Blockchain Technology Can Reduce Exploitation In The Gold Industry

Blockchain is bringing accountability that will strengthen mineral supply chains.

MetalStream
Aug 23 · 4 min read

Gold has the capacity to withstand the ages because it has an extremely stable chemical structure. Some of the gold stocks we have above ground today can be traced back to ancient mines. Our desire for gold extends into the mists of time and so does the abuse and subjugation associated with its mining.

The mining and distribution of the gold always been conflated with manipulation, corruption and mistreatment. The problems extend throughout the supply chain and although things have improved there are still numerous problems to address in the industry. Perhaps the use of blockchain technology can now improve the provenance and liquidity for new gold entering the market.

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Most of us have no knowledge about the origins of the gold we purchase. It is this opacity which breeds many of the problems we see in the gold industry. The high price of gold draws criminal gangs and they bring violence and human trafficking. The use of slave labour in the gold industry has always been an issue and we still face the same issues today.

The World Gold Council defines modern slavery to “encompass slavery, servitude, forced and compulsory labour and human trafficking. It includes both adults and children being forced to work against their free will.” Driven by economic hardship people are sold into slavery or are forced to scrape a living working in gold mines. These unfortunate people risk dangerous working conditions, unsafe environments, violence and sexual exploitation.

A 2015 report by the South African Human Rights Commission estimated that 30,000 illegal miners operated in South Africa. The majority of these people are estimated to be undocumented migrants who have come in search of work from Zimbabwe, Mozambique and Lesotho. The mines they toil in are unregulated and operate without safety precautions. It is believed that hundreds of people have perished in these informal operations in South Africa alone.

Another country affected in this way is Peru. In 2013 the Human Rights Ombudsman estimated that illegal gold mines directly employed 100,000 people and indirectly employed a further 400,000. The majority of the gold produced illegally is facilitated into the market by regulated businesses who launder the commodity. These illegal mines produce 15–22% of Peru’s gold worth an estimated $3 billion in 2013. The forced labour in Peru’s gold mines has been compared to slavery and preys on the most vulnerable members of society.

Beyond the human impacts of the gold industry, there are significant environmental issues which need to be addressed. Illegal gold mining is a contributing factor to the deforestation of the Amazon rainforest and can utilize dangerous chemicals such as mercury. In regulated environments, the handling of these chemicals is strictly monitored but there are no environmental standards in illegal mines. The thirst for profit has fostered corruption allowing illegal miners to produce gold with the confidence that their activities will be disguised once their gold moves up the supply chain.

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Blockchain technology can begin to positively impact issues in the gold industry. Due to the immutable nature of the blockchain, there are now opportunities to track the movement of gold from the mine to the market. We are beginning to see this being implemented in other commodities such as cobalt and diamonds. It would be possible for registered producers to enter the gold they produce on the blockchain so it can be tracked as it moves through the supply chain. A system such as this would bring transparency to the provenance of gold as well as reduce the costs associated with supply.

As gold is a natural resource it is only appropriate that the inhabitants of a gold-producing region should benefit from its mining. There are many artisanal gold miners around the world who mine gold independently from any large mining company. The blockchain could allow such miners to raise capital investment from the marketplace so that they could improve their mining operations. This would cut out some of the criminal middlemen which plague the industry. A scenario such as this would let the blockchain provide both liquidity and transparency to gold mined in artisanal mines.

Although MetalStream strives for the highest possible standards of due diligence with our gold, not all operators in the industry are as thorough in their approach. By implementing blockchain technology in the gold industry the opportunities for due diligence will be opened to a wider market of investors. Ultimately the market will decide the types of practices we are willing to accept but the transparency and accountability of the blockchain should make that choice easier in the near future.


MetalStream is the issuer of the innovative gold-backed MSGLD token. Please visit our website for more information, and contact support@metalstream.io for enquires related to the purchase of tokens.

MetalStream

Written by

MetalStream Gold (MSGLD) tokens are gold-backed, ERC-1400 compliant security tokens employing a metal stream financing model.

MetalStream

Issuer of the innovative MSGLD security token, backed by and redeemable for bullion. Get the liquidity of a token, plus the safety of gold, at a 30% discount.

MetalStream

Written by

MetalStream Gold (MSGLD) tokens are gold-backed, ERC-1400 compliant security tokens employing a metal stream financing model.

MetalStream

Issuer of the innovative MSGLD security token, backed by and redeemable for bullion. Get the liquidity of a token, plus the safety of gold, at a 30% discount.

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