19 Jan 2023

Precious metals, NFTs and KYC compliance

The precious metals sector has proven to be a lucrative investment opportunity for generations, offering investors an opportunity to diversify their portfolios and protect their wealth in times of economic uncertainty. With gold and silver both having seen steep increases in value over the recent years, there is an undeniable appeal to this asset class. 

Many investors view the precious metals sector as a safe haven. Commodities such as gold and silver have a demonstrated track record of growing in value over the long term. As a result, the precious metals sector has long been an attractive investment opportunity due to its potential for wealth preservation and portfolio diversification. 

Beyond steadily increasing in value over the long term, the value of gold and silver have both demonstrated strong resilience to the economic shocks  of the last two decades, making them increasingly appealing assets. Not only do these metals have a long history of success in times of economic instability, but they also offer investors a hedge against inflation.

Precious metals & Blockchain

The combination of precious metals and blockchain technology has the potential to revolutionize the investment landscape. By leveraging blockchain's secure, transparent ledger system, investors can purchase and trade in gold and silver with greater confidence than ever before. 

New projects are essentially using blockchain technology to register and verify ownership of precious metals and other physical assets, allowing the tokens to be fractionalized and easily traded. Other platforms also confer non-fungible tokens (NFTs) that confer ownership of precious metals and stones kept in secure storage facilities. Precious metal NFTs allow investors to own physical gold and silver without having to bear the risk of storing the assets themselves – and with the ability to liquidate the assets remotely. 

This new form of asset ownership has also opened up a wealth of opportunities for those seeking to diversify their portfolios or hedge against market volatility. As more financial institutions begin to accept digital tokens backed by physical metals, it will become easier for individuals to access these markets without having to rely on intermediaries. 

Risks & Regulation

However, despite its glamorous reputation, the precious metals and stones industry has also long been associated with criminal exploitation and money laundering. Precious metals and stones are commonly used by criminals for money laundering as they are compact, hard to trace, relatively easy to transport and simple to liquidate into fiat across the world. These qualities make them highly attractive – and vulnerable – to exploitation for financial crimes. 

For these reasons, regulators around the world have been taking steps to rein in the industry, establishing new rules for businesses and agents that trade in precious metals and stones to carry out adequate Anti-Money Laundering (AML) processes, including gathering KYC on their customers. 

Regulators in precious metals and stone-trading hotspots have already begun implementing regulatory oversight and processes on the trade. In April 2021, the United Arab Emirates (UAE)’s National Anti Money Laundering and Combatting Financing of Terrorism and Financing of Illegal Organisations Committee (NAMLCFTC) adopted new Anti-Money Laundering (AML) guidelines designed to strengthen its existing AML and CTF protocols. 

Other regulatory regimes around the world, such as the EU’s 4AMLD and 5AMLD have also introduced AML / KYC requirements governing sales of precious metals and stones above certain thresholds. 

How KYC-Chain can help

For many companies – particularly startups or small-to-medium sized businesses with limited resources – implementing KYC / AML and other compliance checks on their customers can be highly challenging and resource-draining. 

Nevertheless, as regulations around the world continue to expand and become more strictly implemented – and as criminals become ever more sophisticated in how they exploit digital financial networks –  the risks of not implementing effective AML/KYC checks far outweigh any short-term benefits. 

KYC-Chain’s automated KYC technology allows our clients to carry out efficient, consistent, scalable and cost-effective AML/KYC checks on potential customers. Our solutions are highly customizable and specific for particular sectors, markets and businesses, including for both traditional precious metal and stones traders, as well as blockchain-based innovators.

Our clients use our technology to carry out all the relevant anti-fraud and KYC/AML checks that they are required to conduct by the relevant authorities where they operate. This provides them with the peace of mind that they have fulfilled their compliance responsibilities, built trust among the communities they do business with, and protected themselves from financial crimes and fraud. 

KYC-Chain’s end-to-end workflow solution is constantly being optimized and improved to meet the complex compliance and fraud challenges facing companies in a diverse range of global sectors, including virtual assets, traditional finance, precious metals, and other gatekeeper industries

Are you looking for an automated KYC solution for your business? Get in touch and we’ll be happy to discuss how to make it happen. 

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