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Islamic financial services and technology company OneGram is partnering with GoldGuard, a Dubai-based online gold trading platform, that is building one of world’s largest gold vaults inside the Dubai Airport Free Zone, to create the first completely “gold-backed digital currency” globally. Each token represents a gram of gold and redeemable.
With Sharia scholars on OneGram’s board it ensures that the company is fully compliant with Islamic finance requirements. Advisers listed include amongst others Sheikh Abdulkader Amor, CEO of Al Maali Consulting Group and an Islamic financial adviser, Adam Richard, CEO of Volt Markets, and founder of the Houston Bitcoin Meetup.
Currently the Islamic finance sector is responsible for managing around 1% of global GDP and growing at nearly 20% per year.
With there being an estimated 1.8 billion (bn) Muslims worldwide according to a study in 2015 - equating to around a quarter of the global population of c.7.5bn today - OneGram is seen as a “Sharia-compliant method” for them to keep gold in a digital format that is both secure and digitally transferable, including across borders.
And, given that the number of Muslims in the world is expected to grow to 2.2bn by 2030, the new joint venture between OneGram and GoldGuard was being outlined today at The Ritz-Carlton, Dubai International Financial Centre (DIFC), in terms of its impact on “opening the doors for cryptocurrency trading to the Islamic world.”
A maximum total of 12,400,786 OneGramCoin tokens (OGC) will be sold in OneGram’s upcoming initial coin offering (ICO) on May 21, with accounts able to be opened next week on May 8 when the gold can be purchased. At the current gold spot price, a sold out crowdsale would raise over $554 million (m), which would make it the largest cryptocurrency crowdsale goal in history.
Ibrahim Mohammed, the CEO of OneGram, commenting from Dubai said: “In recent years, the Middle East has seen incredible growth in fintech innovations including digital tokens and smart contracts.”
He added: “With OneGram we are providing 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.”
Islamic Markets & Cryptocurrency
Existing cryptocurrencies it should be noted have not been designed with Islamic markets in mind. Despite Muslims making up around 25% of the global population today, many Muslims simply cannot use cryptocurrencies due to their restricted legal status and high barriers to entry in many countries in the Islamic world.
According to OneGram it aims to solve these issues by using blockchain technology to create a “new kind of cryptocurrency”, where each coin is backed by one gram of gold at launch. In terms of the joint venture, the team at OneGram team will manage the OGC protocol while GoldGuard will run the vault for physical gold.
Each transaction of OGC generates a small transaction fee, which is reinvested in more gold (net of administration costs), and thereby increases the amount of gold that backs each OneGram. Therefore, according to the pitch each OGC increases in real value over time, and is touted as “making OneGram unique among cryptocurrencies.”
Gold Investments & Sharia Law
Historically gold investing has been problematic under Sharia law. While there is currently limited guidance for gold coins and bars, there is virtually no guidance on gold elsewhere in the financial sector.
In most cases trading gold futures contracts is forbidden by Islamic law as gold futures contracts are not backed by physical gold and one can end up paying or receiving interest on your trading account. The upshot is that most people who wanted to buy gold as an investment have purchased gold in its physical form through for example coins or jewellery.
Things are changing though. Back in December 2016, the Sharia Gold Standard, which OneGram complies with, was introduced by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the World Gold Council and Amanie Advisors.
As a result of this new standard, Muslim investors will now be able to take advantage of an increasing range of gold-backed investment opportunities, which hitherto had been non-compliant.
The OneGram ICO will take place on the GoldGuard gold exchange, which trades and regulates precious metals, and is licensed by the Dubai Airport Free Zone (DAFZ) in the United Emirates (UAE), and one of the fast growing Free Zones in the region.
The DAFZ is the governing body, which administers trade licenses and visas to international companies wanting to do business from Dubai within the freezone.
In order for investors to participate in the ICO, the initial step is to register with GoldGuard and purchase gold at live spot rates. Then the gold can be redeemed for OGC for a 10% premium.
This premium is expected as by purchasing OGC, the investor is not only purchasing an asset that offers the spot value of gold but also the future value of additional gold to be purchased from transaction fees.
The ICO in OGC tokens will end when all coins are sold or after a maximum period of 120 days. If all the tokens do not sell out, there will be a new total supply of OGC equal to the amount of OGC sold in the ICO. It understood that subsequent to that no more coins will ever be issued.
At any given moment, an investor in these tokens is able to see the amount of gold backing their coin in the official OneGram wallet app and through the GoldGuard website. Your coins for gold or equivalent fiat currency can be redeemed through GoldGuard’s platform.
Following the ICO, OneGram Coins can be bought and sold through any cryptocurrency exchange that lists OGC.
According to OneGram’s roadmap, next month on June 30 the test network for OGC transactions is slated for launch. Following that in early July the intention is to launch multiple implementations of OneGramCoin block explorers, being described “with complete REST and websocket API’s, allowing our users insight into transactions propagated on the blockchain.”
On August 7, the main network for OGC transactions is set to be launched, before OGCs will be distributed to investors in the ICO and listed on popular crypto exchanges on August 15.
Ibrahim Mohammed, CEO, OneGram, along with GoldGuard and leading Islamic finance scholars including Sheikh Abdulkader Amor were speaking today at a press conference hosted at The Ritz-Carlton, DIFC, to highlight the joint venture.