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Allocated Physical & Digital Bullion Portal:

gold bullion
gold silver bullion

Primary Wholesale Market of the BullionCoin Exchange (BCX)

Important Notice on BullionCoin following its launch on 15 August:

BullionCoin and the Allocated Bullion Exchange have been collaborating closely with each other until it's launch in order to deliver a gold & silver backed digital currency.

However, a few minutes after BullionCoin's website went live, the ABX issued a statement announcing it was withdrawing from its collaboration with BullionCoin citing several reasons.

You can read ABX's full statement here. You can read BullionCoin's reply to ABX's statement here.

Whilst this unfolds, I am going to treat the information as objectively as I can, and so should you.

I strongly suspect it may well turn out to be a storm in a tea cup and not actually be anywhere near as drastic as it sounds, and BullionCoin could well become the digital currency we all want it to be.

Things like this often happen in business and it should not reflect poorly on either party as they both have a great product.

I have spoken to Thomas Koenye, the co-founder of BullionCoin, and it looks like ABX's statement may have been unfairly issued and there are some areas that need clarification which I have added as a pre-face to ABX's statement. Thomas' reply is here.

However, as my primary and overriding concern is the safety and security of client and potential client money and their vaulted precious metals, I will always take the options and decisions that will not expose you to any risks. I will update you as soon as I have completed my due diligence on this matter.

If you have any questions about this then please do contact me and I'll be happy to help. You can also contact BullionCoin and ABX for further clarification from them.

Yours faithfully,

David Gibson, Managing Director

The BullionCoin Exchange's primary market is wholesale in nature, in both contract sizes and prices for the physical precious metals backing the currency. It is here that liquidity is created and transferred into the secondary market for retail investors to use.

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Setup of the BullionCoin Exchange

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The setup of the Bullioncoin Exchange involves 2 markets:

  1. The BCX Primary market, which is wholesale
  2. The BCS Secondary market, which is retail

The entire platform of the BullionCoin Exchange is fully integrated into the existing technology and infrastructure of the Allocated Bullion Exchange (ABX). This way the BCX is able to directly access the ABX's market order clearing & settlement facility and its price discovery mechanism for its participants to use.

The physical contract orders you place in BCX's primary market will go directly through to ABX's global allocated wholesale marketplaces.

Vaulting Arrangements

The BullionCoin exchange has set up its own network of vaults alongside the ABX's private global vaulting network. These are located in Geneva, Hong Kong and London. Their primary function is to allow physical deposits to be added into the system from external sources, such as depositories and deposit boxes.

These vaults will also initially be used to hold precious metals transferred in from ABX accounts and their global markets. This is because, to start with, ABX will be unable to facilitate internal transfers to BCX within their own vaults. Instead ABX held metals will be transported to the BCX vault by Brinks.

The international transport costs will be minimised as Brinks will, in most cases, be able to do a like-for-like swap for the precious metals you hold in one place and add the equivalent bars into BCX's vault.

Members with accounts held at both the ABX and BCX can withdraw the physical they have at any time.

Purpose of Primary Market Participants

The primary purpose and activity of the BullionCoin Exchange's primary market participants, is to buy physical precious metals and create liquidity for the markets by minting new BullionCoins. The act of minting / creating new coins is really the process of changing your Title of Ownership over the metal you currently hold, into an electronic format.

It's that electronic Title of Ownership that is sold and traded between investors in the same manner as a currency. As a currency, BullionCoins will be highly liquid due to the depth of physical gold and silver in the market and their ability to be redeemed in exchange for the vaulted physical gold and silver that backs them.

