The wave of Gold trading technology is a game changer coming from the West

CME gold


Have you ever thought how much credit Betterment and Wealthfront merit, for the growth in passive investing, for pushing financial inclusion, for reducing costs? Do you realize how much Robos have changed the flow of funds into ETF vehicles?

Now take a minute to look at the early signs of how Blockchain is changing Gold markets. These past few weeks, there has been a series of noteworthy announcements around Gold trading technology.

Who cares?

We are already culturally trusting Gold and therefore, anything that improves Gold’s prospects as a store of value or as a means for exchange, is significant. Gold remains a candidate for a reserve currency and can also be used as trade collateral. Gold inherently has desirable features (e.g. limited supply, fungibility, ease of exchange). However, Gold markets are surprisingly old fashioned.

Did you realize that Gold prices were fixed twice a day via a conference all, up until 2015? Did you realize that only in 2015, Gold trading switched to an electronic pricing system? However, most trading of physical buillion still occurs in the OTC market and pricing is still fixed twice daily via the futures markets.

Did you realize that there is still no reliable real time system tracking the supply-side of Gold?

Did you realize that most physical gold is centrally stored with either government entities (like the Royal Mints) or banks?

There is a lot of room for improvement in the Gold trading market. Anything that can improve price discovery, settlement, counterparty risk, verification of the underlying deliverable, tracking of the supply in the market; is significant.

Any new possibilities to replace “paper gold” with solid backing of physical gold, is also a great improvement in the Gold trading.

Paper gold includes Gold certificates issued by banks and mints that give you exposure to gold, futures accounts, ETFs ect. All these are risky in a flash crash kind of scenario, in which there is not enough physical gold to back Paper Gold.

A small taste of the complex issues from the “paper gold” market:

Owners of gold exchange traded funds (ETFs) would be surprised and worried to discover that certain banks might be lending out gold that they have bought and believe that they own.

The leading gold ETF, GLD has been criticized by many analysts for its extremely complex structure and prospectus. Critics have also pointed out the possible conflict of interest in its relationships with HSBC and JPMorgan Chase which are believed to have large short positions in gold and overall lack of transparency. 

If as has been suggested, European banks are lending gold into the market that has come from exchange traded funds then this would validate the many concerns raised about the gold ETF market. Questions would again be asked as to whether many of the ETFs are fully backed by the gold that they claim to own in trust on behalf of clients.Source

What is the Gold tech innovation?

Towards the end of last year there were a dozen PR press releases about the Royal mint of Canada and the UK Royal Mint experimenting with blockchain technology to essentially digitize the gold they keep stored in their vaults. Bear in mind that is a predominantly institutional market but of course, there is some value in promoting the trustworthiness of a country as a trusted big player in the Gold market.

Right now, it seems that the UK Royal Mint is a front runner as they announced just before Easter that they are live testing trading on a CME platform of a Digital Asset – The Royal Mint Gold (RMG).

This is a partnership project amongst The UK Royal Mint (TRM), CME, Alpha Point and BitGo.

CME, the largest gold futures exchange, is offering the trading platform. TRM has agreed to digitized 1 billion worth of gold that is stored in its vaults. Alpha Point, a blockchain startup, has assisted in issuing a Token (issuer is TRM) representing a piece of the gold that TRM has agreed to digitize. Alpha Point has designed the permissioned private blockchain on which the RMG token can trade. BitGo, has designed the digital wallet that can store these tokens following a multi-signature procedure.

There are others participants that have also launched similar projects (making less noise in the press). Both the Euroclear exchange and the IEX exchange have similar projects announced last Fall.  Euroclear is also experimenting with the digitization of oil. They are collaborating on the digitization of the two commodities with Paxos, a Fintech whose proprietary ledger solution focused on post-trade settlement, is Bankchain. IEX has revelaed less about their moves. They have spun off a separate entity, TradeWind Markets, that is focused on digitizating commodities for their exchange.

