Gold Industry Looks to Blockchain to Make Supply Chains More Transparent — Update

While the pilot is expected to run until October with up to a dozen miners involved, the organizations say the ultimate goal of their Gold Bar Integrity Programme is to make the use of blockchain the norm among all gold market participants.

Blockchain, most well known as the technology behind cryptocurrencies such as bitcoin, is a form of digital ledger that is shared among its users. Information, for example, the buying and selling of an asset, is held among and updated across users making it transparent and difficult to tamper with.

Peer Ledger, a Canada-based blockchain firm, and aXedras, a Swiss firm that focuses on applying blockchain to precious metals, are the two companies involved in the pilot. The LBMA and WGC said the first phase will see the two companies demonstrate how their technology could work at the scale of the global gold market.

The LBMA and the WGC hope the program will meet rising demand among investors and consumers of gold to be able to know the metal was produced sustainably and ethically, as well as cutting down on fraud.

“The largest members have all lined up hard and fast behind this because they see the value of moving the standards to which they adhere forward, ” David Tait, chief executive of the WGC, said. “Not only is it a moral obligation for them, it is quite clearly a very astute business obligation as well,” he said.

The LBMA, a trade association representing the gold and silver industry, already plays a significant role in scrutinizing gold supply chains. Refiners that follow its Good Delivery standards must ensure their gold is free from connections to money laundering, environmental damage, or human rights abuse. Refiners that follow its standards account for 90% of global production.

Gold used to settle contracts in London must comply with the LBMA’s good delivery rules and the body said it expects to eventually make participation in the blockchain a requirement.

The program should “strengthen the integrity of the physical gold industry, as well as its investment and trading communities,” Jin Chang, global head of metals at CME Group said. “These initiatives help provide more clarity to the industry and our clients around how their sustainability goals are being met,” she said.

Write to Will Horner at william.horner@wsj.com