There are only a handful of knowledgeable digital currency operators in the world. These are the pioneers with a decade or more of hands-on experience in storing bullion, securing the privacy of user accounts and navigating the ever changing regulatory landscape. Bill Cunningham is one of these special few.
We’re talking today to Bill Cunningham President and CEO of Global Standard. We’ve published a couple of his press releases over the last two months and thought this would be a good chance to sit down and find out what Global Standard is all about. Bill, thank you for taking the time to talk with us.
It’s my pleasure, Carl.
On the surface, Global Standard is a payment system but it appears to be much more. What exactly is Global Standard?
We are a payment system but, but under the hood, we are much more than that. What we’ve actually done is launch a private-sector monetary authority and issued a private currency that is valued in and 100% reserved by physical gold. This model is significantly more dynamic and beneficial over time than only being a payment system, but clearly, it also brings enormous benefits to online payments. And interestingly, Global Standard is the first and only licensed financial institution explicitly authorized to issue a “gold-backed alternative currency” and to administer the innovative payments platform via which it circulates.
Tell us what makes up a private-sector monetary authority.
Carl, as you know, most money in the world, in fact pretty much all real money, is issued by governments either through a central bank or currency board. This system has obvious advantages, most notably the safety and security of the currency being backed by a recognized central authority. Advantages also exist, however, for a private sector initiative. There are, however, also large challenges to overcome for a private company to issue money assuring a level of safety and security comparable to what a central government provides. We’ve implemented a model that overcomes these challenges.
What are the distinctions with your monetary authority that make it viable?
There are a number of things, let me go through them.
First of all, a fundamental imperative is to assure freedom from default risk. We’ve implemented a number of controls and processes to achieve this requirement.
The currency which circulates on the Global Standard Platform has a 100% reserve of physical gold. The gold is actually owned, by a special purpose trust – the Global Standard Bullion Reserve Special Purpose Trust – for the sole purpose of being a reserve. The gold can’t be used for any other purpose; it can’t be leased, it can’t be loaned, it can’t be used as collateral – it can only be used as the reserve. And Global Standard is contractually bound to this arrangement and our liability.
We’re utilizing the existing global gold infrastructure including the London Bullion Market Association and COMEX in the United States to ensure we are dealing with Good Delivery gold that’s held in a proper custodial chain. The gold is physically stored in treasury grade depositories.
Regardless of whatever may happen to the company, by its own actions or by a third-party, the gold remains secure so that if necessary it can be liquidated to return national currency to all holders of AUG, AUG being the designator for the gold backed currency which circulates on the Global Standard Platform. It is free from default risk.
Second, we have to make sure that payments are final and not subject to reversal. So we implement rules and system protocols that require an account have an adequate balance before it can initiate a payment and that payment, once committed, can’t be pulled back or defaulted on by the payer.
It’s also very important to mitigate the type of risks that occur with any private business venture that generally do not exist when you’re dealing with the central government. To this end, the protocols, business processes, and assignment of responsibilities in the system are very meticulously designed to eliminate as many of the business risks as possible so as to keep the settlement platform where AUG circulates as safe, secure, and risk-free as possible.
Also, it’s vitally important to ensure that everything is governed by contract for all parties using the global standard system. Our company, our members, are partners who perform the primary dealer function and organizations who conduct exchanges, or any other ancillary services that are offered in conjunction with the platform are all bound by contract enforceable in a court of law.
This certainly is more than a payment system. I’m understanding the longer term effects.
We truly have implemented a system that can serve as a global currency, that mobilizes the value of gold and circulates easily across borders electronically.
The settlement platform is centralized and it is closed. The only currencies that circulate on it are ones in which we have a contractual obligation or in which we have a contractual relationship with the issuer. At this point in time, the only currency is AUG which is backed by gold which we also issue. Any money circulating on the settlement platform can only exist on the platform. Value cannot directly enter or leave the system.
Let’s go back to daily use, how do we benefit?