Alpha Point is a blockchain tech company that offers a variety of blockchain solutions (more than 20 ledgers and fabrics, ETH, R3, Hyperledger etc plus its own proprietary ledger) with a focus on solutions to digitize, trade, and manage assets with blockchain technology. You can listen to a recent interview on Futuretech Podcast of Igor Telyatnikov, the President & the COO of Alpha Point who explains AlphaPoint’s secure, scalable, and fully customizable platform that can process nearly 1 million transactions per second (recall that bitcoin blcokchains can process 7 transations per second)

RMG is the first token from a government owned entity (issued by the TRM and representing ownership of gold in their vault). We will be seeing, probably by the end of 2017, multiple issuers and multiple tokens trading on various blockchains. Most of them seem to be permissioned and private (I have partial info about this).

There are other tokens issued from private companies, when buying physical gold from them – Digix GlobalCodeTract, and DinarDirham. Digix Global, for example, issues a Digix Gold Token (DGX) that represents the specific gold bullion bought through them and kept in a special, securitized vault. CodeTract’s Gold Token (GCT) or DinarDirham’s Dinarcoin (DNC) are the Digital Gold tokens if when buys gold through them respectively.

Where do we stand?

  • Does such kind of digitization of Gold reduce storage costs and therefore, allow to pass through these savings to investors? I think Not.
  • Does such kind of digitization of Gold reduce the counterparty risk associated with the entity offering the vault services? I think Not.
  • Does such kind of digitization of Gold improve price discovery and eventually lead to the elimination of the price fixing? I vote Yes keeping in mind that it is early stage of such a process.
  • What are the main benefits of the digitization of Gold with multiple issuers-tokens?  Immediate settlement of trades, secure verification of the quality underlying deliverable, tracking of the supply in the market! Replacement of “paper gold” (i.e. certificates or ETFs) by digital gold, which would mean elimination of the inherent risks associated with these derivatives in case of a bear market panic.
  • What is missing? Clearly, gold miners need to get involved in this process so that the digitization starts from there and not from the vaults. Clearly, the current choice of private chains creates interoperability issues.

And before wrapping up this post, I have to draw your attention to China which is testing the “waters” with Micro-Gold platforms. This is Not digitizisation of gold. This is actually growing the “paper gold” market online or via the Internet of Finance.

Tencent issued a new feature on WeChat for Valentine’s day, that allows you to send your loved ones not chocolate, not flowers, but Virtual Gold packets. This is similar to the Red envelope Wechat feature (i.e. digital money).

This feature is through a collaboration with the Industrial and Commercial Bank of China. Essentially users can easily buy and sell gold as an investment from ICBC through the messaging platform.

The minimum amount of gold that can be bought is 0.001 grams – which on February 13 was sold at 28 fen. The maximum transaction limit to buy the gold is 100,000 yuan, which can get gift givers 364.856 grams of gold at current prices. So far, the feature is only available in China.

Once the gold is bought, they can then give out up to 100 gold packets at a time, with not more than 1 gram of gold per gold packet. But for Valentine’s Day, Tencent will increase the limit to 1.314 grams per gold packet, as the numbers 1314 in Chinese sounds similar to the Chinese saying “for the rest of my life”. Source

Efi Pylarinou is a Fintech thought-leader and an investor. 

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Wrap of Week #16: Blockchain Bitcoin & Crypto, Clear Bank, Goldfields, Instarem, Religare, Payments


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ClearBank: a MSFT Azure B2B Fintech

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A well kept secret of the UK B2B banking sector, is now public. Clear Bank, a clearing Bank in the UK, is ready to compete with the four UK clearing banks,

  • Barclays
  • HSBC
  • Lloyds
  • Royal Bank of Scotland (RBS).

Clear Bank is the fifth UK clearing bank and the only one that is pure B2B since it does not offer services direct to the consumer.

Don’t confuse Clear Bank in the UK, with Clear in the US an early stage startup offering banking services to startups. Or Bank Clearly, a digital banking start-up in the Middle East similar to Moven (i.e. no banking license but offering banking services to startups by partnering with CBW Bank).

Back in the 60s there were 16 clearing banks in the UK. Consolidation in this part of transactional banking has left the UK currently with 4 clearing banks that process over 80 Trillion pounds annually worth of payments in the UK. This is a fee business for settling payments between institutions and individuals.

