What Is the BitGold Platform and How Does It Work?

BitGold was an online platform that allowed users to buy, store, and spend gold digitally, combining gold’s stability with the convenience of digital payments. Launched in 2015, it gained attention as an alternative to traditional banking and precious metal ownership before rebranding as Goldmoney.

While BitGold no longer exists under that name, understanding its functionality remains relevant for those interested in digital gold platforms. Its structure influenced many fintech solutions that followed.

Platform Registration and Account Setup

To create an account, users provided their name, email, and a secure password. Identity verification was required to comply with financial regulations, involving submission of a government-issued ID and proof of residence, such as a utility bill or bank statement. Verification typically took a few business days.

Once approved, users accessed a dashboard displaying gold holdings, transaction history, and available payment methods. The platform supported multiple currencies, with deposits via bank transfers, credit cards, and other options. Deposits were converted into gold at real-time market rates, with currency conversion applied when necessary.

Security measures included two-factor authentication (2FA) to prevent unauthorized access. Users were encouraged to enable 2FA, requiring a secondary verification step, such as a code sent to a mobile device. Account recovery options were also available.

Methods for Acquiring Digital Gold

Users could acquire digital gold through direct purchases, payments, or referral rewards. The most common method was buying gold via linked bank accounts at prevailing market rates.

BitGold also allowed users to receive gold as payment. By generating unique payment links or invoices, individuals and businesses could send gold directly to an account. This was particularly useful for freelancers and merchants preferring gold over fiat currency.

A referral program offered another way to accumulate gold. Users who invited others to join received small gold credits, incentivizing platform growth.

Transaction Costs and Fee Structures

BitGold charged fees for buying, selling, and withdrawing gold. Buyers paid a small percentage above the spot price to cover sourcing and maintenance, while selling gold back to the platform incurred a similar spread.

Transfers between users within the platform were free, encouraging peer-to-peer transactions. Withdrawing funds in fiat currency to a bank account involved processing fees, varying by withdrawal method and destination. International transfers were more expensive due to intermediary bank charges, while domestic withdrawals were generally lower.

Users could also convert digital gold into physical gold, such as bars or coins, though this involved fabrication and shipping fees, which depended on weight, delivery location, and insurance coverage.

Security and Storage Framework

BitGold partnered with vaulting services like Brink’s and Loomis to store gold in insured, high-security facilities across multiple countries. This decentralized storage reduced risks from geopolitical instability or financial crises. Each deposit was allocated, meaning users had direct ownership rather than an unsecured claim, distinguishing it from fractional reserve models.

Independent third-party audits verified that total gold holdings matched user balances. These audits were published regularly, ensuring transparency. Serial-numbered gold bars further enhanced traceability.

Regulatory and Compliance Aspects

BitGold adhered to Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, requiring identity verification before transactions could occur. Compliance with financial authorities, such as the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), ensured adherence to legal standards.

Unlike bank deposits, gold holdings on BitGold were not covered by deposit insurance schemes like the FDIC in the U.S. or CDIC in Canada. Instead, assets were protected through insured vaulting agreements. The platform also met financial reporting obligations, ensuring transactions complied with tax and disclosure requirements.

Tax Classification for Digital Holdings

The tax treatment of digital gold varied by jurisdiction. In many countries, it was classified as a commodity or investment asset, affecting how gains and transactions were taxed.

In the U.S., gold was considered a collectible under Internal Revenue Code Section 408(m), with long-term gains taxed at a maximum rate of 28%, higher than standard capital gains rates. In Canada, gold was treated as a capital asset, with gains subject to a 50% inclusion rate under the Income Tax Act.

Sales tax implications also differed. The European Union generally exempted investment-grade gold from VAT under Directive 2006/112/EC, while Australia imposed GST on certain gold transactions unless they met purity and investment criteria. Users needed to track transactions carefully, as tax authorities required accurate reporting of acquisitions, disposals, and gains.