"Will that be cash, plastic or gold?" An Exclusive Interview with the CEO of C-gold

According to c-gold.com “Commerce Gold is a project of Private Gold Equities Exchange Limited, a Seychelles Company (est. 2005, cert. 024795) that specializes in the development and operation of online market places and e-commerce platforms. While Private Gold Equities Exchange Limited operates the c-gold.com business, customer support, as well as gold bailments, storage and redemption are outsourced to CyFro Associates Sdn. Bhd., of Penang, Malaysia.” Commerce gold has physical shops which are operated by independent franchisees.

Though c-gold provides storage and redemption of gold, you can not buy c-gold directly from the company or fund your account with any fiat currency. Due to the fact that c-gold is a closed book system the only way you can fund your account is via bailment of a gold bar or purchasing c-gold from someone who already owns this digital gold currency.

According to the company’s statistics currently there are 3390 funded accounts with 42534.3700 grams of gold in circulation. The gold is stored in Malaysia in 12 secure storage locations and undergoes annual audits as per Malaysian law.

To open an account one has to agree to the company’s rules and regulations including the following: “While holding accounts can be opened with a minimum of identification requirements, all account holders are obliged to comply by our KYC policies and AML procedures within either three months from the day the account was first opened, or when the total transaction volume of the account reaches or exceeds 200grams, whichever the earlier.” To enjoy all the benefits of c-gold, applicants will have to provide ID and utility bill scans to comply with various laws and to avoid any abuse of the system.

Marianna: First of all, thank you for allowing this interview to happen. C-gold.com is a young company. Since its inception has it met / exceeded the expectations for growth?

Robert: I am always happy to answer questions about the project, as it helps avoiding misunderstandings before they even occur. We certainly grew faster than expected in terms of volume and turn-over, if not in terms of sign-ups. For one, I did expect more than 10,000 sign-ups in the first ten months. On the other hand, with over 3,300 active accounts we probably have the best quality to noise ratio in the industry, so we are happy with the results so far.

Marianna: According to your website c-gold has 42534.3700 grams of gold in circulation. How often does the “minting” process occur? And what usually prompts this creation of new c-gold digital grams?

Robert: There is actually no minting process taking place. What is happening is that people bail gold bars into the system. The venture tasked with storing the bars also acts as default bailment and redemption agent. So, new c-gold is created - for lack of a better word - when new bars are deposited into storage.

Marianna: Digital Gold Currency can well be considered an international currency. Do you think that c-gold is better fit for global commerce or private ownership of gold?

Robert: I would say that it suits both purposes, even though our primary objective is global commerce. Indeed, the statistics suggest that especially some people from Europe seem to be using c-gold to keep their gold savings with, as they continue adding to their holdings in regular intervals and don't seem to use their user holdings accounts for anything else.

Marianna: What is the target market for c-gold? What other markets’ participants would you like to see among your account holders?

Robert: The target market are people in the developing world who have problems with cross-border commerce, often don't have bank accounts, let alone being able to receive payments over the Web. I feel that the potential of the Web, often hailed as the 'Great Equalizer', has never been fulfilled to any meaningful extent. Commerce Gold is therefore another attempt at helping the Web to do just that.

In terms of who I would like to see using Commerce Gold, I am aiming for what must be the Grail in the industry, small and medium enterprise, online and off.

Marianna: How fast is your merchant list growing? Do you feel it is important for c-gold’s success to continue attracting on-line businesses and shoppers? Is their any correlation between the added merchants and new account sign-ups?

Robert: Of course, for c-gold to attract mainstream customers, we need mainstream merchants. However, the way to get mainstream merchants to use the system, is probably not only to grow the user base, but more importantly, to actively promote to merchants that cater to niche markets. Many niches doth the mainstream make, so to say. We are very happy with the take-up of c-gold among the main who-is-who in the industry, most of whom supported us pretty much from the onset. However, our real intention is bringing new people into the industry.

In regards to the merchants/sign-up relation, I'm not sure there is one. If anything, then it is probably inverted. Meaning, the more sign-ups, the more merchants, rather than the other way around. So apparently merchants follow market dictate, rather than making the market.

Marianna: Many large online payment systems would not accept digital gold currencies as an account funding option. Why do you think that happens?

Robert: Frankly, it makes no business sense to and for them, to accept gold as a funding option. Not until the probably quite near future, at least. Especially larger systems are accounting in fiat, are obliged to file reports and returns and are taxed in fiat. For them to add gold-which-is-not-money-says-government as a funding option will add a layer of business risk, complicate accounting procedures, and have little to no beneficial impact on their bottom line. I know that I shouldn't say something like that, given my position in the industry, but being realistic, the effort and expense of adding gold funding options is probably in no relation to the benefits of doing so. Not if you are an established payment system with a large user base. This will change when that same user base discovers gold as a better alternative. In Asia there is increasing buzz about it, while gold keeps rising, and that might in fact lead to the break-through the industry so badly needs. But until then, gold currencies will always cater to people who have no other choice, and to a small group of hard-core smarts, who know fiat for what it is, and prefer to deal in gold where long-term commitments are concerned.

