It all started pretty harmlessly: in December 2016, after about 12 months of deliberations, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council announced a new “Shari’ah Standard on Gold.”
The new standard was celebrated as a potentially big boost for global gold demand as it would give more than 2 billion Muslims in the world access to gold-based financial products that were previously forbidden to them.
That included vaulted gold, gold accumulation plans, gold certificates, gold-backed ETFs like GLD, and gold mining stocks.
Under Shari’ah law, physical gold was considered a “ribawi item,” which means it could only be used as a currency and worn as jewelry, but it couldn’t be traded for speculation or future value. However, Muslim investors were well aware that the $1.8 trillion Islamic finance business was missing out on important opportunities.
Under the new standard, Shari’ah-compliance is guaranteed as long as physical gold is the underlying asset.
And we didn’t have long to wait for a brand-new financial product coming from the Islamic world that combines the popularity of Bitcoin with the timeless value of physical gold: OneGram, a gold-backed, fully Shari’ah-compliant crypto currency.
The new currency was announced on May 4 at the Ritz Carlton, Dubai International Financial Center—with the official ICO (Initial Coin Offering) following only 17 days later.
“In recent years, the Middle East has seen incredible growth in fintech innovations including digital tokens and smart contracts,” said Ibrahim Mohammed, the founder and CEO of OneGram, in his first press release. “With OneGram, we’re excited to provide an opportunity for investors who care about Islamic financial markets and the security of commodity-backed investments to benefit from rapid technological advances in the blockchain industry.”
According to OneGram’s website, initially each OneGram coin (OGC) is backed by one gram of gold and can be used for digital payments, just like Bitcoin.
The total number of OGCs is fixed and won’t change after the ICO. The digital transaction fees (minus admin costs) will be reinvested to buy more gold.
“Therefore,” states the website, “the amount of gold backing each OGC will increase with time.”
Plus, of course, a rising gold price and the growing acceptance of OneGram in the market are also poised to pump up its value.
Gold and crypto-currency experts are already speculating about the implications of the launch. A recent CoinDesk review stated:
Bitcoin is often referred to as a “good” money because of its limited supply, relative fungibility and ease of exchange. If gold can also start to satisfy those requirements, a seismic shift from fiat to digital could be easier to “sell”—the public is predisposed to trust gold, certainly more so than cryptography.
It could also open the door to the creation of a new global currency as an alternative to the dollar, something that Russia and China are rumored to be looking at.
We sure do live in interesting times—and it is not all that far-fetched to think that OneGram, or another gold-backed crypto currency like it, could be a stealthy way to introduce a new global gold standard.