Clear Bank has no plans to offer services directly to consumers. Clear Bank’s value proposition is to make processing payments in the UK via systems like Bacs, Chaps etc, Faster & Cheaper.

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Who cares?

Clear Bank will be helping Challenger banks to access the payment system at the Bank of England level, at the same level as incumbents.

Clear Bank will help the 44 UK Building societies offer current account services in a cost effective way. Right now, only 2 out of the 44 offer such capabilities to their members due to prohibitive costs.

Clear Bank will boost indirectly retail banking by reducing the substantially processing costs, which will facilitate competition for incumbents in the UK.

Clear Bank will help Fintechs by providing Banking as a service through the Cloud at a very low cost. Clear Bank will be offering an API so that Fintechs can interconnect to the ClearBank Fabric.

Who is behind this innovation?

Clear Bank has been built on the Microsoft Azure Cloud. I spoke to Richard Peers, Director of Financial services at MSFT in the UK, last week and he clarified the hybrid approach: “The application and business logic of Clear Bank is in the public cloud; connectivity to payment schemes and customer data is local in the private cloud.”

Clear Bank is built on the Azure public cloud and the Azure Service Fabric (hybrid approach). No need to understand the technical details here. What is important to know is that Clear Bank’s business model is in the category known as PaaS (Platform as a service). Most of us are mainly familiar with Saas. Microsoft has been working with financial services providers on various projects whose value proposition is delivered via Paas or Iaas. The infographic below captures the main differences. This is where we start understanding how the technology has lowered the cost and also how the Banking As a service offering is secure.

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Clear Bank’s platform includes authentication of the parties involved using a combination of voice, biometrics and face recognition. As Richard pointed out “The Iaas is a technical model that delivers a business model that allows a different scale, agility, security, cost model.”

He also explained in clear business language about Azure Service Fabric, the micro services “kitchen” of MSFT:

“The current world has been operating with applications that are still client/server many tiered and typically needing significant engineering and testing across the full stack before they can be deployed, with huge dependencies between layers. So think about having to get everyone in a company as complex as Microsoft on board with a decision before you can act. In the microservices world, you can focus on a component, get it right and deploy without total dependency on everything else.”

 My last question to Richard, was about the nature of the True innovation in Clear Bank’s case? I always thought of MSFT as a cloud computing player focused more on the Blockchain tech potential and now I realize that is has been instrumental in launching a clearing bank (we all expected blockchain to be the tech disrupting this part of the stack) that is NOT Blockchain powered?

The true innovation is in the fundamentals of the business model and the scalability of the cloud when applied at its highest potential.   Banks need to operate at real-time, based on an API model with the ability to reason over data at low cost, resiliently and securely.  Their use of the cloud allows this, delivering a faster and more cost efficient model with the agility to add new services as the market moves. ClearBank provides a Banking as a Service (BaaS) model to other Financial institutions and Fintechs, allowing them to focus on their own products and core businesses. ClearBank provides the underlying banking infrastructure and software all as a service.”

 On our radar screen

We will be watching Clear Bank’s role in the digitization of financial services. What microservices will be built on it, how much will the UK payment system save, how much will the global system interact through Clear Bank? Which of the multiple banking services that ClearBank offers, will prove to be the key by impacting the payment ecosystem?

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.

Wrap of Week #15: Bitcoin, Fintech in Art, Fintech for SMEs, Insurtech via Venture Scanner, AI & Banks

The 15th week of 2017 (packed with religious holidays) was rich in terms of insights:

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Who’s Who in Fintech and Art

This post was inspired by Spiros Margaris whom we all know as a Fintech global influencer but I doubt that any of you know Spiros Margaris the Artist.

Lets indulge together.

A Fintech Influencer who is an Artist

I first stumbled across this piece of Spiros’s artworks.

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Oy Darlin ‘Clementine, 2002: Oh My Darlin ‘Clementine is a series in which I have to go to the Clementine School, my school, my school, and the gym (The Gym). 

