High inflation in most countries of the world has led to the depreciation of national currencies and increased demand for settlements with precious metals. Some countries, where gold has historically been a strong position as a means of payment and accumulation, have begun to increase imports of this metal. Thus, India, which is the second country in terms of gold import, increased the import of this metal almost 10 times over the period from May 2021 to May 2022. During the same period, the Indian Rupee broke the 79 rupees mark against the US dollar for the first time. At the time of writing this article, the exchange rate of the Rupee to the dollar is 79.09.
And this is quite an illustrative example, because in India, a country with a predominance of a not very rich population, gold in a variety of forms is passed from generation to generation and can be used as a means of exchange for goods and services. According to unofficial data, every large Indian family (a clan of up to 40 people) can own up to 40 kg of gold. A great influence on the change in the situation with the purchase of gold in this country was the COVID-19 pandemic, which provoked an increase in prices.
A similar situation has developed in Venezuela. The country has quite large reserves of its own gold, and in some areas of Venezuela, the price tags indicate the value of the goods not only in the national currency, but also in gold grams. Against the background of weakening confidence in the bolivar, hotels and inns began to sell goods and services for gold.
It costs half a gram to spend the night at the hotel, a quarter of a gram to have lunch at a Chinese restaurant, and an eighth of a gram to get a haircut. “People just stopped trusting the bolivar,” says economist Luis Vicente Leon. Venezuela was one of the first countries to announce the legalization of cryptocurrencies, but if digital transactions are still possible in the capital and large cities, then in the province where the Internet practically does not work, gold becomes the only payment method. The above examples are no longer just a “special case”, but a trend and realities in which dollars and bitcoins remain “gold” for the rich, and less affluent segments of the population are forced to go back several centuries and use the methods of calculation used by their distant ancestors.
The recently announced first halal blockchain HAQQ with its own digital asset – Islamic Coin – is an example of an ideal blockchain ecosystem on the basis of which it is possible to implement projects based on the principles of Islamic finance.
One of them will be a “Golden Stablecoin” (GSC) project.
The main project’s definitions.
1. The project requires a physical gold storage (depository) as a collateral.
2. The project requires a blockchain system (hereinafter referred to as BC) for issuing GSC with control of its compliance with the physical (real) gold.
3. The project requires mechanisms for calculating the price of GSC in relation to gold and mechanisms for determining the value of GSC in other currencies for use in any calculations.
How the GSC project works.
1. The issue is solved by attracting participants who have licenses to work with precious metals. The attracted participant records the place, form and conditions of gold storage. BC receives information and determines the volume of GSCs available for issue. Once GSC is issuing, gold is deposited for the validity period of the GSC.
2. BC exists in a decentralized system that unites all the participants. They have full access to the blockchain and can control what is happening in it. The control of the availability of gold is carried out by the audit commission (auditor) in accordance with the Rules established by the Participants. Participants acting as depositories of gold may have different jurisdictions. It is essential to be able to pay for gold with fiat funds or GSC, depending on such country’ jurisdiction.
3. The proposed mechanism for replenishing the gold reserve of the system is the purchase of gold by Participant 1 for fiat from a licensed Participant from its reserves. Informing the BC. Issue of GSC – transfer it to the Participant’s account 1. A note on the deposit of the corresponding amount of gold from a licensed Participant. The second option is the transfer of gold to the licensed Participant in the deposit. With a mark of acceptance and receipt of the GSC.
4. GSC assessment with LME price. Accounting prices when buying/selling from a licensed participant – are set by the system (LME + %). The price of the GSC itself is supply and demand in BC.
5. For GSC exchange operations with gold, a commission is paid to the GSC according to paragraph 4 (which become the property of the BС). According to the gold deposit, income is accrued at the end of the month in the GSC, from the number of BС received. For the transfer of the GSC from the account of one participant to the account of another Participant, a commission is paid for the transaction (the amount is set by the BС, debited in favor of the BС in the GSC).
Thus, participants using the GSC can at any time compare its price with the LME and make up a settlement equivalent in USD for themselves, while their GSC reserves remain tied to physical gold. BС exists on commission. Gold owners receive income from providing gold as collateral.
Let us remind you that Islamic Coin has recently became the owner of a prestigious award in the field of digital finance – Gulf Excellence Award. The project has a Fatwa and the leaders of the Islamic financial market take part in the work on it.