by GoldCore
May 30, 2017 Gold-backed Currency Launches in Dubai
- New gold-backed currency OneGram launched
- Backed by one-gram of gold, uses blockchain technology
- OneGram is first in wave of new Shariah, tech-savvy gold products
- 2017 sees big changes for gold thanks to Shariah gold and blockchain
- Gold investors should prepare for tightening in supply
- Bitcoin and shariah gold demand suggest change in retail investor thinking
Ramadan Kareem rang
out across Dubai and the rest of the Muslim World this weekend as the
holiest month in the Islamic calendar began. For 29-30 days over a
billion Muslims around the world practice sawm (fasting), charity
(zakat) and salat (prayer). This period is a time of spiritual
reflection, increased devotion and worship as well as a time to come
together with loved ones for both the break fast meal (Iftar) and
pre-fast meal (Suhur).
Ramadan
is obviously observed in different ways around the Muslim world. Here
in Dubai a non-Muslim will experience a place full of both celebration
and reflection, with events happening every evening that are there to
welcome everybody. The month also sees a number of companies launching
Ramadan promotions ranging from bank accounts (free banking for six
months, anyone?) to spa treatments (2-for-1 massage?) to huge packs of
dates (the first food to break the fast).
As
part of the celebrations, a new gold-backed currency has been launched,
here in Dubai. It is a new currency known as OneGram (OGC) backed by
one gram of gold and can be used for digital payments. There is a fixed
number of OGCs and digital transaction fees (minus admin costs) will be
reinvested to buy more gold. According to the managers, “the amount of
gold backing each OGC will increase with time.”
OneGram
has been launched by a private company of the same name. The company
claims to offer a proof-of-stake blockchain that is ‘’further
anonymized’ than Bitcoin. Reports state that ‘developers employ
zero-knowledge dual-key stealth addresses and ring signature protocols
toward ‘instant, untraceable, unlinkable, trustless transactions.’
Shariah Gold Standard
In
December we witnessed the launch of the Shariah Gold Standard.
Announced in Bahrain by the Accounting and Auditing Organisation for
Islamic Financial Institutions (AAOIFI) and the World Gold Council, the
Standard is the first ever set of guidelines for the 2 billion Muslims
looking to invest in gold-based financial products.
As we explained in December:
According
to Islamic texts, gold is a ribawi item, which means that it must be
sold on weight and measure, and cannot be traded for future value or for
speculation. In order for a gold instrument to be Shariah-compliant,
the precious metal must be the underlying asset in related transactions.
When the Shariah Gold Standard was launched, one of the world’s leading investors Mark Mobius labelled
it as a “godsend” that was both “innovative and revolutionary”.
Currently the Islamic Finance market accounts for 1% of the global GDP,
and is growing at nearly 20% per year. The new AAOIFI issued guidelines
are expected to propel demand for gold as more companies (such as
GoldCore) launch Shariah-compliant gold investment products. The
combined use of both innovative Shariah gold investment standards and
new technology could boost demand by around 500-1000 tonnes per annum.
The
launch of OneGram is part of the new wave of gold financial products
that we are beginning to see as a result of the Shariah Gold Standard.
Muslims have long looked for more gold products to be made available to
them in the $2 trillion Islamic financial markets.
A
gold-backed cryptocurrency is not just a positive sign for Muslim
investors, it is also a positive sign for those who are looking to
invest outside of the financial system. Of course, investing in physical
gold has long been available for both Muslims and non-Muslims for many
years, but this recent announcement says a lot more about the demands
for safe-haven investing than previous changes in financial markets
have.
A new safe-money standard?
Right
now it seems the world is paying attention to a financial and
geopolitical situation that is proving to have one too many cracks to
fix and fill. But, in the background, there is a growing awareness of
how we can protect ourselves when those cracks turn into canyons.
There
is something in the air that suggests we might be seeing a turn in the
way savers and investors are beginning to view their money. The launch
of technologically advanced, shariah compliant gold-products is an early
indication of this. But when one also considers the recent performance of bitcoin, then we see that the desire to hold money outside of the financial system with reduced counterparties is growing.
The
size of the bitcoin market might be minuscule compared to gold, and
gold’s market size minuscule compared to that of the dollar, but times
are changing. The increased accessibility to these sound-money,
safe-haven assets is a sign that the most powerful financial group in
the world - the people on the street - are harnessing ways to gain
control of their investment portfolios.
Ultimately
we believe bitcoin is a complementary asset to gold, but time will
tell. Whilst watching and waiting on bitcoin, gold investors should feel
assured that launches of gold-backed products such as OneGram are not
only validation of the modern approach to investing in gold, but also
validation of their decision to invest in gold.
This
is good news for gold investors who have chosen to invest in not only
the ultimate form of financial insurance but also one that is finite and
physical. As awareness and demand grow, it is not unreasonable to
expect to see some tightening in the availability of physical gold,
which will have a positive impact on the price.
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