The era of gold stablecoins has arrived! The World Gold Council promotes "digital gold"; is spot gold still appealing?

As gold prices reach new highs, the World Gold Council (WGC) is planning a digital revolution in the gold market, introducing "digital gold" that can be used as collateral to meet Margin requirements. This innovation is expected not only to break the traditional impression of gold as "yieldless" but also to bring disruptive changes to the London Spot gold market, which could be worth up to $900 billion. However, does this mean the era of Spot gold is coming to an end?

What is "digital gold"?

Core Concept: Transforming spot gold into a digital asset that can circulate within the gold ecosystem.

Application scenarios:

1. As collateral

2. Meet the Margin requirements

3. Support for tokenization, custody of gold, cross-border settlement, etc.

Technical Foundation: Relying on blockchain database to achieve traceability of gold sources and verifiability of transactions.

WGC CEO David Tait stated that this will allow gold to circulate in digital form within the ecosystem for the first time, and can be used for common derivatives and collateral trading in financial markets.

PGIs Model: Fractional Ownership Gold Trading

Name: Pooled Gold Interests (PGIs)

How it works: Allows banks and investors to buy and sell partial ownership of spot gold held in a segregated account.

Pilot program: Launching in the first quarter of 2025 in London, attracting major banks and trading companies to participate.

Goal: To make gold a flexible financial asset rather than just a store of value.

Why digitize gold?

1. Break the dilemma of no returns:

Spot gold is stable in value, but lacks cash flow.

After digitization, it can be used as collateral to generate income.

2. Increase Liquidity:

Simplify trading and settlement processes

Reduce cross-border transaction costs

3. Expand Market Coverage:

Attract more asset management institutions and financial institutions to participate.

Challenges and Questions

Technical Implementation: How to Achieve Traceability in the Full Process from Mines to End Users, Balancing Transparency and Commercial Confidentiality

Reserve Security: Ensure that the issuing institution has sufficient Spot gold as collateral.

Market Acceptance: The London gold market is dominated by traditional institutions, and there are doubts about the acceptance of new models.

Competitive pressure: Facing challenges from cryptocurrencies and gold stablecoins (such as Tether Gold, Pax Gold)

Ruth Crowell, the CEO of the London Bullion Market Association (LBMA), stated that although promotion takes time, progress is going smoothly among the group of refiners, with 96% of eligible refiners having joined the "Good Delivery Program for Gold Bars."

Will spot gold be replaced?

Experts generally believe that "digital gold" and spot gold will form a complementary symbiosis:

Spot Gold: Continues to dominate the "store of value + consumption" demand (such as jewelry, central bank reserves)

Digital Gold: Expanding Financial Trading and Derivatives Market Applications to Enhance the Flexibility of Gold Asset Allocation

Wang Youxin, head of the Bank of China Research Institute, pointed out that if the system design and regulation are appropriate, digital gold will become an important financial innovation product, having a positive impact on the gold market.

Conclusion

The "Digital Gold" initiative promoted by the World Gold Council may open a new chapter for the gold market. It will not replace spot gold, but it is expected to transform gold from a "sleeping store of value" into an "efficient financial asset." For investors, future options for gold investment will no longer be limited to gold bars and ETFs; digital gold may become the new favorite in asset allocation.