The first hybrid digital rights to gold appeared on the Russian financial market

The first hybrid digital rights to gold have appeared on the Russian financial market, which allow you to receive either money or bullion upon redemption. Rosbank acted as the issuer, placing the issue on the Atomaiza platform. Previous issues of digital assets were only tied to the value of gold and did not provide the opportunity to redeem them in the form of bullion. Other market participants are preparing to launch similar projects, despite the presence of a number of already identified shortcomings.

This week, information system operator (ISO) Atomize for the first time issued hybrid digital rights (HDR) for gold, as follows from the information posted on its website. The issuer of the GDS was Rosbank. The output volume is very small – the equivalent of 30 g of gold, estimated at 170 thousand rubles. At the same time, the entire issue was bought by one investor.

As Roman Nekrasov, co-founder of the ENCRY Foundation, explains, hybrid digital rights are a digital analogue of an investment contract with predetermined repayment terms.

The issuer leaves buyers a choice – upon repayment, they can receive either gold bullion or its cash equivalent, he notes. As explained in Atomize, the investor buys “digital gold” with a 2% discount to the current market value, which is determined based on quotes from the Moscow Exchange. Upon redemption, he receives the full current value of gold or bullion from the bank’s vault (in denominations of 5 g and 10 g).

After testing, the project participants plan to launch a mass government-produced digital currency (GDS) product for gold for retail investors, says Pavel Sidorkin, product director at Atomaiza. In this case, the bank will have a sufficient amount of gold to issue it to clients during the repayment periods provided for by the decision on the issue.

Previously, many DFAs were issued, the name of which mentioned digital square meters, digital gold and even digital diamonds, but they remained ordinary monetary requirements, notes Lidings advisor Dmitry Kirillov. Taking into account the fact that the issuer is a Russian bank, the targeted risks of this issue are minimal, says Maria Telegina, a teacher at the educational platform Moscow Digital School.

DFA market participants generally assessed the issue positively, announcing similar plans. Lighthouse plans to release hybrid DFAs in November with the participation of one of the largest gold mining companies in Russia. Alfa Bank plans to launch state-provided securities for gold bullion by the end of the year. Tokeon is considering the possibility of issuing digital financial instruments for precious metals with the delivery of a physical asset or payment of cash. Masterchain is also considering hybrid DFAs.

However, Kommersant’s interlocutors also noted a number of negative aspects.

According to Lighthouse CEO Denis Jordanidi, “when hybrid DFAs are issued on the market, where the bank is involved, the problem of achieving a fair market price is not solved.” According to him, “the markup that the bank adds to the price of the London Exchange or the Moscow Exchange is on average 6%, and the discount with which it buys from the manufacturer is 3–4%.” Mr. Jordanidi believes that hybrid DFAs for gold should solve the problem of connecting directly the gold producer and the investor.

Hybrid digital rights to gold contain a number of risks, experts say. Among them is the lack of legal practice, which creates distrust and caution in its use on the part of investors, points out Artem Laptev, director of development of the Tokeon digital assets platform. In addition, experts draw attention to the need for the issuer to set redemption limits. “If we are talking about the supply of physical gold bars, we can assume that they will not be sawed to pay off buyers of digital rights,” notes Roman Nekrasov. Therefore, the financial component of the transaction will largely be determined by the form of storage of the precious metal, he points out.

Ksenia Kulikova