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The return of gold as real money

Gold is an excellent store of value, but it's lost its utility as money. But now a London-based fintech startup wants to bring gold into the 21st century. Ben Judge reports.

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A horse my gold-backed electronic currency for a horse

Gold has been an excellent store of value over the long run: as gold fans often point out, it's perhaps the only form of money where the quantity that would have bought you a decent toga in Roman times is still worth a half-decent suit today. Still, as a means of exchange, it's less useful than it once was.

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Unless you're exchanging a handful of sovereigns for a nag at the Appleby Horse Fair, it's difficult to swap your gold for anything real. In short, it's lost its utility as money. But a London-based start-up, Glint, aims to fix that. By marrying the world's oldest currency with 21st-century technology, Glint's founders Ben Davies and Jason Cozens hope to get people using gold to buy goods and services, settle debts and send to their friends.

It's fair to say that Davies is unimpressed with our current monetary system. Since the dollar was untethered from the gold standard 40-odd years ago, central banks have been able to print money at will to fund overspending by modern governments, which has led to the global economy staggering from ever-bigger boom to ever-bigger bust. But following the financial crisis, people are starting to realise that something is wrong, says Davies. Global debt as a percentage of GDP is still at record highs, and as far as the average punter is concerned the cost of living continues to rise, but wages are not keeping pace.

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"The inequality of wealth is horrific," says Davies. "Something's going to change." Cryptocurrencies are phenomenal, he says, but bitcoin's problem is that it has no tangible backing. It's also little use as a currency: high volatility, lengthy transaction times and steep fees make it near-impossible to use as a means of exchange. So Davies believes the time is right for "fairer money" and to him, that means gold.

Glint marries gold up with the electronic payments system the firm is regulated as an e-money provider by the Financial Conduct Authority. Using a smartphone app (iOS only now, but Android should follow in early 2018), Glint allows customers to buy gold at 0.5% above the spot price and store it in allocated accounts in vaults in Zurich. Users can check the balance at any time and get a Mastercard debit card, which allows them to "spend" the gold in their account.

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Davies claims that they will be able to do this in real time without having to sell first or load money on to their card. Users will be able to spend in a range of fiat currencies using the spot rate for that currency, and will be able to send gold to other users, and make payments into bank accounts.

"The revolution has to start somewhere," says Davies. He sees a future where vaults around the world are connected to Glint, with merchants accepting gold as payment, bypassing the fees of card processors. He also makes a case for its use in developing countries where currencies may not be robust. Time will tell but perhaps gold really can return as a global currency.

In the news this week

Coinbase, one of the largest cryptocurrency exchanges, has sounded a note of caution to users who might be thinking of cashing out of the bitcoin bubble. The huge numbers of people piling into bitcoin is creating "extreme volatility and stress on our systems", it says. Once the cryptobubble does burst, the bitcoin price could fall very rapidly which means getting quick access to your cash is essential.

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However, Coinbase warns that its services "may become degraded or unavailable during times of significant volatility or volume" exactly the conditions that would occur if everyone was panic selling which "could result in the inability to buy or sell for periods of time". Coinbase advises customers to ensure their contact details are up to date, that they are familiar with any buy or sell limits on their account, and that they have completed all the necessary identity checks. Even so, customers should expect transactions to take the "maximum number of days indicated".

Buying into the mania phase of the bitcoin bubble just got a little easier with the news that Revolut, the fintech forex start-up, now allows users to buy bitcoin and other cryptocurrencies via its smartphone app. "Premium" users can now buy bitcoin, ether and litecoin with any one of 25 fiat currencies with a charge of 1.5%. However, although you can buy, hold, transfer and sell the cryptos bought via the app, you cannot transfer them to an external wallet. Nor can you transfer cryptos from an external wallet to the app and exchange for fiat currency.

ASX, the Australian Securities Exchange, is to replace its ageing clearing and settlement system with one built on blockchain technology, says Janice Smyth in the Financial Times. ASX will use a "permissioned" or secured private version of distributed ledger technology that has been developed by Digital Asset Holdings. Blythe Masters, chief executive of Digital Assets, said it is "the first meaningful proof" that blockchain can "live up to its potential". No date has been set for its implementation, but it should be ready to discuss the transition timetable by the end of March 2018, says ASX.

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