Traditional Gold Gets a Much Overdue Facelift With BitGold
What is BitGold, and how does BitGold work? These were just a few questions that gold enthusiasts were asking when the company BitGold burst onto the scene in 2015. For some, it’s just another method to buy and store gold through modern, digital means. For others looking for more efficient means to purchase goods and services, it means much more.
With the advent of BitGold, no longer was gold simply something purchased in physical form, then stored away in a lock box or vault somewhere. Now, users can purchase gold then turn around minutes later and purchase something with it. It promised to serve a vast, untapped market of people looking to incorporate gold savings into their everyday lives.
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From its origination, BitGold was designed to be an efficient way to purchase and transact using gold in real time. The company built a proprietary platform allowing users to purchase gold grams using traditional payment systems (i.e. credit card, bank draft). Once the gold was purchased, it was “deposited” into the user account, much like a e-transfer settling inside a standard bank account. The user could then purchase goods and services with a BitGold prepaid card, make scheduled payments, or withdraw funds as necessary (all in equivalent cash value).
In short, they effectively transformed physical gold into something representing currency-like qualities and utility.
Customer gold is stored at Brink’s Company (NYSE:BCO) locations throughout the world. International vaults are located in New York, Toronto, Singapore, Zurich, Dubai, Hong Kong, and London. The Royal Canadian Mint in Ottawa added to its vault storage network in December 2016. Although it theoretically doesn’t matter at which location the gold is stored, many people choose to store it in regional vaults.
Since BitGold also ships physical gold transfers upon request, this has cost advantages. For example, an American ordering a standard-unit 10-, 40-, or 80-gram gold cube from New York would pay significantly less than if it was shipped from Hong Kong. Although users flock to the platform for transaction and payment convenience, BitGold hasn’t forgotten about the traditionalists by offering physical redemptions.
Another practical feature that BitGold employs is the ability to transfer gold to other users. Anybody can transfer a defined amount of gold to another account anywhere in the world, free of charge. Users simply add contacts to a contact list and, once accepted, can promptly send them desired amounts of gold. Contacts don’t need to be registered users to be added to the contact list. There are also no cross-border fees and no restrictions to most countries.
Needless to say, this would be logistically impossible if gold bullion was the only option.
In terms of fees, personal and business transactions are executed at the best bid and offer (BBO) price, plus an additional 0.5% fee. By definition, this means customers will be charged more than the BitGold price of 0.5% on every transaction, with the extra amount dependent on the robustness of the bid/ask spread. From what I can tell, the company doesn’t disclose how many buyers and sellers make up the spread so, in times of illiquidity or fast-moving markets, the extra fee above 0.5% may be pronounced.
GoldMoney Personal Account Fees
| Account Cost | Fee |
| Purchase Minimums | 0.001 Grams |
| Purchase Maximums | 1000 Grams |
| Insurance/Storage Fees | Free |
| Bank Redemptions or SWIFT Redemption Fee | o.5 Grams |
| Deposit and Redemption Fee | 0.5 Grams |
| Physical Redemption Fee | 0.5 Grams + Shipping and Insurance |
(Source: “Personal Account Fees,” GoldMoney, last accessed March 8, 2017)
In the end, there’s very little that separates a BitGold account from a regular bank account. Users of each can deposit funds, transfer funds to other people, make bill payments, purchase goods via debit card, and more. The main difference is, BitGold doesn’t pay deposit interest (but neither do the banks anymore), and funds start out as gold holdings instead of currency.
As of July 2015, BitGold became officially known as GoldMoney Inc (CNSX:LOV, TSE:XAU), a subsidiary of the parent company it acquired in May 2015 for CA$52.0 million. BitGold and GoldMoney are now interchangeable. Holders of a BitGold personal or business accounts simply had them changed over under the GoldMoney umbrella. All the functionality and features remained as they were. The changes were instituted to convey the new and improved GoldMoney customer experience.
On August 1, 2016, over a year after the amalgamation, GoldMoney unveiled a “Unified Platform,” which represented the combination of the BitGold and GoldMoney businesses under one brand—GoldMoney—with a refreshed look, user experience, and upgraded operating model.
The biggest takeaway from this was the organization of GoldMoney into three distinct units: “Personal,” “Business,” and “Wealth.” The unified entity became more diversified, with GoldMoney continuing its traditional role as a high net worth precious metal custodian, and BitGold transaction wing of the new entity, catering to active users.
Is Bitgold The Legit Way To Buy Gold?
