Core Viewpoint - The World Gold Council (WGC) plans to pilot a digital gold format next year, which could transform the $900 billion London physical gold market by creating new trading, settlement, and collateralization methods [3][4]. Group 1: Digital Gold Initiative - The new digital format aims to enable gold to circulate digitally within the gold ecosystem, allowing it to be used as collateral [3][4]. - WGC's CEO David Tait emphasizes the need for gold digitization to expand market coverage and enable asset management firms to view gold from a new perspective [4]. - The proposed "Gold Ownership Pool" (PGI) will allow banks and investors to trade partial ownership of physical gold held in independent accounts, with a pilot set to launch in London in Q1 next year [4][5]. Group 2: Market Context and Challenges - Despite rising gold prices, which have doubled over the past three years, gold remains a static, non-yielding asset on many banks' balance sheets [4]. - The digital gold initiative comes in response to competition from cryptocurrencies and stablecoins, which pose a risk of replacing gold as a traditional asset [7][8]. - Previous attempts to create gold-backed stablecoins have largely failed, with successful examples like Tether Gold and Pax Gold managing only $1.3 billion and $1 billion respectively, a small fraction of the $400 billion in gold-backed ETFs [8]. Group 3: Existing Market Structures - The London gold market operates on an over-the-counter basis, relying on large banks like HSBC and JPMorgan for substantial gold inventories [8]. - Currently, there are two trading modes in the London market: "allocated gold" and "unallocated gold," with the WGC's proposal introducing a third mode [8]. - The adoption of a blockchain database for gold bars, initiated by the LBMA and WGC, has seen low uptake, although 96% of companies on the LBMA's good delivery list have joined the program [9][10].