ownership. The FCA only states that the Financial Services Compensation Scheme does not cover Glint customers. Separately we have also not seen any blockchain gold offer that meets this simple but time-tested ownership model. Blockchain providers can assert that a certain blockchain keypair represents ownership of gold but until judges in jurisdictions decide on actual cases that is simply conjecture.
Compliance
Any payments or e-money company must navigate an array of regulatory requirements. The risk of getting regulators offside with mechanisms they are not familiar with is high. At SendGold we took specific advice to build our platform to fit into existing regulatory regimes. As for blockchain, the ongoing regulatory uncertainties represent a similar level of regulatory risk. For example, in 2017 China declared that it was no longer legal to exchange the national currency (the RMB) for blockchain assets of any kind.
Technology
On the technology side, some providers appear to be boxing themselves in with offers that rely heavily on the participation (and approval) of credit card schemes. The ongoing technology challenges to blockchain scalability and transaction throughput are well-known. With these firmly in mind, at SendGold we chose to build our platform on proven, tested, bank-grade technology that means we are not beholden to buy-in by third parties or to the vagaries of difficult-to-scale and difficult-to-secure blockchain ledgers.
The SendGold approach
Many digital gold providers have emphasised fund raising (many through ICOs) and marketing before the hard work of bottom-up legal, regulatory, and technology basics were firmly established.
At SendGold, while we are at the early stages of customer acquisition, our bottom-up approach of making sure the legal, regulatory, and technology foundations are firmly in place now positions us to scale our sustainable digital gold offerings.
J.P. Morgan, Bank of America to Clients: “Buy Gold”
Free Lunch Economics (And Why It Doesn’t Work)
Gold ETF: It always pays to read the fine print.