Spiros works with media photography and film and has exhibited in Switzerland and New York. His work seems to be inspired by his childhood and his country of origin (Greece). Fintech will have to wait to become more of a memory that the artist feels the need to preserve, rather than a live and active arena that the artist is currently participating in.

Fintech and Art in the Museum of Contemporary Art in Shanghai

 I know First is an Isreali Fintech that uses Artificial intelligence to provides daily investment forecasts based on an advanced, adaptable, self learning algorithms. The company’s algorithms discover patterns in large sets of historical stock market data.
Last Fall, I Know First collaborated with London based artist Fabio Lattanzi Antinori who worked on a piece for a solo show at the Pavilion of the Museum of Contemporary Art in Shanghai. The exhibit was part of “Fortune Tellers” exhibit and featured an interactive sculpture, which reacts to the presence of the audience through capacitive sensing, by producing music, when touched. More specifically, the installation was about creating an interrelation between the volatility of financial markets, particularly the Shanghai Stock Exchange, and the temporary condition of human life.


Currency Design at London’s VA Museum

London’s Victoria and Albert Museum held a #FridayLate event in early April that brought together artists and designers to discuss society’s relationship with money today. Invisible Finance via digital currencies and virtual transactions is clearly changing our understanding of money.

Scrip is a concept designed by NewDealDesign as the ‘tangible future of cash’ in a world in which cash is moving from the physical to the abstract. It is a concept luxury sci-fi wallet! The user would swipe the smart copper surface depending on the denominations he-she intends to spend. A small digital display would show the invisible cash spent.


 A marketplace to invest in Art

Away from pure art and concepts, Arthena qualifies for a genuine Fintech. It started as an equity crowdfunding platform dedicated to the alternative investment asset class of Art. The founders deployed data science algorithms to evaluate the investment products and decisions. Transparency in the art market and bringing this asset class to your mobile, is the way Arthena is designed.

Arthena, has now added a series of funds that individuals and insitutions can invest in. From currently open funds as Rising –Emerging, Established Masters, Blue Chip Artists; to more thematic funds like Emerging NY artists, War & Contemporary Art, Undervalued masters which are now closed.


Mobile art discovery & Reverse Fintech

Artelry is another player in the Art ecosystem that has launched an app for both collectors and artists. The focus is in the discovery phase of the investment process. They are disintermediating galleries and offering a traceable way for Artist Resale Royalties. Transparency is also their core value proposition.

MutualArt, is a global leading source of art market information and manager of the APT (Artist Pension Trust) collection. They just announced that they raised $32 million in funding to launch a new private sales service, adding an offline part to their 100% online service. MutualArt’s new offline private sales service offers collectors, art advisors, foundations, corporations and institutions exclusive access to artworks from the APT collection – currently comprising nearly 13,000 artworks from 2,000 established and emerging artists in 70 countries.

Blockchain for tracking Art, crowdfunding Art

Ascribe is a startup that lets artists register their digital work into the blockchain, creating “a permanent and unbreakable” link between the artist and their work. Focus is really on empowering the artist.

Weifund, is a blockchain-based equity crowdfunding platform developed by ConsenSys. It is a use-case of smart contacts in the Art world.

Mitzi Peirone, a 25yr old model, painter, writer, is making her debut in the filmmaking industry with “Braid”; a psychological thriller that will be the first US feature film to be funded through an equity crowdsale using cryptocurrency.


Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.



Wrap of Week #14: Chained Finance, M-Akiba, MyProsperity, Cyber risk Insurance, Yielders

The 14th week of 2017 was an amazing week with themes around:

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Government Bond Innovation: Africa puts the rest of the world to shame


This post is inspired from a hot of the press Fintech innovation in Fixed Income coming from the Rest!

Kenya, made headlines at last albeit a 2yr delay, by issuing the first Mobile-only Government bonds targeting retail!

In this pos,t I will start by looking back at the state of innovation in the Fixed Income market and the stumbling blocks over the past two years. All this is happening in the West.

