Disrupting a $900 billion market! The World Gold Council plans to launch 'digital gold' with a pilot program in London next year.

Wed Sep 03 2025

According to the Financial Times, the World Gold Council (WGC) is planning to launch gold in digital form. This initiative may create revolutionary changes in the trading, settlement, and collateralization of gold, potentially transforming the $900 billion physical gold market in London.

The World Gold Council is an industry organization representing the interests of gold miners. Its CEO, David Tait, stated in an interview with the Financial Times that this new form will allow for the "digital circulation of gold within the gold ecosystem, using it as collateral" for the first time.

Although many investors value gold for its physical attributes and lack of counterparty risk (considering it a safe-haven asset), Tait believes that digitizing gold is necessary to expand its market coverage.

Tait, who previously worked in banking, stated: "We are working to standardize the digital aspect of gold so that the future gold market can also utilize various financial products commonly found in other markets." He added, "My goal is to change the perception of gold among numerous global asset management institutions."

This week, gold prices reached an all-time high, and its value has doubled over the past three years. However, despite the significant increase, gold remains a low-liquidity, non-yielding asset on the balance sheets of most banks and other investors. Tait believes that if gold is digitized, it could be used to meet margin requirements and serve as collateral, thereby generating returns.

Tait stated: "From a collateral perspective alone, banks can earn substantial profits—because they have the opportunity to use the gold on their balance sheets as collateral."

The new digital sector, called "pooled gold interests (PGIs)," will allow banks and investors to buy and sell partial ownership of physical gold stored in independent accounts. Commercial institutions in London will participate in a pilot of this model in the first quarter of next year.

A white paper released on Wednesday by the World Gold Council and Linklaters shows that the framework relies on a small number of core participants who collectively hold the underlying gold through a trust structure. This is the latest initiative by the World Gold Council to promote the digitization of the gold market, having launched a blockchain database for refineries and gold bars in January this year.

Despite the surge in gold prices, some industry insiders believe that as one of the world's oldest assets, gold faces the risk of being surpassed by competitors such as cryptocurrencies and stablecoins pegged to traditional assets.

By launching a new type of digital gold, the World Gold Council aims to achieve goals that others have been unable to accomplish.

To date, most attempts to create gold-backed stablecoins have ended in failure. The two most successful gold stablecoins—Tether Gold and Pax Gold—manage approximately $1.3 billion and $1 billion, respectively, which is only a tiny fraction of the $400 billion managed by gold ETFs (Exchange-Traded Funds).

The London gold market is the world's largest physical gold trading center, supported by substantial holdings from commercial banks such as HSBC and JPMorgan, as well as reserves from the Bank of England, with transactions conducted in an over-the-counter (OTC) format, meaning that trading parties directly reach agreements without the need for a central clearinghouse.

The white paper points out that trading in the London gold market is divided into two categories: "allocated gold" trading (involving specific gold bars) and "unallocated gold" trading (which only stipulates the quantity of gold without specifying particular bars). The proposal from the World Gold Council would introduce a third type for over-the-counter gold trading in London.

Allan Guild, founder of Hilltop Walk consulting, which is providing advisory services for the project, stated that the pilot will involve "major banks and trading companies" as co-owners of the underlying gold.

However, some market participants express that this move may face resistance, as the gold market is dominated by well-established institutions that are risk-averse.

Adrian Ash, Research Director of the gold trading platform BullionVault, questions whether the London gold market will adopt this model. He stated:

    "Gold is already the best-performing asset class. This feels like a solution in search of a problem."

In January of this year, the London Bullion Market Association (LBMA), representing gold trading banks, jointly launched a blockchain database called the "Gold Bar Integrity programme" with the World Gold Council; however, the rollout of this database has been slow.

However, Ruth Crowell, CEO of the London Bullion Market Association, stated that "the promotion has been progressing very smoothly" among the refiners. Ninety-six percent of the refiners on the LBMA's "Good Delivery List" have joined the program.

Tate indicated that the purpose of the database is to enhance the transparency of refiners, verify the source of gold, and gradually eliminate "bad practices." He remarked, "The process can be challenging at times. But I remain confident that it will one day change the way gold is procured."

Tate added, "As the database becomes more widespread, everyone will use it... Every gold bar will ultimately have its own 'passport,' its own 'birth certificate.'"

Source: https://news.futunn.com/en