The actions available to primary market participants are:

  • Trade created BullionCoins as complete wholesale contracts (e.g. 10,000 coins) between other primary market participants
  • Sell them into the secondary market where the wholesale contract will be broken up and bought as single coin units
  • Redeeming their wholesale contracts back into physical metals for delivery or collection

A simple summary of how it works is:

  1. Participants buy physical precious metals through the BullionCoin exchange's primary market & hold Title of Ownership to it
  2. Primary market participants will then authorise their precious metals to have BullionCoins to be minted against them
  3. The action of creating BullionCoins is the digitisation of the Title of Ownership to the metal they bought
  4. By selling those coins into the secondary market, they will be selling their Title of Ownership to multiple retail investors
  5. The coins that those investors hold will act as an electronic Bearer's Title to the gold and silver backing it
  6. Coin holders can use the coins as currency to perform trades and transactions similar to the way we use fiat currency
  7. Upon collecting enough coins, those retail investors can redeem them in exchange for the gold & silver backing it

Learn more about BullionCoin's advantages & benefits and how it's the ideal safe & stable digital asset for Asset Managers seeking overnight and short-term asset parking.

How Do I Create a BullionCoin Wallet?

Those that join GoldVu now ahead of the imminent launch will then be eligible to participate as one of the founding investors.  All founding investors will receive an income on their initial investment that is at a higher rate of those that are created after the founding investment window closes.

Unlike other digital currencies, all investors (institutions / companies / merchants / individuals) wanting to have a BullionCoin Exchange wallet must go through a Know Your Client (KYC) process. So get it out of the way now and get ahead of the crowd running up behind you!

BullionCoin Exchange Wholesale Contracts

Types of Coins Available to be Minted

There are 2 types of BullionCoin that can be minted:

  • BullionCoin Gold coin which represents title to 1 gram of vaulted gold at 9999 fineness
  • BullionCoin Silver coin which represents title to 50 grams of vaulted silver at 999 fineness

Both coin types are respectively backed by 100% physical bullion on a fully allocated basis.

The primary market members are responsible for creating both of these types of BullionCoin. They cannot be created in any other marketplace.

BullionCoin Exchange Primary Market Coin Contracts

There are 2 main contracts available for both the gold and silver BullionCoins.

Investors can purchase the coins through this exchange in the following wholesale quantities:

Gold Coin Contracts

  • 10,000 (ten thousand) x 1 gram coins (ABX physical gold contract of 10 kilos)
  • 100 x 1 gram coins (ABX physical gold contract of 100 grams)

Silver Coin Contracts

  • 10,000 (ten thousand) x 50 gram coins (ABX physical silver contract of 500 kilos)
  • 100 x 50 gram coins (ABX physical silver contract of 5 kilos)

Primary participants buy the ABX physical contracts first and then covert then into the respective quantity of digital coins.

Earning Lifetime Revenue From the Coins You Created

Where a BCX primary market participant mnts coins into existence by buying precious metals and then selling them into BCX's secondary market, will be rewarded with a lifetime's stream of free income / revenue as a reward for participation.

The fee income/revenue that you, as a primary market participant will receive, is a fixed portion of the transaction fees associated with all of the specific BullionCoins that they created. These transaction fees are generated in the secondary market and you'll receive a daily update on your earnings in your account and via the BullionCoin app.

The revenue stream associated with the coins you specifically created will continue until they are removed from circulation by an investor redeeming them for the physical backing it.

Your revenue will be affected by:

  1. The total number of coins you create and sell into the secondary market
  2. The number of times your specific coins are used in transactions within the secondary market

The more of each of the above, the greater your total revenue will be. If your coins are never redeemed, then you will be earning a yield on your initial (and returned) capital investment forever. You will automatically receive this cash flow for Free into Perpetuity!

Until now, gold & silver bullion are traditionally viewed poorly from the point of being a cash flow producing asset. However, that has changed with the introduction of the BullionCoin Exchange.

Ponzi?

Most definitely NOT!

So Where Is the Income Coming From?

Each time someone buys or transacts using BullionCoins, the buyer is charged a fee as a percentage of the value of that transaction. That fee is deducted from the buyer's BullionCoin Wallet on top of the value of his transaction.

The investor that created those specific coins used in the transaction, is entitled to a portion of that fee. The more often your specific coins are used by others, the more fee revenue is generated and credited to your BullionCoin Wallet.

