Time For Silver-Backed Crypto?

Over 60 central banks are currently working on this, so CBDCs are soon coming to a country near you.

These are not the same as cryptocurrencies. Central banks love the idea of eliminating cash. That’s because it allows them to track every dollar or other currency unit they create. That way they know who spends how much, when, where and on what.

The level of control that will ultimately give them will be unmatched. And the COVID-19 pandemic has massively accelerated this trend.

There are over 400 million people in China and India without a bank account. “Unbanked” people would have easier access to tax refunds or stimulus checks.

China is pushing hard and fast towards making itself into a “cashless” society. It’s planning to make the 2022 Beijing Winter Olympics a completely cash-free event.

Don’t think the U.S. is willing to be left behind. This past February, Fed Chair Jerome Powell said a digital USD is a “high-priority project…We are looking very carefully, very carefully, at the question of whether we should issue a digital dollar.”

Around the same time, Treasury Secretary Janet Yellen told the New York Times, “It makes sense for central banks to be looking at” CBDCs, adding that “too many Americans don’t have access to easy payments systems and banking accounts, and I think this is something that a digital dollar, a central bank digital currency, could help with.”

CBDCs can be created and distributed much more easily and quickly than existing currencies. This is a major problem in my view (think inflation), but it’s a major advantage if you’re a central planner.

Already the world has reached an astounding $281 trillion in total global debt, or more than 355% of world GDP. If CBDCs are adopted, I expect they will hasten this trend. Eventually, the entire financial system is likely to need a total reset.

I believe precious metals will have a major role to play. Even if I’m wrong on that point, they will still likely soar as inflation hedges.

In fact, I think that ultimately we may have a gold and/or silver backed cryptocurrency that is government mandated, once faith in fiat currencies is completely lost and a reset is required.

That new currency will have both intrinsic value and the conveniences of crypto. And if that currency is on a blockchain which logs all transactions, then it can be very secure.

There are already several cryptos backed by precious metals or that are in the development stages. One of the biggest advantages of this approach to owning precious metals is that it allows ownership of small amounts, without dealing with storage issues, while offering security and the ability to easily and quickly transfer value to someone else.

Here are a few companies that are active in this space. For example, Aurus (https://aurus.io/ ) has built a platform allowing refineries, distributors and vaults to autonomously tokenise precious metals. There are other similar developments:

• deVere Group has the Pax Gold crypto, which is backed by a portion of a London Good Delivery gold bar
• Dignity Gold company has secured $6 billion in gold from mining claims in Nevada and Arizona for its DIGau digital token
• Lode (https://lode.one/ ) has the AUX Coin which represents 1 milligram of vaulted, audited, insured and verifiable gold bullion, and the AGX Coin is 1 gram of silver

(Note: I provide the above for informational purposes only. I am not endorsing any of these companies).

Even if precious metals backed cryptocurrencies don’t replace CBDCs, they are very interesting as they may go a long way to solving the problems of storage, security and rapid transferability.

This is certainly an area of precious metals to watch closely. People may well gravitate towards this as they seek a highly practical store of value, based on one of the oldest forms of real money: gold and silver.

And this could be a burgeoning new source of demand for precious metals, helping to push silver and gold much higher in the future.

Written By: Peter Krauth