When BitGold first opened for business, many people were skeptical. Some of the concerns dealt with misconceptions about what the company was really about, while others were just generally cautious.
The first misconception centered around the company’s name itself: BitGold. Some users initially thought the company was more closely related to Bitcoin than it actually was. Not only were the prefixes of the names similar, BitGold initially considered allowing Bitcoin transactions to purchase gold when the platform was first created. Those intentions never came to pass, though it was part of the original roadmap.
Second, some people unfairly associated BitGold with a similar previous-generation digital gold platform, “e-gold Ltd.,” operated by Gold & Silver Reserve, Inc. (G&SR) from 1996–2009. At its height, e-gold was processing more than $2.0 billion worth of transactions per year, and had grown to five million accounts by 2009.
However, e-gold was also severely under-leveraged, processing $2.0 billion transactions annually with just $20.0 million of physical backing this up. With reports of rampant fraud and under-capitalization abounding, e-gold ended up in federal court, and eventually placed in receivership. Many people lost their investments when this happened. (Source: “The e-gold story,” DGC Magazine, June 27, 2013).
Fortunately for users, the company is nothing like its shady predecessor. BitGold’s business foundation is much more stable and transparent. Our review of BitGold has confirmed BitGold’s legitimacy as a trusted gold custodian. The reasons for this are twofold:
1. Increased oversight. The company’s May 2015 acquisition of GoldMoney brought one of the most trusted names of gold custodianship under its wing. GoldMoney absorbed the well-known James Turk to its board of directors, as well as several officers into the fold. GoldMoney is strictly regulated by the Jersey Financial Services Commission, and has additional regulator and audit oversight through a public exchange listing on the Toronto Stock Exchange.
2. BitGold vaults its gold thought Brink’s Company, one of the most trusted names in vault security. Brink’s has been vaulting precious metals since 1859, and is fully approved by London Bullion Market Association (LBMA) and COMEX, which was formed by merging the New York Mercantile Exchange with Commodity Exchange, Inc.
In terms of the gold in GoldMoney vaults, it meets accepted industry standards. Its corporate by-laws state that GoldMoney must buy or sell assayed and stamped 0.9995 pure (99.95%) or better bullion-grade gold, from refiners and assayers whose gold meets the minimum specification set by LBMA or COMEX. These types of standards should pass muster for even the most finicky of investors.
In terms of account security, GoldMoney has covered its bases well. Original Chief Technology Officer (CTO) Alessandro Premoli, had previously developed encrypted storage and messaging systems for highly sensitive, data-intensive organizations. Ensuring robust encryption deployment appeared to be a primary focus of the company early on. After all, it would only take one major breach to potentially send the whole business model crashing. Trust is everything to precious metals investors.
The GoldMoney platform uses military-grade encryption (“RSA 4096” and “AES 256”) standards to secure customer accounts and personal information. Accounts will lockout on time delay if a threshold of unsuccessful logins attempts is breached. Moreover, if GoldMoney detects that someone other than the user is attempting to access an account, GoldMoney will notify the user directly. All of these rigorous methods make unauthorized logins nearly impossible, boosting confidence for those where security is of paramount importance.
For those looking into how to invest in gold, GoldMoney is a legitimate option. Due to its transparency and safeguards, users can focus on the merits of gold investing instead of the security of their gold. This isn’t a fly-by-night company, unlike other entities of the past. The security of customer gold has never been called into question.
What is GoldMoney?
In the end, GoldMoney (BitGold) is little different than a regular online bank account which uses gold (instead of currency) as the investment vehicle. Considering the promising nature of the gold price forecast 2017, investors may want to consider giving GoldMoney a shot.
This is especially true for individuals looking to transact with their gold holdings on a semi-regular basis, as opposed to letting it sit idle. While GoldMoney’s 0.5% deposit/redemption fee is prohibitive to transact with on a daily basis, it’s reasonable enough that semi-weekly or monthly usage is warranted.
Even if you only plan on saving your gold, having the option to transact with gold is beneficial in case unforeseen circumstances crop up. The convenience of selling gold instantly for hard currency, or paying a bill are desirable features that simple physical can’t satisfy. As there are no storage fees associated with personal GoldMoney accounts, users don’t need to worry about storage fees eroding their savings over time.
To some, GoldMoney is an indispensable way to use gold in today’s world. To the traditionalist, nothing will supplant cold, shiny physical gold in their hands. It’s a matter of perspective, but everyone agrees that the platform’s utility is unmistakable.
