Digital gold: Digix democratizes access to gold

In an interesting twist, blockchain technology is now democratizing access to one of the oldest standards of wealth: gold. Singapore-based Digix is betting the future on increased adoption of digital gold, particularly in Southeast Asia.

Digix is the company behind the world’s first digital gold token, DGX, with 1 DGX equal to one gram of gold. The company’s vaults in Singapore and Canada are accredited members of the Bullion Association and are fully insured. Moreover, every gold bar backing DGX is always openly verifiable by the public at all times, thanks to blockchain technology.

“Throughout the years, gold has maintained its value and built its reputation as a ‘recession-proof’ asset class that is largely uncorrelated with traditional market movements and economic fluctuations. This is due to the fact that currency devaluations will never apply to physical commodities like gold — as it cannot be printed like money and its value is not impacted by a government’s decision to change interest rates or to increase the circulation of a particular currency.

“During the COVID-19 pandemic, we have seen a number of major hedge funds announce that they are betting on gold on expectations that central banks’ unprecedented economic stimulus packages during the coronavirus crisis will result in devaluations in major currencies — further highlighting gold’s position as a reliable asset in times of uncertainty,” Digix COO and Co-founder Shaun Djie told Digital Life Asia.

Southeast Asia to lead the way

What makes Southeast Asia unique in terms of digital gold adoption? According to Djie, it is the combination of surging digital adoption and the cultural importance of gold in the region.

“A recent Mastercard study showed that digital adoption is on the rise in Southeast Asia and is expected to remain for the long term — making the region a perfect hotbed for the growth of digital applications and innovations. With e-commerce, online banking and contactless payment becoming a normal part of everyday lives, it is no surprise that more physical assets will soon receive the digital treatment,” Djie said.

“As the demand for gold rises globally, few regions showcase the potential of the gold market as much as Southeast Asia. Gold consumption in the 10 ASEAN countries reached 309 tons in 2018, making it the third largest market for gold globally, after China and India. Indonesia, Thailand, and Vietnam together account for over 80 percent of SEA’s gold market and have continued to show strong demand over the years.

“In addition, gold enjoys a rich cultural and traditional importance in Southeast Asia — with jewelry, bullion, and coins being prized possessions that are handed down for generations, and for their ornamental value throughout the region,” he added.

Djie noted that even ride-sharing and e-payments player Gojek is now offering an online gold investment feature.

Best of both worlds

Djie was previously a gold trader, who then came across blockchain in 2015.

“I immediately understood its potential to disrupt the entire financial sector — and to have transformative applications across numerous industries far beyond Bitcoin’s use as a digital currency.

“I also realized that blockchain has the potential to solve the biggest challenge of physical gold, which is the high premiums associated with transporting, storing, and insuring this precious metal. As of late, the premiums of gold have surged by approximately 60 percent due to the worldwide lockdowns and increased transportation costs as a result of the COVID-19 pandemic. In addition to high premiums, gold has always been a negative yielding instrument where investors have to pay to store, insure, and secure the asset,” he said.

Because of this, only wealthier individuals could previously dream of owning gold. This limited the benefits to only a few investors.

“Combining my professional experience in gold with my passion for blockchain, Digix was born out of the two-fold desire to democratize access to gold and to introduce an asset-backed digital token to market, offering users the stability and reliability of physical gold, while leveraging the benefits of blockchain technology,” Djie said.

Digital gold for all

Has democratizing the space worked? Has the market grown with the entry of users who previously would not have considered investing in gold?

Djie pointed out that while many mainstream consumers still can’t afford the prohibitive cost of traditional gold investment, digital gold has opened new opportunities for them to benefit from gold.

“The democratization of gold through digital gold has given a new avenue for the market to grow. It allows everyday consumers to easily purchase gold and unlock the benefits of one of the most well-regarded asset classes available in the market. With the option of buying gold by the gram, digital gold allows anyone, regardless of their purchasing power, to trade, spend, hold, and microinvest their savings in the world’s most time-tested asset class.

“As a result, Digix has seen an approximate 13 percent increase in digital gold token holders over the past three months — with a much higher demand coming from mainstream consumers who have not previously invested in gold. In addition, we are also seeing a higher demand among institutional and traditional investors as they benefit from the ease of purchase and trading — without having to worry about the custodianship and safety of their holdings, as all gold is custodied in secure, accredited precious metals vaults, as well as being registered on the blockchain,” Djie said.

In a world of uncertainty, it’s good to know that gold remains reliable — even digital gold.