Company running Perth Mint cryptocurrency withdraws support, but questions linger over future of GoldPass app (original) (raw)
The company that runs the Perth Mint's cryptocurrency has announced it will no longer support the digital tokens because of alleged breaches of Australian and US laws by the taxpayer-owned organisation, in a move understood to have surprised the mint.
Key points:
- Trovio has run Perth Mint gold token service since 2019
- It said alleged regulation breaches were behind its decision to withdraw
- The future of another Mint service, the GoldPass app, remains in doubt
Trovio, a Singaporean-based technology company has run the Perth Mint Gold Token (PMGT), since 2019.
PMGT is described on the mint's website as a "secure way to trade in cryptocurrency" because every token can be turned into physical gold held at the mint and guaranteed by the government.
The mint confirmed it had been working with Trovio since early last year to bring its involvement in the token program to an end, a process the ABC was told was started by the mint.
It is understood a statement publicly announcing those efforts on Trovio's website for the PMGT only came to the mint's attention on Monday after questions from the ABC, after both sides had only agreed to make their efforts public once the change was finalised.
The Perth Mint has been caught up in a controversy over some of its services. (Four Corners: Mat Marsic)
It comes as doubt swirls over the future of another mint service – the GoldPass app – which allows users to buy, sell and trade gold from their smartphones with little more than a licence and a bank account.
Decision sparked by alleged regulation breaches
In a statement released on the token's website dated March 1, Trovio said it would no longer support the PMGT "due to ongoing investigations into … alleged breaches [by Perth Mint] with AUSTRAC and US State Regulation".
The statement was updated last night to say Trovio had made a decision to no longer support the PMGT "due to several factors after a number of years in operation".
But the ABC has been told the mint had initiated that process early last year, after reassessing the risks and benefits of the partnership which see Trovio run the token, with the mint guaranteeing the digital currency and allowing its name and logo to be used.
Around 1,195 Perth Mint Gold Tokens have been issued since they were launched, representing 1,195 ounces of gold – worth about $3.5 million and sold to customers in Australia and the US.
"Working with an entity owned by the government of Western Australia and one of the largest London Bullion Market Association (LBMA) accredited refineries aligned with the product vision, as well as Trovio's core values at inception," Trovio said in its statement.
The original version of the webpage included the line: "However, considering recent allegations we have decided to no longer support this product."
The Perth Mint refines 330 to 340 tonnes, or 11 million ounces, of gold a year. (Supplied: Perth Mint)
It was removed when the page was updated.
The Perth Mint is currently being investigated by Australia's financial crimes watchdog, AUSTRAC, over its compliance with anti-money laundering and counter-terrorism funding laws.
It said it had also self-reported breaches of what's known as the US Model Commodity Code, which has been adopted by 23 US states, by holding customers' gold in its vaults.
The ABC last week revealed that while the mint made that information public last year, it did not mention the breaches could date back to 1998, when some services launched, and span at least 900 accounts holding hundreds of millions of dollars' worth of precious metals.
Last week the mint said it had self-reported the issue and had been proactively engaging with US regulators, and had taken steps to limit the opening of any new non-compliant accounts.
An investigation by the LBMA is also underway, after a Four Corners investigation revealed the Mint had sold gold bars to China which met international standards for 99.99 per cent pure gold but fell short of the Shanghai Gold Exchange's more strict requirements.
In a statement earlier this month, a Perth Mint spokesperson said the mint welcomed engagement with the LBMA and was committed to working transparently through the investigation process.
Premier not informed about token end
Premier Mark McGowan was the minister responsible for the mint at the time the PMGT was launched.
But when asked about it today he said he didn't have any memory of it being brought to his attention at the time, and said he "hadn't been informed" about its looming end.
"I don't have any recollection of anything about cryptocurrency," he said.
Mr McGowan denied that illustrated a lack of communication between the mint and government, and within government.
Mark McGowan was the minister responsible for the mint at the time the cryptocurrency was launched. (ABC News: James Carmody)
"Look, there's numerous issues in government," he said.
"When you're the premier of the state you have to be across numerous issues of public administration in all sorts of areas of economic, social, federal, environmental infrastructure, personal across government, and that's the nature of things.
"Now in terms of the issue that you're referring to, whatever happened in 2019? I don't have any recollection of it."
Mr McGowan instead directed questions to the minister currently responsible for the mint, Bill Johnston, who will address the media later today, after returning from a two-week overseas trade mission.
'Far from a storm in a teacup'
Opposition Leader Shane Love said Trovio's public statement showed it was not comfortable dealing with the mint.
"It's further indication that this is far from a storm in a teacup," he said.
Shane Love says there needs to be a full explanation given into the matters at the mint. (ABC News: Keane Bourke)
In its statement, Trovio said customers would be able to trade their PMGTs on a cryptocurrency exchange or turn them into Perth Mint GoldPass certificates.
It said further information about the wind-down process would be published in the coming months.
