Digital Asset Live Editor-in-Chief was first quite sceptical, when he met Fouad Soultana, Novem Gold COO at Blockchain Life 2019, too many gold backed coins turned thin air over the last couple of years. Yet, the talk with Mr Soultana turned quite interesting, here it is.
Q1: Do you actually own any gold, that you link to your tokens?
A1: Yes, before we issue any NNN tokens the equivalent amount in gold has always to be stored. For every 100 NNN tokens we store 1 gram of LBMA certified 999.9 gold.
Q2: In the short history of cryptocurrencies, quite a few projects backed their tokens with gold. Besides your involvement in the gold trade, what makes your tokens stand out?
A2: The many years of experience in the gold and blockchain industry allowed us to develop an ecosystem that addresses a) problems related to gold ownership and b) adoption of blockchain based services.
We combine the digital level of blockchain with physical stores, where people have the chance to be educated about a better way to buy gold. These offline touchpoints help us not only to generate revenue, but more so to drive mass adoption. Also, the way we have setup our company took us a lot of time. Token owner are always the gold owners and we are always just providing infrastructure and handle the backend work.
Furthermore, the gold will at no point be under the company balance. This is another security layer to protect gold/token owners. So whatever happens to us, your gold as an investor is always safe! We asked similar projects, what would happen in a case of bankruptcy. They could not give us a definite answer.
One more security layer is the country Liechtenstein itself. This country is a harbor for many wealthy people when it comes to storing gold, diamonds or expensive paintings. There are many reasons, among others that there is no legal basis for governmental gold dispossession in times of crisis or war. Our main priority is to protect our investors as best as possible.
Q3: Your whitepaper presents the 999.9 token as a stablecoin. Are price fluctuations possible then? Why and to what degree? How do you expect token holders make profit, if it is a stablecoin?
A3: The term stablecoin is not clearly defined yet. However, gold is a rather stable commodity. So our NNN tokens only fluctuate when gold does. As mentioned earlier our ecosystem consists of three elements: gold stores, NVM token, and NNN token. Every element serves a specific purpose.
The NNN tokens can be used the same way physical gold is used today as a store of value. People who look to diversify their funds by owning gold have now easy access through NNN. Those people do not have to think about insurance, storage and other related matters as everything will be taken care of.
The NVM, on the other hand, is used to enjoy discounts when buying physical products or the NNN. Parts of the overall company profits are used to burn the tokens, which results in a decreasing supply that shall realize an increase in value over time. Further mechanisms will also be presented soon.
Q4: Many tokenization projects in the gold related industries focus on security tokens, that allow investors participate in crowdfunding efforts in the gold mining and trading operations. Does your project involve security tokens?
A4: The result why those projects offer security tokens is due to their business models. They offer their investors either shares, some sort of interest from the mining or trading operations or something else, which leads to the tokens being considered as a security. That said, it is the other way around than the question illustrates. The business model is decisive for the legal consideration.
Also it differs from country to country, as those projects have to get legal opinions for every country they want to operate in. In our case, the NNN is considered a security in Liechtenstein even though we do not issue any shares. In Asia, however, our NNN token is not regarded as a security in the countries we have received legal opinions from so far.
Q5: Which operations in the gold related industries will be tokenized first? Where else may DLT be employed in the gold related industries?
A5: Next to buying, selling and storing gold, mining operations are already tokenized. However, when it comes to the latter, one has to be very careful, as there are a lot of scams. Often times, tokenized mines do not even exist.
Another valid use case may be tracking & tracing of the complete supply chain from mining to refinery and finally to our storage facility for example.
Q6: What main challenges do you foresee in tokenization of gold?
A6: The main issue I currently see is that there are often times technically very capable individuals behind those gold tokenization projects, who unfortunately have absolutely no experience in this industry. Also those projects often lack in infrastructure and access to the needed network that is not easy to get as this is a very traditional industry, where hand shakes often count more than contracts metaphorically speaking.
Q7: How would you describe a regulatory regime for your project in its home country? What regulatory changes have to be implemented to mass or industrial adoption in gold backed tokens, in the USA, Europe and Asia?
A7: Liechtenstein is the first country with a Blockchain act, and thus leading worldwide.
Q8: What is your conservative estimate to the market cap in tokenization of gold, in short term (1 year from now), mid term (3 years) and long term (5 years) ?
A8: This is a hard one. It depends on politics, regulation, setup for mass adoption, and trust in this new way of buying gold. As it is a trillion dollar industry, we might see short term already a market cap of over one billion. In 5 years it is very likely to become a multi billion dollar industry.
Q9: Your site says ‘we are hiring’ with no further specifications. I am about to launch a Jobs section. Who do you look for?
A9: We are on the lookout for a very capable t-shaped head of marketing, who’s comfortable in a fast-paced environment. First experiences with blockchain technology would be a great bonus.