A new Toronto-based payments startup says it wants people to start using gold to buy things online.
But first, BitGold plans to buy Loma Vista Capital, an unprofitable but publicly traded mining company—a deal that will allow it to go public on the Canadian Securities Exchange.
BitGold’s platform, which is currently in private beta, will allow users to buy gold stored in one of the company’s vaults. Customers will be able to then be able to use the gold in their accounts to make payments and buy things online.
“Gold has been used throughout human history as a store of monetary value, and as such enjoys investment demand for its monetary utility. Gold’s unique qualities also make it considerably useful in a large number of industrial applications, and as such it also has a commodity-driven demand profile,” according to a joint management information circular sent by BitGold directors to shareholders of Loma Vista and filed with securities regulators. “BitGold believes this makes it an attractive alternative to fiat currencies, which are exposed to devaluation and inflation risks, and modern crypto-currencies, which have no intrinsic value, and suffer from wild price fluctuations.”
It also plans to introduce a debit card, to facilitate gold-based payments in brick-and-mortar retail, and roll-out a network of ATMs internationally.
“By using its proprietary technology platform to link existing global payment settlement infrastructure to a secure gold vault storage service, BitGold aims to make gold accessible in micro amounts and easy to acquire, store, and spend, thereby making it useful for everyday transactions and accessible to a broader market,” the information circular reads.
The company says that all the gold it stores will “allocated”—“meaning that it is acquired as
specific, uniquely numbered, physical pieces of gold, which are owned by the customer,” according to the circular.
Customers will also be able to physically withdraw their gold.
Despite its early stage, BitGold has already attracted some big investments.
BitGold says it has raised approximately $7 million, in conjunction with the amalgamation, through the sale of “subscription receipts.” After the deal is completed those subscription receipts will be converted into BitGold shares and give holders the right to buy additional shares, over an 18-month period, at a fixed price.
Of that, around $2 million is being invested by asset-management firm Sprott Inc. and some of its directors. Sprott has several gold-related investment funds and offers physical gold bullion trusts. Sprott and BitGold are also working on developing strategic partnerships.
It also raised a $3.5 million series-A in late December.
The decision to become a publicly-traded company appears to be motivated by a desire for legitimacy as well as capital. The information circular highlights the additional reporting standards required of publicly-traded companies. BitGold is also aiming to move from the CSE to the more prominent TSX-Venture exchange.
While the deal with Loma Vista still requires the approval of shareholders, who will meet on March 14, it seems likely to happen. Roy Sebag, the president and CEO of BitGold holds the same roles at Loma Vista.
Sebag, along with Joshua Crumb, who is also BitGold’s co-founder and chief operating officer, also own the majority of shares in Loma Vista.