(Bloomberg) -- Gold is going digital.
Blockchain technology may help keep track of the roughly $200 billion of the precious metal dug from remote mines, traded by middlemen and melted down by recyclers that’s sold each year to buyers scattered around the world.
The London Bullion Market Association, which oversees the world’s biggest spot gold market, will seek proposals including the use of blockchain for tracing the origins of metal, partly to help prevent money laundering, terrorism funding and conflict minerals, according to Sakhila Mirza, an executive board director.
“Blockchain cannot be ignored,” Mirza, also general counsel of the LBMA, said in an interview Monday. “Let’s understand how it can help us today, and address the risks that impact the precious metals market.”
Markets in commodities from crude oil to diamonds and even tomatoes are looking at using the digital ledger technology that underpins cryptocurrencies like Bitcoin -- known to some as "digital gold" -- to track ownership. Tracing gold supply is key to preventing metal that funds armed conflict from entering world markets, identifying owners and maintaining security from mine to vault.
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The LBMA has pushed ahead with efforts to modernize a trade that until recent years relied on phone auctions to set a key benchmark price for the market.
“For us, it’s a question of where the gold comes from,” Mirza said.
The LBMA oversees a list of refiners approved to supply the London market. Its London Good Delivery List sets global standards for large gold and silver bars.
“Everything that ends up in an LBMA good-delivery refiner needs to be tracked in the supply chain, regardless of whether it ends up as a large bar in a London vault, a kilo bar shipped to the Far East, or a coin owned by a collector,” Mirza said. “A lot has been done already but it’s still very paper-based. We now want to formalize it through an efficient and possibly technologically based solution.”