By Sidek Kamiso, 10.03am
The 1997 financial crisis has exposed many weaknesses
in the currency exchange regime, but in the absence of a viable alternative
little has changed in the way international trade is conducted.
Labuan-based e-dinar Ltd believes it may have the solution
that will rid international trade of volatile currency fluctuations.
It is called e-dinar, a fully electronic or virtual monetary exchange
system that uses gold instead of notes as currency.
In the exchange system, each currency unit is fully
backed by a precise gold value, explains e-dinar consultant Rizal Rahman
in a recent interview with theedgedaily.com.
"Although the primary function of the system is to render
payment in gold from one customer account to another, the e-dinar has
the potential to fully evolve into an internationally accepted exchange
mechanism for trade," says Rizal.
The key aim of e-dinar, he says, is to provide a stable
currency free from interest and speculation. "We are not competing against
other established currencies. Our role is to complement the existing
monetary system and provide an alternative, interest-free exchange system
that can be operational worldwide."
The system works by translating the monetary value of
the account holders' deposits into gold. The stored gold value could
then be converted into the currencies of their choice or transferred
to another e-dinar account as payment.
Alternatively, a person with an e-dinar account could
convert the gold in his account to physical gold by buying specially
minted one-ounce gold and silver coins. While these gold and silver
coins are not legal tender, they have an intrinsic value and are convertible
into cash, says Rizal.
"Since gold is universal, its value is known everywhere,"
he says, noting that despite the availability of e-dinar gold coins
few people will want to carry so much gold with them.
Although the original concept of the system was mooted
more than 20 years ago, e-dinar did not have much success until the
Internet boom, which has made it easier for gold to be transacted online.
Its accountholders now number over half a million and contribute more
than 60,000 troy ounces of gold reserves. All transactions are handled
by the company's secure website.
Rizal says although many people had been concerned about
security, most who have used the system agree that it is the most transparent
and efficient mode of transferring money. "We have even published the
amount of our gold reserves in real time, so there is no question about
transparency," he asserts.
He says the gold reserves are kept in Dubai by a reputable
company Transguard and managed by a special purpose trustee.
Currently, no fees are applicable to open an account
but account holders are charged storage fees, which is a fraction of
the fee charged by banks for similar gold storage services.
In term of safety, Rizal says e-dinar technology ensures
that transactions are secure yet hassle-free. "We have the technology
to protect account holders' interest, and our website is secure and
able to handle most Internet transactions with ease."
In fact, he says the current concept of virtual money
could - in future - be converted into other virtual transactions including
using mobile devices to manage one's account.