The BullionCoins that make up the fee already existed in the buyer's account. There is no extra creation of coins as part of the payment and so there is no change in the quantity or ratio of vaulted physical bullion to coins in circulation.

Fees in the form of Bullioncoins credited to your account can then be either sold in exchange for cash, used in a trade or redeemed for the physical backing it.

The fee is part of BCX's way of profit sharing and incentivising the continuous creation and use of this digital currency.

Any Risks Involved With This?

Not really, but you only get paid your transaction fee income only on the coins you created and no other. This means that there is a possibility that the people who bought your coins just sit on them and never transact / trade them. Which is unlikely as they will eventually be charged a non-usage fee that is more akin to a demurrage charge..

But you may find yourself in the unfortunate case where others around you are having their specific coins traded 10 times per day and receiving fee revenue 10 times a day and you could be receiving nothing.

Whilst minimal, it's an element of risk that only founding/early investors should really consider due to the lower quantity of coins in circulation or lack of retail investors to turnover the currency enough. As time passes the potential of this happening will all but disappear. The best way to avoid this scenario is to initially sell them in batches into the secondary market over a period of a few days

That way if the next buyer in line, buys coins just to sit on them, then not all of those will be yours and his / her purchases will also include coins that someone else created (hopefully).

Coins Redeemed Back Into Physical Metal

All BullionCoin holders are allowed to redeem their digital holding back into physical metal. When that happens those redeemed digital coins cease to exist.

If any of those are your coins then the revenue associated from those specific coins stops. Those coins and accompanying revenue are effectively destroyed and permanently removed from the BullionCoin Exchange and monetary system.

The BullionCoin Secondary Market

It's within the secondary market that the coins get recorded into a blockchain ledger through the BullionCoin Wallet system as part of the BullionCoin Exchange.

In the secondary market, the coins will be able to be individually traded between retail users, merchants and investors.

There will very likely be a gain, or premium, added to the coins' value which will be more in line with the retail / high street pricing. 

Therefore the difference between the coins' pricing structures between the wholesale and secondary market is that in the wholesale market the wholesale coin contracts will be the same as the physical precious metals price and coins sold into the secondary market will be priced at a premium dictated by retail supply & demand.

This means that the investor creating the original BullionCoin on the primary wholesale market, is getting that coin at a discounted price to what it's selling at on the secondary market.

BullionCoin Exchange Full Investment Lifecycle

The Profit Centers for Primary Market Members

The BCX rewards primary market participants that mint and sell new coins into the secondary retail marketplace. These lifetime revenue incentives mean that there are two areas to profit from, which are only available to BCX coin creating participants only. These are:

  1. Selling your newly minted coins into the secondary market, whereby you take any retail premium over the wholesale price as a profit.
  2. Receiving a fixed lifetime percentage of the transaction fee associated with the coins you created that are circulating & transacting in the secondary market.

The revenue generated by secondary market transactions are automatically credited to your e-wallet account.

So basically institutions and large investors will receive an income forever just by doing the following through the BullionCoin Exchange:

  1. Buying some physical gold or silver bullion
  2. Converting its Title of Ownership into a digital form and selling the ownership rights to retail investors
  3. Recovering all of their original capital by that sales process at a profit (from which they will get a never ending cash flow)
  4. Reuse their capital & profit to rinse and repeat the above

As the old saying goes…"Money makes Money!!"

What Now?

Investors wanting to act as a participant in the primary BullionCoin Exchange will need to create an account. Once opened you can then start buying the wholesale physical contracts and raise a digital title of ownership to that metal to then sell into the secondary market. Asset Managers and investors can then enjoy receiving a lifetime revenue stream from retail participants into their Wallet.

For more information contact us.

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Have your say about what you just read! Leave me a comment in the box below.

Please Note: All comments are moderated and manually reviewed for spam. In turn, your comment may take up to 24 hours to be posted. GoldVu.com also reserves the right to edit comments for grammar and spelling errors.

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