What this does for payments is really significant. Payment systems today are generally too slow, uncertain, and costly. Internationally they’re very inefficient. And a growing concern is developing with consumers afraid to share personal information – they don’t want to have credit card information or personal identities stolen.
The fact that Global Standard payments are final and immediate is a great benefit to the recipient. They get their value immediately and it can’t be pulled back. To online retailers or any organization accepting funds electronically, this eliminates the possibility of chargebacks which could be a significant positive impact on a company’s bottom line; and they don’t need to wait to have the value they’ve been paid.
The centralized system and the protocols in place also make this a very efficient payment system and the efficiency translates to low-cost. As an example, let’s compare Global Standard to a credit card as a method of buying something online. The credit card is typically going to cost the payment recipient 2½ – 3% or more in processing fees. For your typical online purchase of around $100, the Global Standard fee is 1% and as the value of the transaction goes up the fee actually reduces as a percentage. At $5000 credit cards still cost 2½ – 3% and up. The Global Standard fee will be a little bit over .1%. That’s a significant advantage when these lower costs translate to much higher profitability for online retailers. We’ve modeled a number of these online retailers, and by accepting only a relatively small portion of their payments with Global Standard we’ve been able to see where bottom lines can be improved 15, 20, 25 percent or in some cases even more. For a non-profit, for a charity, if they can put more into the charitable works as opposed to paying for the payment that is significant.
This all sounds good for someone receiving a payment, what about someone making a payment?
All of these benefits I just discussed are very good for the recipient but the benefits are also there for the person making a payment especially individuals. Individuals can now hold some value in gold but have it in a liquid form so that they can make payments online. They can purchase things, spend to friends and family or use it for any other reason they may want to send somebody money. Very importantly, today when you make a payment online you typically have to give up a lot of personal information including your name, address, credit card number, and the security code from your credit card. This information then sits on a server somewhere and all too often is stolen. I’ve read that 30%, maybe as much as 50% of the people who are online will not transact online for fear of losing their information or even having their identity stolen. With Global Standard the payment takes place on the platform, there’s no need to divulge this information every time you make a payment. A merchant never sees your personal information as part of a payment. Not only does this help the individual, but think of the larger market if more people are willing to make payment online using Global Standard since so many people today will not make a payment online for fear of losing credit card or personal information, I’m seen some reports that this number is 30% or more – what an untapped online market.
This all seems to work well domestically, what about international payments?
All of the advantages domestically also apply to international payments; the same speed, finality of settlement, and low cost. The currency’s gold value is relatable to any national currency and is universally appreciated as money.
As we obtain all of our licenses in the U.S. we will begin to expand internationally starting in the UK where we already have a licensing opinion from the Financial Conduct Authority that allows us to operate now. The UK market will be followed by the rest of Europe and other countries. We have a number of strategic discussions underway, that as they develop, will guide our priority as to where to go next.
One area we see as being very important is international remittances. We bring significant advantages to that $600B market area. Remittances are extremely important to many Third World countries. In many cases, they’re a tangible part of a country’s GDP. The cost and the timeliness of getting those remittances back to families are currently far higher than what authorities would like them to be. The World Bank has set up an objective to reduce costs by 50% from what exists today. Once Global Standard is able to enter this market we can, in fact, reduce current costs by 50% or in many cases more. Payment with Global Standard also takes place immediately so there is no delay in money getting back to family members. The savings can be so significant that in some countries they, could have a noticeable impact on a country’s GDP and GDP growth typically translates to reductions in poverty – clearly in our long-term mission
Internationally Global Standard is good for businesses. Even the big guys have to go through the banking system and very few have access to international settlement platforms. With Global Standard, everybody has direct access to the settlement platform which greatly simplifies international payments
This is an enormous idea, Bill, tell us how you came up with it?
