Bullion Federation Global Convention (BFGC) was held on 4th-6th of August in New Delhi, India. The convention aimed at decrypting the gold supply chain by developing technology infrastructure, framing policies and setting up effective compliance standards.
Mr. Kumar Gaurav, Chairman of Auxesis Group, shared his insights on introducing blockchain technology in Indian gold supply chain. Auxesis Group is India’s first enterprise blockchain company providing innovative technological solutions to supply chain, banking, insurance, and capital markets. Mr Gauray is also a founder of Cashaa, a UK based blockchain start-up which enables international money transfer at £1 fee with the best exchange rates. Auxesis and Cashaa are ranked among the leading 100 blockchain companies in the world.
Tyler Gillard OECD made a announcement to use a transparent system to remove the Indian gold supply chain issue, while Rajesh Koshla, MD., argued to create our own standards instead of LBMA – to have India make its own decisions on gold price and standard.
Growing concern of conflict-gold imports
Gold is an indispensable global asset having diverse applications in advanced technologies, electronics, healthcare, space exploration, dentistry, finance, automotive, jewellery and several other sectors. The popularity and acceptance can be attributed to its excellent conductivity, non-corrosiveness and malleability.
Conflict-gold is illegally mined gold which passes through a chain of intermediaries before it is sold in the market. Funds generated through such sales is used to support war, military, terrorism and other illegal activities. Conflict gold imports in India was estimated at 30-35 tonnes, valued at around Rs 8,000 crore in 2015. According to GFMS Gold survey, Ghana produced 108 tonnes of gold in 2014 and exported over 55 tonnes to India due to import duty differential. Most of gold is re-routed to India through Dubai and payments are redirected to source to fund illegal activities.
Unorganized sector holds over 70% of India’s jewellery market who either recycle their gold jewellery or secure them from undisclosed sources. Large jewellers and refiners are able to procure gold at discounted rates to London Bullion Market Association (LBMA) prices. Resellers constitute to significant part of demand from jewellers there is lack of transparency in the reselling activities. The price and quality of gold procured from different sources in gold supply chain vary considerably without consistent levels of standardization.
To curb the growing concern of conflict-gold and lack of standardization, Bureau of Indian Standards (BIS) has decided to regulate gold manufacturing business in India. They have made it compulsory for gold dore refiners to be BIS certified. Experts opine that India must adopt OECD guidelines to develop responsible gold supply chain from conflict-affected areas. There lies a huge scope to spread awareness among regulators and gold traders about these OECD guidelines.
Tracing gold supply chain using blockchain technology
Blockchain, the technology underpinning bitcoin is considered to track each step of gold supply chain. This innovative technology can allow buyers, auditors and other players to check the gold supply chain logistics such as tracking shipments, bills, invoices and other transition documents. It may also allow gold manufacturers to audit their supply chains and report use of conflict-gold. The adoption of blockchain technology in gold supply chain will significantly reduce operational cost with increased efficiency, transparency and thus, the overall demand. This decentralized system will help India accelerate its overall socio-economic development.