Turkey’s Blockchain of Gold

Turkey’s Blockchain of Gold

Takasbank, the central clearing house responsible for the fulfilment of orders transacted through the Borsa Instanbul (BIST) Exchange in Turkey, have announced their physically-backed blockchain platform for gold is now live. Known as the BiGA-Digital Gold Transfer Platform, it will allow for the transfer of ownership of gold “…between participating banks 7/24…”

The tokenised asset traded on the platform is called a GA BiGA ilen, which is issued in return for each gram of gold housed in the Borsa Instanbul vaults. Although firm details are yet to be released, Takasbank suggest “There are 3 main capabilities in the system: export, redemption, and transfer for digital assets.”

Valuable Asset and Viable Hedge

Borsa Instanbul can trace its roots back to 1866 but was reconfigured in 2013 to amalgamate the nation’s stock exchange, gold exchange, and derivatives exchange under one authority. The Government of Turkey is the major shareholder in the exchange and the value of annual trades on the exchange reportedly exceed $1 trillion.

As a commodity, gold has traditionally been seen as a store of value but banks had been deterred from holding it on their books since the global quasi-gold standard was eliminated in 1971.

Banks rank assets according to their perceived credit and market risk rating. Over the last few decades government debt has been graded as a Tier 1 because it was deemed as zero risk and could be marked at 100% of market value while other assets – such as gold – were seen as being at the mercy of price fluctuation and were so held at around 50% of market value and counted as a Tier 3 asset.

However, the Basel III agreement in April this year effectively reinstated the commodity as a Tier 1 holding and as a result gold is possibly being seen as a potential bank stabiliser and a viable hedge against so called “no-risk” government debt.

An increase in the purchasing and repatriation of physical gold by central banks has been covered in the mainstream media but the tokenisation of the commodity through platforms such as BiGA-Digital Gold provides a logistically attractive alternative providing physical settlement is available and third party trust is maintained.

Local news sources state that a number of stakeholders are already engaged in the new Takasbank system, including state lenders Ziraat and Vakif, private lender Garanti BBVA, as well as private and state participation banks Albaraka Turk and Kuveyt Turk.