Perth Mint continues to promote the token on its website, which links to a Trovio-run site that still contains promotions of the product, but includes the announcement under its 'news' section.
"I am surprised that this hasn't been given more air," Mr Love said.
"On the back of everything else that's happened with the Perth Mint, we know there is a lot of interest in what's going on.
"It is time that there was a full statement made on these matters by either the minister [Bill Johnston or] the premier.
"The public do deserve to have more information than what they've been given thus far."
A Perth Mint spokesperson said the token was still available because discussions with Trovio were continuing.
"PMGT is owned and operated by Trovio. Under a licensing agreement with The Perth Mint, Trovio is able to use select 'The Perth Mint' branding for use within the PMGT product," they said in a statement.
"Since early last year the Perth Mint has been in discussions with Trovio to exit the PMGT product.
"The details of the Perth Mint's exit are yet to be finalised and therefore the PMGT product is still available.
"The Perth Mint's proposed exit from PMGT will not make a material difference to the Perth Mint's services."
Doubts linger over GoldPass app
It comes as the future of the GoldPass app – through which users buy, sell and trade GoldPass certificates – is also in doubt.
Internal mint documents seen by the ABC show that as of May last year, the organisation had plans to "fully terminate" the service by August 2023.
But when approached by the ABC, the mint did not respond to detailed questions about whether that was still the plan 10 months on.
Documents show that at May last year, the Perth Mint planned to end the GoldPass app. (AAP Image: Theron Kirkman)
The documents related to legal advice the mint had received, which warned it was likely not complying with the US Model Commodity Code.
But that advice did not consider GoldPass's level of compliance because of plans to shutter the program just over a year later.
A Perth Mint spokesperson said the organisation did not comment on the commercial details of individual products.
"Any changes to the way the Pert Mint provides its services and products are communicated to relevant parties, including customers, at the appropriate time," they said.
"Any significant changes to product offerings will be noted in the annual report."
Last year's annual report mentioned the existence of GoldPass but made no reference to whether the program would continue or not.
No easier way to 'enable money laundering': opposition in parliament
The GoldPass smartphone app was launched by Perth Mint in October 2018, with the mint describing it as giving "investors the Midas touch" offering app-based transactions "100 per cent backed by physical Perth Mint gold … with the weight and purity of every ounce guaranteed by the government of Western Australia".
It allowed users to buy, sell or trade in increments small as 0.00001 ounce of gold, worth about three cents.
The registration process takes minutes and only requires a driver's licence or passport and bank account under the same name.
When the GoldPass app was launched, the Perth Mint said it would give investors the "Midas touch". (ABC News: Keane Bourke)
Investors can then use the app to buy and sell physical gold and silver, without a maximum amount on how much can be held in an account, which can be converted to cash or physical metal at any time.
Discussing the app in parliament last year, now-Opposition Leader Shane Love raised particular concerns about the ability for users to transfer gold to one another.
"I could think of no easier way to enable money laundering and all sorts of other matters," he said.
Trovio 'unable to comment on allegations against mint'
In a letter to the ABC from its lawyers about the GoldPass app, Trovio said the GoldPass platform used software it developed and licensed to the mint.
"That licence obliges the Mint to utilise Trovio's software in accordance with all applicable laws, including all licensing, regulatory compliance, know your customer and anti-money laundering requirements," it said.
"Trovio is unable to comment on the allegations made against the Mint because it does not operate the GoldPass platform on behalf of the Mint or otherwise. Trovio is only a licensor of software to the Mint."
By September 2020, the app was made available in the US as well.
Answers to questions in parliament showed that as of November last year, there were 26,700 active accounts between Australian and US-based users, and that by the end of December tokens worth more than $3 million had been purchased.
Those same answers showed that when the decision by the mint to launch PGMT was made, no legal advice was sought about compliance with anti-money laundering and counter-terrorism funding laws, including in the US.
They also showed the minister responsible for the mint – which at the time was Mr McGowan – was not informed about the decision to develop and launch the cryptocurrency.
'Know your customer'
In that same speech to parliament in November, Mr Love referenced concerns about the mint's compliance with a particular part of anti-money laundering and counter-terrorism funding laws, known as "know your customer" – which is about knowing who customers are and where they are getting their wealth from.
Responding in parliament, Mines Minister Bill Johnston said the government was "systematically dealing with the issues at Gold Corporation" – the holding company which owns and runs the mint.
Bill Johnston says the government is systematically dealing with the issues at Gold Corporation. (ABC News: Cason Ho )
"One of those is the 'know your customer' challenge, and we have a large investment in getting assistance with resolving it," he said.
"My fear from the day I got the job until now has always been that we are holding gold on behalf of somebody who is not the sort of person we should be dealing with."
When asked by Mr Love if that was why the mint went into cryptocurrency, Mr Johnston said: "The cryptocurrency thing does not change the risks."
That investment was worth $34 million and was given to the mint to upgrade IT systems and hire additional staff to support compliance with anti-money laundering and counter-terrorism funding laws.