I think the background here is very significant. You’re quite familiar that e-gold was forced to cease operations back in 2009 after they pleaded guilty to operating without money transmitting licenses. When it became apparent to the e-gold ownership that they would not be able to get the necessary licenses to continue doing business as the court indicated they could, they began looking for options for the future. I was able to provide one where I put a group together to buy the intellectual property. The e-gold system was built on the same monetary concepts of Global Standard. The e-gold team, primarily Dr. Doug Jackson, worked to upgrade the intellectual property to meet the necessary regulations and include later generation software and technology.
e-gold took a reputational hit because of the court case, you don’t seem to see this as an issue.
The exact opposite is true if you go look at what actually happened. e-gold pled guilty to operating without money transmitting licenses and one count came along for money laundering. The court very clearly said that the system wasn’t illegal and should be given every chance to operate, and noted Dr. Jackson had respect for the law but was given poor legal advice. The court documents laid out very specific information on how it should proceed going forward so that it would meet all of the regulatory requirements. We are clearly not bound to the stipulations of the plea agreement, but we made a very conscious decision to follow those guidelines because we thought that by taking regulatory compliance to a higher degree we could provide a safer platform for our customers.
So what we’ve done with the e-gold and now Global Standard intellectual property was to implement it using state-of-the-art software technology. We’ve also implemented an anti-money-laundering program that is significantly more thorough and rigorous than any you’re going to find from any other money services business in the US or globally and much more like the best practices from the banking industry. Again, we think having the safeguards in place creates a much safer environment for all of our customers. We’ve also worked all the other regulations relative to privacy, consumer protections, and different regulations imposed by different jurisdictions. We have gone the extra mile to make sure we’re compliant.
Add all this to the fact that e-gold was successful reaching $3B in annualized payments and with a $75M gold reserve. Dr. Jackson is a consultant to Global Standard so we have the advantage of having the smarts behind the intellectual property available. We are able with his help to capitalize on the lessons learned, good and bad, from 20 years in the business.
You’ve launched the system. Where are you now in your progress?
We did launch to the public in late May and then in early June made the formal announcement. We are licensed or have been told we do not require a license to do business in 35 states plus the District of Columbia and have two others with approval expected imminently giving us just over 85% coverage of the US population. We are continuing down the path with the remaining states with the intent obviously to get 100% US coverage. We’re also working ambitiously right now to bring the system up to Canada where we are registered with Fintrac, as well as in the UK.
Our next intent is to expand throughout the rest of Europe and then globally. Where we go next is dependent upon on-going discussions with a number of potential strategic partners. How fast and well those different discussions go will dictate what our priorities become; whether we go to Brazil or Malaysia or the Philippines or Mexico or a host of other locations.
What do our readers need to do to sign-up and start using Global Standard?
It’s quite simple. Go to www.GlobalStandard.com and click sign-up. You’ll need to verify your cell phone and email, and then go through our identity verification process, and then your all set to use the system.
If someone is not a business or doesn’t know others who will give him AUG, how do they get it?
Now or even later if you want to exchange USD or another currency as we expand globally, you can go to an exchange provider who will take USD in exchange for AUG and the reverse. These exchange providers are authorized by Global Standard and are under contract. The first exchange provider, who is also our first Primary Dealer, is Fidelis FX who can be found at www.fidelisfx.com . You can login to their site via a federated login with Global Standard, link a bank account, and buy some AUG.
You called Fidelis FX a Primary Dealer, what is that?
I noted earlier we have responsibility assignments and protocols to minimize risk. A Primary Dealer is part of this process. It determines the market need for AUG and to increase circulation it buys gold and provides it to the special purpose trust so Global Standard can issue more AUG. If the amount of AUG needs to be reduced it spends AUG to Global Standard so that gold can be released from the trust – this process is extraordinarily well defined and controlled.
The immediate initiatives are bringing more members to the system including signing up more businesses. We’ll be expanding our geographic footprint as I discussed, and
making improvements and upgrades is an
Bill, I appreciate your time and I wish you great success. Please keep me up to date.
Thanks, Carl, I’ve enjoyed this and I will keep you up to speed.