Nornickel, a major metal producer, wants investors to learn about digital assets.
To that end, when customers buy exchange-traded commodities (ETCs) based on the company’s metals, they will also receive blockchain-based tokens alongside the more traditional certificates.
Nornickel subsidiary Global Palladium Fund (GPF) is launching ETCs on nickel and copper, along with blockchain tokens proving their authenticity, on the London Stock Exchange (LSE) and Borsa Italiana, the firm announced Thursday.
The tokens will be issued by Swiss-based Atomyze, Nornickel’s tokenization platform, using Hyperledger Fabric, an open source blockchain base overseen by The Linux Foundation. Nornickel has demonstrated a long-lasting allegiance to Hyperledger. The company joined the consortium two years ago.
Wednesday’s move is only the latest by Vladimir Potanin, Nornickel’s oligarch founder, who has long been a champion of metal-backed cryptocurrencies.
The GPF has already launched gold, silver, platinum and palladium ETCs on LSE and the Deutsche Borse. According to Alexander Stoyanov, managing director of the GPF, the securities were welcomed with notable demand, though he declined to disclose any numbers.
Blockchain story, with caveats
The Hyperledger-based tokens will have the numbers from particular metal batches purchased by a certain client encoded in them, while the traditional certificates will only show the client bought a share in the fund, according to Stoyanov.
The actual metal backing the ETCs will be stored in the vaults of the ICBC Standard Bank, institutional custody provider Brinks and London Metal Exchange warehouses in Rotterdam. Buyers will receive the traditional certificate representing their share in the GPF, along with tokens on their accounts with Atomyze.
Now, those two will not be directly connected, Stoyanov said, although he hopes that in the future, when the market is more used to tokenized commodities, that will change.
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“Of course, we would love to sell our tokens without the ETCs. But the [investment] funds have a mandate from their clients to buy certain investment products. And we want to create a community and get people comfortable with the DLT and such products. With time, acceptance of this format will come,” Stoyanov told CoinDesk over a call.
The tokens were created to show buyers the benefits of decentralization and transparency that blockchains provide. In reality, however, the project looks more like a traditional, centralized enterprise. At this point, the only way to check your token balance is to look it up in your Atomyze account. There are no external blockchain explorers that can be used to verify that information, Stoyanov said.
It is also technically impossible to withdraw your tokens from Atomyze, according to Stoyanov. The blockchain nodes will be run by Atomyze itself. He said the stock exchanges listing the ETCs would not run their nodes, at least for now.
“We don’t even know how to start a conversation about this with the exchanges,” Stoyanov admitted. “However, I know some of them are looking that way already. With our project, we’ll try to prop the look a bit more actively.”
Tokenization dreams
Nornickel is one of the few industrial heavyweights that wants to use distributed ledger technology (DLT) not only for enterprise use cases, like trade finance or supply chain management, but also for tokenizing its own assets.
Potanin, the company’s founder, has been a long-time fan of blockchain technology. His vision is to let people buy metal-backed tokens as a way to get exposure to metal-related markets without having to bet on particular companies’ success.
Since starting its blockchain venture in 2019, Nornickel had two issuers registered in Switzerland and the U.S., the latter hiring a group of execs from top enterprise blockchain, crypto and Wall Street firms. Both firms are working with Nornickel’s metals supply via the Global Palladium Fund.