CEO of NorNickel’s palladium fund explains tokenisation of precious and base metals – interview

Since the beginning of 2021, the palladium fund Global Palladium Fund (GPF), established by NorNickel, has launched a number of ETCs tied to the metals it produces on five European stock exchanges. This is a precedent in the mining industry, where blockchain can play a key role in adopting environmentally sustainable practices.

Compared with traditional investment methods, trading tokens saves investors substantially on metal storage and banking fees. GPF provides the full infrastructure and offers warehouses, while the investor pays only the exchange fee.

The fund also offers tokenised contracts for metal delivery to enterprises. This simplifies accounting when entering delivery contracts and more securely protects data from unauthorized access.

In an exclusive ForkLog interview, Global Palladium Fund CEO Alexander Stoyanov spoke about foreign investors’ interest in their projects, attitudes toward current regulation of digital assets in the Russian Federation, and the role of blockchain in increasing transparency in heavy industry.

ForkLog: Hello, Alexander! Just now your nickel [simple_tooltip content=’цифровой биржевой инструмент’]ETC[/simple_tooltip] with a carbon-neutral balance has just gone live on the Vienna Stock Exchange. Can this case be considered a market precedent?

Alexander Stoyanov: Good afternoon! As far as I know, this is indeed the first case in the world where an ETC based on carbon-neutral products has been launched through its own saved credits. Our product has undergone audits by independent auditing firms Ernst & Young and Sphera.

In total we have already launched products on five exchanges in England, Germany, Italy, Switzerland and Austria. All of them have passed independent audits. The physical platinum-group metals are stored either in Brinx storage or at ICBC Bank in London. The base metals are stored in a warehouse in Rotterdam.

Because green themes, climate protection and the environment are gaining importance not only for industrial companies but also for investors, all our products are tokenised and recorded on the blockchain.

For example, for the carbon-neutral nickel-linked ETC we include ESG and greenhouse gas parameters, which have been independently verified. Blockchain allows tracing information from the ore’s place of mining and the method of its production, to its application by a specific manufacturer and subsequent disposal.

ForkLog: Have you already noticed investor interest in such financial instruments?

Alexander Stoyanov: Investor interest is quite high. There are Russian, European and American investors. Unfortunately we are not allowed to disclose the percentage split among them or other commercial information. But our instruments already have a fairly large turnover.

At the end of August we lowered the price of our Gold ETC (GPF Physical Gold ETC), and now this is the cheapest offer among similar products.

When we talk about base metals, including carbon-neutral nickel, we are unique in our kind. No other tokenised investment product currently has physical metal backing.

ForkLog: Is there a carbon-neutrality premium built into token prices? How did you calculate its size?

Alexander Stoyanov: Yes, it is included. We used the parameters of the Intercontinental Exchange (ICE), where energy resources trade, including carbon credits. Based on three months of data, we derived the average price for such carbon-neutral products.

ForkLog: Tell us more about moving contracts with clients into a digital format.

Alexander Stoyanov: Large multinational European companies are already carrying out operations via tokenised instruments. They purchase the tokens, and on that basis we deliver the metal to them.

Among our partners are international commodity companies Traxys SA, Umicore SA and Glencore International AG. There are other clients as well.

ForkLog: Explain how this works. What rights does a token holder obtain?

Alexander Stoyanov: We exchange tokens with our clients that are backed by physical metal. If we speak of investment tokens, they embed not only ESG parameters or greenhouse gas emissions but also serial numbers of bars, for precious metals, or serial numbers of bundles, for base metals. This is a full contract specifying the metal’s parameters, and this is the key distinction of our platform from other projects.

Industrial clients receive physical metal, while investment clients receive a blockchain record indicating serial numbers of bars or bundles. This allows any independent auditor to verify that a token corresponds to the specific serial number stored in a warehouse or storage facility.

ForkLog: Are there plans to expand the initiative?

Alexander Stoyanov: The topic is quite new, and our industry is fairly slow in terms of how long it takes and what resources are required to execute contracts and how the whole transaction cycle unfolds. Yet I was surprised to see that many companies are pursuing similar processes. NorNickel and GPF were simply the first.

Given the high interest, I think in the next year or two we will see more companies joining either our platform or similar projects.

Let me add that blockchain plays an important role in independently confirming the origin of metal, ESG components, and greenhouse-gas emissions. The technology enables optimization and a transparent demonstration of how responsibly producers or miners regard their production and what happens in the world.

ForkLog: On which platform do you tokenise the products?

Alexander Stoyanov: The platform is called Atomyze. It was initially deployed on the Hyperledger Fabric framework. Atomyze has been in live operation since December 2020. It tokenises not only investment but also industrial products.

In each jurisdiction the platform is run by an independent local company. Each has its own board of directors. For example, in Europe this is Swiss Atomyze AG.

ForkLog: You filed an application to include Atomyze in the Russian central bank registry. What stage is its consideration?

Alexander Stoyanov: Yes, earlier this year. It is a long process; approvals are ongoing.

We are reasonably optimistic about development in Russia, as the law “On Digital Financial Assets” has already been enacted. It is clear that all new things take a little longer.

ForkLog: What opportunities would a positive central bank decision open for GPF and investors?

Alexander Stoyanov: The coordinate system of all Atomyze platforms is broadly identical, depending on regulatory or governmental features. All of them offer investment and industrial tokenised products.

ForkLog: Will participation be limited to professional investors?

Alexander Stoyanov: At the moment we see mostly professional investors, but things move forward and we do not exclude any scenarios. But for now we mainly target institutional clients.

ForkLog: When is the US launch planned? Which products will American investors have access to?

Alexander Stoyanov: I hope soon. They will access the same instruments as on the European platforms.

ForkLog: How do you view the current regulation of tokenised assets in Russia?

Alexander Stoyanov: It seems to me that regulation of digital assets in any country is a thing in itself. Due to its novelty, this industry is difficult for regulators and lawmakers to grasp, so some are ahead and some behind, but at some point it will be regulated in every country. For now, everything is proceeding much more slowly than we would like. On the other hand, we understand that creating new provisions takes time.

We do not deal in cryptocurrencies. Our entire business cycle, idea and strategy are based on assets backed by physical assets, such as metals.

ForkLog: Overall, does the metal tokenisation project pay off?

Alexander Stoyanov: I view this phenomenon with great optimism. I believe the project is progressing successfully, although some regulatory issues take time. The project elevates NorNickel and the Global Palladium Fund to a new level of client engagement, new level of trading and transparency. It also validates all the efforts we, as a mining company, are making within ESG, greenhouse gas emissions and climate change.

The whole world is moving towards digitisation. But we are the first among mining companies to have a project of this scale.

Interview by Lena Jess.

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