GoldMoney cryptocurrency token?
Suppose I want to create a cryptocurrency token backed by a GoldMoney account. This would be very easy to do, and could be coded in about thirty minutes. Here is how it would work:
I issue a token on the Ethereum blockchain. Let's call it EEgold. I offer to mint one of these tokens for every one gram of gold I receive in my GoldMoney account (let's say I have a separate account set up for this purpose). The person who wants the tokens must also pay the GoldMoney transaction fee to send me the gold. I send the token to the wallet address of the person who sent me the gold. If someone wants to redeem the token for gold, they must have a GoldMoney account. They then send me the tokens to the wallet address I give them, and I send them equivalent gold through the GoldMoney network minus the transaction fee.
This seems like it would be an interesting system for several reasons. First, token-holders could trade this token on the open market without restriction. For example, there would be no requirement for a holder to have $2,000 worth of tokens in order to get a prepaid debit card. He could instead just sell his tokens to a cryptocurrency exchange that offers prepaid debit cards to users with smaller accounts. Transactions could be settled in seconds instead of 24 hours. For example, say a user has some of these tokens and wants cash. It currently can take several hours or even a full day to sell gold on the GoldMoney network. This is because a "sale" on the GoldMoney network is actually a sale of physical metal, and it uses a centralized database with all of the multiple security checks that have be done in that kind of a system, but with a sale of these tokens, the gold just stays in the vault under the account name of the token issuer.
There have been gold-backed cryptocurrencies already, such as OneGram and OZcoinGold, but none of them have been trustworthy. So far, they have all had vague explanations as to how the gold could be redeemed or where it was stored. GoldMoney has a proven record of using popular commercial vaults provided by reputable security companies such as Brinks and Loomis. Because of the trust that investors have in GoldMoney, if they were to provide such a token, or allow someone else to provide it, it would go a long way towards making gold savings more liquid and easy to access.
The one big problem I can see with this design is the issue of storage fees. The issuer would not be able to make the token have an exact 1:1 correspondence to a gram of gold (or some other unit). This is because the amount of gold in a GoldMoney account decays a tiny amount over time due to the small storage fee charged at the end of the month. So the token would end up needing an NAV like an ETF has, so that the amount of gold represented by each token would grow smaller by a tiny amount each month. This would allow the issuer to pay the storage fee without ending up with less gold than would be needed to pay for redemptions.
So here is my question: Does anyone know if it would violate GoldMoney's terms of service for a user to issue a token backed by the user's GoldMoney account? I imagine it probably would, but I'm curious what others think. Is this a third-party payment? There is no cash in the transaction. For example, the issuer would not take cash from investors and use it buy gold on the GoldMoney network. Any recipient of newly minted coins would need to be a GoldMoney customer first, and this person's identity would be known to GoldMoney. Any person that redeemed tokens would also have to be a GoldMoney customer. But the issuer wouldn't know who these people were. Only GoldMoney would. Would this violate financial regulations, including KYC?
I can also see how GoldMoney might consider this token to be "competition" because, after all, GoldMoney gets revenue from transaction fees. However, it seems to me they would still make money from both storage fees and arbitrages as the value of the token fell below or rose above its NAV.
Again, this token could be created using the Solidity programming language in about thirty minutes. Incorporating the NAV part of it is a little complicated, and might take longer, but I imagine could probably still be done in a few weeks or a month. Over the long-run, token-users would need a web-interface to handle redemptions, and that would take a long time and require someone with decent coding skills. But still, it seems like a very easy system to engineer.
Regardless, I would never do something like this without GoldMoney's permission. But I thought it was an interesting idea, and I wonder what people here think about it.