The demise of the potentially ground-breaking project launch in the autumn of 2017, named Royal Mint Gold (RMG), highlights the wariness of governments to become involved in the largely unregulated world of cyptocurrencies, which exploded into the public eye last year with the stellar rise of bitcoin. https://www.reuters.com/article/us-...blocks-royal-mints-digital-gold-idUSKCN1MZ1SZ
For folks who value the "no counter party risk" aspect of owning (and possessing) physical metal, these sort of trading solutions wouldn't really be attractive. As a trading or payment systems solution, it's viability would be dependent upon the trust people have in the institutions backing it. It would have been interesting to see a first world government backing such a project.
So, how does a gold backed crypto work? Cryptos not backed by anything worked by being popular and supported by serious investment. Since it was not tied to anything physical it is not limited by anything when increasing in value. If you back it with gold then the value necessarily is linked to that gold. Ie if a single gram of gold backs a cryptogram then the value is about USD39.60, the value of the gold. If the cryptogram becomes very popular, and prices rise, the holder of the original gram backing the currency needs to make money. Did the RM expect to make profits only due to expected growth in demand and future sales? How do they cover the costs of secure storage of the gold? Does a cryptogram have some sort of annual fee or does it's gold allocation degrade? If gold goes up in value as a result of increasing crypto demand, then the RM benefits as its gold reserves that are not tied to cryptograms increases in value as well. It makes you wonder whether RM was intending this as a short term strategy to pump and dump its gold reserves? What was the end game?
