Muslims could reinvent the revolutionary cryptoeconomy

Muslims could reinvent the revolutionary cryptoeconomy

A different trend in the crypto-economic world is happening in the Middle East, particularly in predominantly Muslim countries: we are talking about digital assets backed by gold.

In the Islamic faith, it's believed that economic activity should be based on real and physical assets, not on speculation, and therefore those who profess that religion don't like to invest in Bitcoin, Ethereum or any other cryptocurrency of a speculative nature, because that goes against the Islamic law.

Islamic law, or Sharia, is a code of conduct that includes the criteria of the moral of life, the forbidden and permitted, or what they believe separates good from evil. It is more about a way of life, a guide of conduct that governs all aspects of their life.

Cryptocurrencies have not been officially banned in Saudi Arabia or the United Arab Emirates, but these governments have issued warnings about the purchase of Bitcoins by their citizens. Somehow, that's in part why Muslim markets have been reluctant to trade in digital currencies.

However, the people of those countries don't want to be left out of this financial revolution; because of that, to serve the Islamic population, a new type of cryptography approved by the Sharia is emerging.

A startup in Dubai, in the UAE, created the cryptocurrency OneGram, which is backed by one of the most stable assets in the world: gold. According to the company, OneGram is the first physically gold-backed and Sharia compliant cryptocurrency based on Blockchain technology.

OneGram's pitch is that each unit of value is backed by a physical gram of gold that is stored in a safe. Therefore, this limits volatility and speculation, which according to Islamic principles is acceptable.

"We are trying to prove rules and regulations from Sharia are fully compatible with digital blockchain technology," said cofounder Ibrahim Mohammed, according to Reuters.

In traditional markets, the price of gold is used as the bar of measurement of how the global economy is functioning. The concept that gold is a stable and palpable asset, instead of speculative, aligns itself more closely with Sharia's anti-risk rules.

But OneGram is not the only cryptoactive backed by gold. There is a similar concept in Thailand with HelloGold, founded last year in Malaysia. Southeast Asia is another key point of Islamic finance, with Indonesia and Malaysia being Muslim-majority countries.

"In recent years, the Middle East has seen incredible growth in fintech innovations including digital tokens and smart contracts," Mohammed told to Forbes in another interview. "With OneGram we are providing an opportunity for investors who care about Islamic financial markets and the security of commodity-backed investments."

Given the current instability of the crypto-economic market, the idea of ​​digital currencies backed by a worldwide standardized commodity such as gold, could be the answer to volatility; if reasonable regulatory measures are adopted to provide certainty to the market, perhaps the world's biggest investors could finally embrace the concept of cryptocurrencies as the future of the economy.

 

By Alejandro Cortés

Sources: Reuters, Forbes, Quartz

  • Alejandro Cortés

    Alejandro Cortés

    Egresado de la Escuela Mexicana de Periodismo Carlos Septién García. Ha trabajado para varios periódicos en México y los Estados Unidos desde 2002.

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