Linklaters advises World Gold Council on launching a vision for the next-generation gold market
Linklaters has advised the World Gold Council alongside Hilltop Walk Consulting in developing a legal framework that underpins a transformative new concept of Wholesale Digital Gold – a pioneering vision to transform the global gold market by modernising the way gold is owned, traded and settled.
In today’s wholesale market, gold trades are settled in two main structures. The first is allocated gold which involves direct ownership of specific physical bars but is operationally complex; and the second is unallocated gold, which has higher liquidity and lower costs, but may expose investors to the credit risk of the institution where the account is held.
Following on from the FMSB’s Precious Metals Spotlight Reviews, and in consultation with key industry participants; a new way to settle gold has been proposed, bridging the gap between these two structures. Pooled Gold Interests (PGI) combines the best of both worlds by providing physical ownership, just like allocated gold, but with new benefits to investors including:
- Broader and simplified use of gold as collateral
- Ownership of an interest in a pool of vaulted gold bars – even in small, fractional amounts
- Easy and secure transfer of gold interests between parties
The challenge for Linklaters was to develop a legal solution supporting this vision. The developed framework underpins the issuance and transfer of interests in a pool of vaulted gold bars. Core participants in the Wholesale Digital Gold ecosystem would co-own the underlying pooled gold and issue digital fractional ownership interests in the gold, maintaining transparency and trust.
Linklaters has co-authored a thought leadership white paper with the World Gold Council that describes the vision for Wholesale Digital Gold and the legal framework.
Richard Hay, Partner and UK Head of Fintech at Linklaters, commented:
“We are proud to support the World Gold Council and the broader industry in articulating their exciting vision for a digital gold market through the development of a new legal structure to support that vision. This structure provides legal certainty, and supports operational flexibility essential for innovation in precious metals trading. By enabling secure, transparent and efficient digital ownership of fractional interest in gold, we are helping to unlock new opportunities for market participants and reinforcing London’s leadership as the world’s preeminent gold trading hub.”
Michael Voisin at Linklaters, commented:
"We were delighted to build upon our track record of delivering innovation in the financial markets through the design of a novel legal infrastructure supporting the vision for Wholesale Digital Gold. The vision and underpinning legal solution are also closely aligned with UK Government’s recently announced Wholesale Financial Markets Digital Strategy."
Mike Oswin, Global Head of Market Structure and Innovation, World Gold Council added:
“Wholesale Digital Gold is a vision to transform the way gold is owned and traded. The UK Government’s recent publication on Financial Markets Digital Strategy highlights the importance of digitalising wholesale markets to drive efficiency, resilience, and innovation – an ambition that closely aligns with our own.”
“As the world’s leading gold trading hub, with the Loco London market clearing an average of 20 million ounces daily, the UK is well positioned to lead the way in improving the way gold is traded and cleared to the benefit of all market participants. Introducing a robust legal structure and innovative technology for gold ownership and settlement, will only reinforce London’s role in the global gold market.”
The Linklaters team was led by Capital Markets partners Michael Voisin and Richard Hay, alongside managing associate Adjoa Abekah-Mensah and associate Michael Kest.
