DLT/Blockchain, the BIS and the Link to Gold as Money

OWNx Team Global Finance and Economics, News & Current Events

Some of the largest global institutions are beginning to catch on that DLT (distributed ledger technology) is going to have an enormous impact on banking and payment systems. DLT has been around for years, primarily in the form of the Bitcoin blockchain. It’s stated benefits have been around nearly as long.

In one important development, the Bank for International Settlements (BIS) is officially acknowledging that those benefits are more than just potential. We find the following interesting admission disclosed in a paper released by the BIS last week entitled: Distributed ledger technology in payment, clearing and settlement: an analytical framework:

DLT may radically change how assets are maintained and stored, obligations are discharged, contracts are enforced, and risks are managed. Proponents of the technology highlight its ability to transform financial services and markets by: (i) reducing complexity; (ii) improving end-to-end processing speed and thus availability of assets and funds; (iii) decreasing the need for reconciliation across multiple record-keeping infrastructures; (iv) increasing transparency and immutability in transaction record keeping; (v) improving network resilience through distributed data management; and (vi) reducing operational and financial risks.1 DLT may also enhance market transparency if information contained on the ledger is shared broadly with participants, authorities and other stakeholders.”

Yes, DLT can provide those benefits, and more. Not only does it have the capacity to  change how banking and payments are conducted by you and me, it also enables us to re-imagine what a monetary system should be, who should be in charge of it, and what type of money is used within the system.

The BIS undoubtedly understands this. However, for them to discuss the use of DLT as a means to change the actual money we use is a bridge too far – at least for now. Bitcoin let that proverbial cat-out-of-the-bag. But what is not well known is that little labs of innovative financial thinking have popped up all around the world. They are not just focused on how to make the existing banking system better. They are thinking about how to make money itself better.

That’s a big deal.

Many people think there is no better money in the world than gold and silver. This belief makes it likely that at some point, organizations like the BIS are going to have to deal with the impact that distributed ledger technology will have on the very money we use.

We’ll keep an eye out for a white paper from the BIS on the the role silver and gold bullion may have in such a future monetary system. Although it is likely to come at some point in the future, we won’t hold our breath waiting for it. In the meantime, we will work to keep you ahead of the BIS in understanding just how DLT might change the world for all of us in the years to come.

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