Marianna: One of the most desired features of digital gold currencies and online payment systems is anonymity…

Robert: Let me jump in here, before answering the rest of your question, please. I actually disagree with that view. I don't think that anonymity is desired - nor in fact desirable - to the extent some pundits tend to make out. True, some users want anonymity for a variety of legitimate reasons, but in my experience they are a minority, especially if they don't come from the US. Our rapidly growing German user base, for example, seems to be happy to provide scans of ID cards or passports without as much as a question, as are most Asian users.

Marianna: ….Many companies trying to meet this demand have put themselves into legal troubles with government authorities. How anonymous are your transactions and how do u balance client privacy and state regulations?

Robert: Commerce Gold has no intention to cater to people who are unwilling to ID themselves to us. If you think about it, it doesn't actually make sense to trust us with their gold, but not trust us with their identity. Sure, the internet is a dangerous place to disclose your identity and address particulars, and we do understand that some users might be hesitant to comply by our rules. That is why we don't demand the ID scans from the onset, but instead give users the opportunity to 'try us out'. Once they are at ease with our system, they then need to ID themselves to us. This has nothing to do with governments, by the way, but it is simply how we want to construct Commerce Gold.

As to privacy protection, well, there are no electronic records of the submitted documents. Compliance prints two copies and files them off-premises in secure locations. This means that Commerce Gold wants to know its customers, but we won't disclose their particulars to third parties, unless there is evidence that any particular user is in breach of our Terms.

Marianna: Many agree that the USA fierce attempts to regulate the use of DGCs and online payment systems on their territory are gradually eliminating US customer base from the world of digital money. How do you see this trend develop? Do you work with US clients?

Robert: I am not sure that any attempts of the US authorities to regulate the use of DGCs are all that fierce. Let's not forget that e-gold had proactively tried to obtain registrations, licenses and a rule book, prior to the questionable attack against them, and were apparently repeatedly turned down.

So, from where I am sitting, it looks more as if the authorities at first didn't take the phenomenon seriously enough to regulate it, and are now trying to discourage the industry with heavy-handedness. I am not convinced if this is in fact a matter of policy though, and imagine that it may instead be something overzealous bureaucrats cooked up to enhance their careers (or not).

Depending on the outcome of the current proceeding, the US might eventually get around to regulating the industry, but there are plenty of related factors to consider, such as private membership cards, discount cards, frequent flyer miles, and similar, which, in a way, are all some type of digital currency. On top of that there is the issue that if specifically DGCs were to be regulated, then, at one point or another, the legislation would need to define gold as something of value, a store of value, even. And that might be a can of worms they will probably need considerable time to figure out how to best open.

As to Commerce Gold, we do have an American niche, but we are neither promoting to US residents, nor are we going out of our way to attract them, and users from there are in fact a minority.

Marianna: Last fall in my e-mail communication with JP May, the creator of 1mdc software, he did praise c-gold for choosing the right storage location for its gold and connected the jurisdiction issue with a possible DGC success. What other factors do you attribute to c-gold’s increasing popularity?

Robert: I think the fact that the people involved are well known in the industry and the early support of the primary players contributed more than anything else. If the five largest operators embrace a currency, the rest will sooner or later fall in line, simply because it makes good business sense. Another factor might be that we offer bailment and redemption to anyone. While so far nobody took us up on the offer, the mere fact that user could drop off gold bars, coins, etc. at the shop, or pick up a kilo bar, probably does instill a sense of security. I recall that e-gold used to offer the same options initially.

Marianna: In your interview with Benson of Digital Money World you mention plans for development of MobileGold and GoldBeam. If is not going to reveal any trade secrets, can you tell us a little bit about that and when will we see these products?

Robert: In brief, GoldBeam will allow users to beam gold between electronic wallets installed on hand-held devices, and MobileGold will allow merchants to accept gold payments at POS locations (checkout counters, vending machines, etc.) Of course there is much more to it all, but, well, you know...

Marianna:

Robert: No. None at all.

Marianna: < Who is c-gold’s main competition? And what is c-gold’s competitive advantage?

Robert: This is difficult to assess. Basically everyone is a potential competitor, from Pecunix to e-Bullion to e-gold to WebMoney to PayPal to the European Central Bank ;o)

But at the same time, we are clearly trying to do a few things differently from all of the above. We are trying to introduce the offline component that others are lacking, and which I believe to be the key to mainstream acceptance, down the road.

Marianna: Where do you see c-gold in ten years?

Robert: Well, we are planning for an IPO (Initial Public Offering) in Singapore around the end of 2010, and have already begun to establish our franchise network. If all goes well, then in it might well be that in 10 - 15 years a shop clerk in the free world will ask, "will that be cash, plastic or gold?"

I fully expect that some Asian bank will have bought Commerce Gold by that time (or the other way around), and built the concept in a commonly accepted, true alternative to national fiat currencies.

Marianna: Thank you for this interview and all of us at Trainex Journal would like to wish c-gold continuous success in everyday operations and future plans!

Robert: You are most welcome, and all the best for the Trainex Journal and its tireless staff and supporters.

Comments

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