Physical Gold Custody Risk

  • Specific Risks: Licensed custodians (e.g., HSBC, Standard Chartered) hold the physical gold backing $ART. Risks include custodian operational errors (e.g., inventory miscounts), internal fraud (e.g., asset misappropriation), or external security breaches (e.g., vault theft). Such incidents could break the 1:1 link between $ART and tangible gold.

  • Mitigation Measures:

    • Adopt multi-custodian management: Split physical gold holdings across 2–3 licensed custodians (no single custodian holds >50% of total spot gold), reducing single-point failure risks.

    • On-chain traceability: Record each batch of gold’s serial number, weight, and purity on the Ethereum blockchain via NFTs (Non-Fungible Tokens), enabling users to verify custodian inventory against on-chain data quarterly.

    • Custodian liability insurance: Require all custodians to purchase asset custody insurance (coverage ≥ $100 million) to compensate for losses from theft or fraud.

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