As more and more OPEC and Middle Eastern countries begin to move away from the Petrodollar, the door is now open for another type of currency to rush into the vacuum to replace it. And perhaps it is not a coincidence that last year the Islamic Council on Sharia Finance legalized the ownership of gold outside of currencies and jewelry for the first time.
Last month a financial institution in Dubai created the region's first cryptocurrency, and facilitated its acceptance under Sharia Law by backing it with physical gold. Now analysts are speculating that not only could this model become a prime investment vehicle for Muslims around the world, but it could also lead to a complete change in the financial structure of Islam and the Middle East, and possibly replace the dying petrodollar system that has been the foundation of finance there for over 44 years.
The launch of the first-ever Islamic finance-compatible cryptocurrency could be a game changer for the entire Islamic banking industry and the way it does its finance business, its founder says.
OneGram, launched in May in Dubai, calls itself the world’s first Shariah-compliant cryptocurrency whose value is backed by actual gold reserves. The company started selling a total stock of 12.4mn digital tokens on May 21 that are backed by one gram of gold each, aiming to raise around $500mn in its “Initial Coin Offering” programme. At its sister company GoldGuard, a Dubai-based online gold trading platform, OneGram will store the physical gold – bought through Australian-based ABX (Allocated Bullion Exchange) – in a gold vaults inside the Dubai Airport Free Zone which is currently being built. This would create a completely gold-backed, redeemable digital currency.
OneGram’s founder and CEO, Mohammed Ibrahim Khan, says he felt inspired by the now popular cryptocurreny Bitcoin when it was launched eight years ago, but he also felt that Bitcoin and similar cryptocurrencies were not designed with Islamic markets in mind, although they are considered to have more “intrinsic value” than fiat money created in the conventional finance system that is based upon debt. However, since there hasn’t been an Islamic evaluation as to whether Bitcoin is halal or not, its use is subdued in the Arab world.
“While the 1.6bn Muslims make up over 23% of the world population, many Muslims simply can’t use cryptocurrencies because of their restricted legal status and high barriers of entry in many countries in the Islamic world,” Mohammed notes, adding that the physical backing by gold, which also implements the newly announced halal gold standard, would change that since OneGram has Shariah scholars on its board who ensure that the company is fully compliant with Islamic finance requirements.
The ultimate objective for OneGram is to create a blockchain-based payments solution around its tokens that complies with Islamic finance standards. Its name will be “YalaPay”, and there will be an incentive programme for retailers and companies to participate. OneGram also plans a cooperation with Mastercard to create a “Liquid Gold” debit card which can be used across the globe in ATMs, at point of sales systems and online and can be loaded with OneGram coins, gold value or normal money.
“The Muslim world finally has a fintech digital innovation that is Shariah-compliant and is something they can claim as their own and be proud of,” Mohammed says, adding that “Islamic finance experts have said that OneGram coins potentially can change the face of Islamic finance.”
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