The Gold Bar Integrity Programme is designed to produce a traceable chain of custody for gold bars, allowing them to be tracked from the mine, through the smelter, to buyers.
"Over time, this will help consumers, investors, and market participants to trust that their gold is genuine and has been responsibly and sustainably sourced," the groups said in a joint statement.
The pilot phase of the project will see two distributed ledger companies, aXedras and Peer Ledger, test the use of blockchain to record of a gold bar's place of origin and chain of custody.
Over time, this project is planned to capture all transactions by major participants in the gold industry.
The main thing is its bringing transparency," LBMA CEO Ruth Crowell told Mining Journal.
Crowell said that the programme was designed to give customers trust in not just the purity of gold bars, but also its ESG credentials. "In terms of fake gold that's a story we're used to […] But it's not just about a cheat on the gold content, it's a cheat on where the gold if from."
"From the LBMA's perspective, it's about assessing the key risk: does it come from what is says it is?"
The use of blockchain will allow for a more responsive and relative implantation of the LBMA's Good Delivery rules.
"At the moment what we do for the Good Delivery list is we require a manual audit. What we're proposing now is that recording in real time," Crowell said.
"You would have the full lifecycle, in terms of proving you'll have meaningful data to support that," Crowell said. "Blockchain is the trust machine."
David Tait, CEO of the WGC, told Mining Journal that increased trust in gold could help the industry overcome capital hurdles.
"Lack of trust comes in many different shapes and sizes," Tait said. "Fraud, duplication, illicit practice. "All these problems culminate in a rather unimpressive capital burden that sits at a compliance level with many institutions."
"The WGC have got three main targets, accessibility, fungibility, and integrity," Tait said. "It's hugely important from a regulatory perspective."