The World Gold Council promotes the issuance of gold-backed tokens for London’s billion-dollar market.

On Wednesday, the World Gold Council (WGC) announced the plan to launch a digital token called Centralized Gold Benefits (PGI).

This new token type will be backed by real gold bars held in storage in London. Notably, for the first time, investors can own a small portion of a large gold bar weighing 400 ounces without needing to own the whole bar. PGI will have legal status, be tradable, and even be usable as collateral.

Mike Oswin, head of global market structure and innovation at WGC, shared: "This is an opportunity to engage in the market, holding a digital representation of gold with full legal rights, and being completely confident that gold truly exists."

He further stated that PGI can be used for simple investments or as collateral. WGC believes that this type of token will attract new players and open up more ways to use gold, especially in the context of the gold market reaching record highs this year.

WGC hopes that digital gold will function as a true collateral asset

Currently, the gold market operates mainly in two forms: allocated gold and unallocated gold. Allocated gold means that investors directly own a specific bar or coin. In contrast, unallocated gold only provides them with the right to request a certain amount of metal without specifying a particular bar. This unallocated form is the most common globally.

The issue at hand is that if an organization storing gold encounters risks, investors may lose their claims. This is one of the core issues that the WGC is trying to address through PGI tokens. Oswin stated that the main goal in the initial phase is to make gold easier to use as collateral.

Although gold is recognized as a tangible asset in many financial markets, the movement of physical metal often encounters many difficulties, resulting in it rarely being used in this way. Instead, investors often opt for bonds or cash.

Oswin emphasized: "We want to make gold a financial asset similar to other types of collateral assets. Therefore, pledging gold will become as simple as pledging a bond or digital cash."

He also mentioned that once this system is established, the token could open up many applications in the future. When asked whether these digital tokens could be used to pay for futures contracts, Oswin stated that this is not the main plan, but this possibility could still occur.

"In the near future, if PGI is freely circulated in the market as a collateral asset exchanged between parties... it may not be far-fetched to say that there could be futures contracts using this as a real payment mechanism," he remarked.

WGC aims for global expansion while skeptics remain doubtful

Currently, the launch of PGI focuses on the UK market, but WGC does not intend to stop there. Oswin confirmed that they are considering how this model could operate in the US and other markets. The council also released a white paper this week to present its long-term vision.

According to data from WGC, the Loco London gold market, referring to gold bars actually stored in the UK’s warehouses, has reached 8,776 tons of gold valued at $927.5 billion as of June 30. This market alone has seen about 20 million ounces of gold traded daily. However, the council's vision does not stop at daily trading volume or access to tokens. Oswin asserts that they are building a model that can scale beyond the borders of the United Kingdom.

However, not everyone believes in this promise. Russ Mould, investment director at AJ Bell, said that some traditional investors may not be keen on the digital version of gold.

"WGC can see this as an important development, as they strive to maintain their relevance in a world where cryptocurrencies and stablecoins are favored," he remarked.

He also noted that true gold investors, often referred to as "gold bugs", are not very concerned with complex technology. What attracts them to gold is its physical form and the fact that gold does not just come from nothing like fiat currency.

Mr. Teacher