To be able to document the origin of precious metals and to ensure their integrity is key, not only to comply with the strict standards and regulations in place but also for ethical reasons. Digital solutions allowing for the efficient and immutable sharing of data and documents along the supply chain have been lacking until now. The blockchain-based solution now offered by a Swiss start-up digitally transforms the precious metals industry.
Switzerland is home to some of the world’s largest gold refineries and the second-largest gold trader, which in turn are closely connected to the Swiss financial center.
The global precious metals market, last year valued at almost 200 billion US dollars, is growing. One of the industry’s most difficult challenges is to preserve the available of trusted data and documents along the value chain of precious metals, which involves miners, refiners, logistics firms, banks, asset managers, manufacturers, and recycling companies. Paper-based processes between business partners don’t allow for an efficient sharing of provenance, chain of custody and compliance data.
Miners and refiners need to source their precious metals responsibly and sustainably. Refiners not only face the risk of counterfeits. They also need to be able to proof the origin of their products, while being bound by confidentiality agreements. Meanwhile, logistics providers face complex documentation issues, and financial institutions offering products around physical precious metals (physical gold bars, silver futures, platinum ETFs, etc.) face international regulatory requirements as well as reputational risks.
Industry currently faces lots of duplication of work
The sourcing of precious metals is currently characterized by numerous inefficiencies due to the use of different data and documentation standards by the business actors. Meanwhile the regulations in place at the same time get tougher every year. A lot of important compliance work is repeated and duplicated along the supply chain.
One of the questions is how do you create a digital twin? Antoinette von der Merwe, of ETH Zurich, answered this question in a policy paper of the Center for Development and Cooperation of ETH Zurich (NADEL): “Apart from the bullion serial number, there are numerous methods and the London Bullion Market Association (LBMA) has a whole process for adding new ‘security features’. These could range from etchings in the gold bar to invisible DNA trackers. When gold is refined, its fineness must be marked on the gold bar, acting as another check.”
It is here that the Swiss startup aXedras’ blockchain-based solution – the Bullion Integrity Ledger comes into the picture. “The software aXedras provides focuses on the precious market industry, applying the latest blockchain and distributed ledger technology”, says Philipp Stockinger, business development engineer at aXedras. “Together with leading Swiss stakeholders of the global precious metal industry, we have been harmonizing data standards on a single blockchain-based platform. Our digitized solutions not only offer unified and immutable data, but also interoperability between the different players,” he adds. There is as a result no more need for complex Excel sheets and paper-based exchange of documents.
“Business partners can thus confidentially share relevant data with each other, and if wanted even with third parties such as authorities in real time,” Stockinger notes. This does not mean that members of the aXedras ecosystem get access to their competitors’ data. “The Integrity Certificate preserves confidentiality. We work on a strict need-to-know basis,” he underlines. The data included in the digital Integrity Certificate, which also shows available data around the origin of the precious metals, is linked to a specific piece of precious metal. The Integrity Certificate is a digital twin of a physical gold bar, a kilogram of gold or any other precious metal and can currently contain up to 70 different pieces of information. “It brings data standards, efficiency and transparency to the market and empowers the market participants to know where the precious metals originate from,” Stockinger says. See illustration of a fictive Integrity Certificate below:
aXedras’ solutions support the Swiss financial center
aXedras was founded in 2018 and today employs over 30 specialists. aXedras’ long-term aim is to extend its unique blockchain-based solution to additional precious metals on top of gold, silver, palladium, and platinum already covered.
The company’s clients range from mining organizations and refiners to logistics providers, banks, and trading companies. They span around the globe, whereas the bulk of the refiners are Central European and Swiss based, given Switzerland is home to four of the world’s largest precious metals refiners – Argor-Heraeus, Valcambi, Produits Artistiques Métaux Précieux (PAMP) and Metalor Technologies – which in turn have close connections to the country’s bustling financial center. Avoiding dubious origins of the precious metals handled and the “reputational risks they potentially entail is of utmost importance for these Swiss-based refiners and financial institutions,” Stockinger underlines.
Pilot study mandated by global precious metal authorities
Two global independent precious metals authorities – the London Bullion Market Association (LBMA) and the World Gold Council – have recently concluded a pilot as part of their “Gold Bar Integrity Programme”. aXedras’ Bullion Integrity Ledger was applied in both test and real cases involving more than 30 industrial players. The findings of the study are currently evaluated, with a report awaited later this fall. “We are confident that our solution – conceptualized and realized in Switzerland – will benefit the global precious metal industry,” Stockinger concludes.
“The initiative underlines the confidence that all participants in the market can have in the integrity and accountability of the gold they trade, and the gold they buy. This is a major advance in furthering transparency for the common good of the gold industry.” says Ruth Crowell, LBMA CEO.
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