In Dubai’s decades-old Gold Souk, customers from around the world haggle over bangles and necklaces. Elsewhere in the emirate, the region’s top centre for gold trade, bullion is playing a new role in financial engineering.
A local start-up company founded last year, OneGram, is issuing a gold-backed cryptocurrency — part of efforts to convince Muslims that investing in cryptocurrencies complies with their faith.
The global surge of interest in bitcoin, ethereum and other cryptocurrencies extends into the Gulf and southeast Asia, the main centres of Islamic finance.
But because they are products of financial engineering and objects of speculation, cryptocurrencies sit uneasily with Islam. Sharia principles, in addition to banning interest payments, emphasise real economic activity based on physical assets and frown on pure monetary speculation.
That has triggered debate among Islamic scholars over whether cryptocurrencies are religiously permissible. Cryptocurrency companies are seeking to sway the debate by launching instruments based on physical assets and certified as valid by Islamic advisors.