Digital gold is coming, London's $930 billion gold market is about to change?

# Ancient Gold Enters a Profound Digital Transformation

By: Long Yue  

Source: Wall Street CN  

Ancient gold is ushering in a profound digital transformation.  

The World Gold Council (WGC) – a representative body of the global gold industry – officially put forward a groundbreaking proposal on Wednesday. It plans to launch a digital token backed by physical gold in London, aiming to completely revolutionize the way gold is traded, settled, and used as collateral. This move may inject new vitality into the world’s largest physical gold trading center, which has a scale of up to $930 billion. However, it has also sparked market discussions about the intense collision between tradition and innovation.  

## Unlocking "Dormant" Assets, Targeting the Trillion-Dollar Collateral Market  

For a long time, gold has mainly played the role of a static, non-income-generating store of value on the balance sheets of banks and investors. According to David Tait, CEO of the World Gold Council, in an interview with the *Financial Times*, gold must be digitized to expand its market reach.  

At the core of this launch is a digital token called "Pooled Gold Interest (PGI)". As Mike Oswin, Global Head of Market Structure and Innovation at the World Gold Council, explained to CNBC, each PGI token will represent legal ownership of specific physical gold held in London vaults. For the first time, it will allow investors to trade fractional ownership of standard 400-ounce gold bars.  

"We want to position gold as a financial asset on par with those digitally native bonds or cash," Oswin clearly stated in an interview. "Pledging gold (through PGI) will become as simple as pledging bonds."  

The core goal of this initiative is to activate the liquidity of gold as financial collateral, enabling it to be conveniently used to meet margin requirements and thus enter the vast global collateral market.  

## The "Third Pillar": Reshaping London’s Trading Landscape?  

Currently, the London over-the-counter (OTC) gold market ("Loco London") mainly operates in two transaction modes:  

- **Allocated Gold**: Investors hold ownership of specific gold bars.  

- **Unallocated Gold**: Investors hold a claim to a certain amount of gold. This is the most common form of global gold trading, but investors bear the credit risk of the institution.  

The launch of PGI is regarded by the World Gold Council as the "third pillar" for constructing market transactions. According to WGC data, as of June 30 this year, the total amount of gold stored in London vaults was 8,776 tons, worth $927.5 billion.  

Oswin optimistically stated that PGI may even have the potential to serve as a physical settlement mechanism for gold futures contracts in the future. Moreover, its application ambition is not limited to the UK: "We are also exploring how to roll it out in the United States and other jurisdictions."  

## Transformation or Gimmick? Market Doubts Persist  

However, this grand blueprint is not without resistance, and market reactions are polarized.  

"True gold believers may not care at all – they might even be wary," Russ Mould, Investment Director at AJ Bell, said bluntly in an interview. He believes that the core appeal of gold lies in its physical tangibility; it is "a tool against financial complexity, opacity, and leverage." Digitization, by contrast, may reintroduce these risks.  

This skepticism is not an isolated case. Adrian Ash, Research Director at gold trading platform BullionVault, commented more sharply: "This seems like looking for a solution to a non-existent problem."  

The market’s cautious attitude stems from the fact that the gold market is dominated by highly traditional and risk-averse participants. Previously, the "Gold Bar Integrity Initiative" – a blockchain database jointly launched by the World Gold Council and the London Bullion Market Association (LBMA) – was promoted relatively slowly in the market. This undoubtedly casts a shadow of uncertainty over PGI’s future. Whether it will be a disruptive industry revolution or just another well-received but underadopted attempt remains to be ultimately tested by the market.  

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