In Dubai’s decades-old Gold Souq, customers from around the world haggle over bangles and necklaces. Elsewhere in the emirate, the region’s top centre for gold trade, bullion is playing a new role in financial engineering.
A local start-up company founded last year, OneGram, is issuing a gold-backed cryptocurrency – part of efforts to convince Muslims that investing in cryptocurrencies complies with their faith.The global surge of interest in bitcoin, ethereum and other cryptocurrencies extends into the Gulf and Southeast Asia, the main centres of Islamic finance.
But because they are products of financial engineering and objects of speculation, cryptocurrencies sit uneasily with Islam. Islamic law principles, in addition to banning interest payments, emphasize real economic activity based on physical assets and frown on pure monetary speculation.
Halal or not halal
The speculative nature of cryptocurrencies has triggered debate among Islamic scholars over whether cryptocurrencies are religiously permissible. Cryptocurrency companies are seeking to sway the debate by launching instruments based on physical assets and certified as valid by Islamic advisors.
Each OneGram cryptocurrency unit is backed by at least a gram of physical gold stored in a vault. The idea is to limit speculation.
“Gold was among the first forms of money in Islamic societies, so this is appropriate,” said Ibrahim Mohammed, the Briton who founded the firm with other investors last year.
“We are trying to prove rules and regulations from sharia are fully compatible with digital blockchain technology.”
Tens of millions of dollars worth of the currency has been issued so far. About 60 percent of the planned number of coins remains to be sold; OneGram hopes to issue them all before listing them on exchanges around the end of May.
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