Fixed Income Fintech in the West

Innovation in the Fixed income part of the Capital structure of corporations and in Government and Agency Debt instruments, has proven tough. Algomi, the UK based Fintech player focused on adding value in

”How bonds are traded”

has been stubbornly working at it and continues to do so despite a couple of setbacks. I wrote about Algomi in the early days of my Fintech expert journey – see Algomi Connecting Fixed Income Buy and Sell side by enhancing distribution. In Spring 2015, in Technologies for the storm in fixed-income I covered all ventures coming from Fintechs or incumbents.

Bondcube was included (a very early stage Fintech at that time) who unfortunately, filed for liquidation last summer. Their transparent platform was focused on large orders, taking anonymous indications of interest from asset managers and investors, as well as banks and brokers, matching them and then executing. Asset managers who constitute the majority of bond holders, were uncomfortable being price makers rather than price takers. Being a liquidity provider is not in their culture. So, in the end, they preferred to call a dealer. Bondcube’s failure on the last step (execution) shows again that Institutional Culture is hard to change (more details here).

Late 2015, I profiled Origin Markets: A Fintech for Corporate P2P Borrowing and Lending (very early stage at the time) who has a laser focus on adding value in

“How bonds are Issued”

Origin is digitizing the MTN (Medium Term Note) market which works through a shelf of private placements (more than $1trillion market). Six investment banks, BNP Paribas, Bank of America Merrill Lynch, Societe Generale and Credit Suisse, have already partnered with Origin.

From the original landscape coverage, OpenBondX out of the US recently joined forces with DirectMatch. OpenBondX has been focused on secondary market trading of US Treasuries (UST) and corporates bonds, whereas Direct Match focuses only on the USTs. The latter is obviously one of the most liquid bond subsectors, but yet on any given day no more than 13% of outstanding Treasuries trade.

The other recent “unification” in this subsector, is Trumid acquiring Electonifie. Trumid was backed earlier by Soros and Peter Thiel and recently received funding also from Credit Ease; and can thus embark on a buying spree. Electronfie, launced in 2015, had been looking to raise capital over the past six months or find a partner.

Canada has seeded Overbond, which claims to be positioned in the “How bonds are Issued” segment by digitizing the primary issuance process. For now, it seems to be a platform that aggregates Bond information, and data. We will be watching their positioning evolve.

All of the aforementioned ventures, are solving problems of the Fixed Income market at the wholesale level, i.e. asset managers, deals etc. At the retail level, investing or trading in single bonds remains an over-the-counter market with lots of inefficiencies. Saxo Bank announced last Fall the launch of a retail bond trading platform for their SaxoGo Trader clients. More info here. However, the word on the Street is that it is not that alive yet.

Fixed Income Fintech in Africa

Kenya is in the spotlight.

Did you know that there are 38 Fintechs out of Kenya, as we speak? Check here.

Kenya has a country rating B+ (as Sri Lanka, Nicaragua etc).

The 10yr government bond offers a 14% yield. Bank deposits are at 7%.

  • The M-Akiba (Swahili translation of “savings”) Mobile-Only bond is a 3yr bond. It offers a tax free 10% semi-annul coupon. The coupon will be paid twice a year to MPESA or Airtel Money.
  • The M-Akiba proceeds are going to be used in infrastructure projects in Kenya. The bonds are un-collateralized lending to the government.
  • The current issue size is 5 billion Kenyan shillings Ksh. ($47.7 million). The government plans to issue up to $48mil in the summer.
  • The minimum purchase order is 3,000 (around $30) much lower than previous levels (Ksh. 50,000 = $480). The bonds can be traded through brokers.

This is a pilot project that the world should watch for a couple of reasons. We are seeing a pilot case of crowdfunding government infrastructure projects by borrowing directly from the same people that will be the workers in these infrastructure projects.

We are seeing the government competing directly with the consumer banking market – i.e. banks – by offering Higher tax-free rates and liquidity. Typically, governments borrow at lower rates even on an un-collateralized basis.

We are seeing an alternative way of educating the people towards increasing their savings.

We will be monitoring the success of this direct retail placement from a government and the upcoming larger issue.

Will we soon be seeing the launch of mobile apps from the US Treasury, the Japanese government, or the Indian government? Stay tuned.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.