Gold bar industry pilots blockchain anti-fraud system

Two gold industry associations have launched a plot programme that will use a blockchain-based ledger system to register and track billion bars, in a bid to prevent trade in counterfeits and introduce traceability into the sector.

London Bullion Market Association (LBMA) and the World Gold Council (WGC) are collaborating on the project, which aims to provide "an international system of gold bar integrity, chain of custody and provenance."

This first phase of the project will see two blockchain companies – aXedras and Peer Ledger – demonstrate how their technology can register and track gold bars to create an immutable record of their place of origin and chain of custody.

"Over time, this will help consumers, investors, and market participants to trust that their gold is genuine and has been responsibly and sustainably sourced," said the two trade organisations in a statement.

Despite recent volatility, the price of  gold has trended upwards in recent years, giving scammers an opportunity to capitalise on the increase by introducing counterfeit products into the market that can be hard to distinguish from the genuine article.

It is currently trading at around $47 per gram, a little below its 10-year high of around $51 per gram but almost 50% more than its value a decade ago. Even with the industry's quality standards, counterfeiters still regularly slip significant amounts of gold bars into the supply chain every year.

In 2020 for example, a massive 83 tonnes of fake gold bars that turned out to be gilded copper were discovered in China after they were used as collateral to obtain loans from financial institutions

LBMA and WGC said that over time, the plan is to encourage all major participants in the gold industry to adopt the blockchain-based traceability technology.

That would create a global ecosystem – effectively digitising the supply of gold – "so that all gold bars are registered and tracked across the entire supply journey from mine to vault, and ultimately to end consumers such as jewellery manufacturers."

24 companies involved in the gold bullion trade have already signed up to participate in the project, according to the trade bodies.