By Xavier Kong
PRIME Minister Tun Dr Mahathir Mohamad recently espoused the suggestion of a cryptocurrency for Muslim states, putting forth that it is the first time the idea of using cryptocurrency has been heard.
This follows the call from Iranian President Hassan Rouhani that Muslim countries can cooperate closer in terms of banking and economy, including the use of cryptocurrency under a unified currency. Turkish President Recep Tayyib Erdogan had also made a similar call for a separate transaction system independent of financial markets which he says are “fragile to shocks and manipulation.”
Mahathir noted that it was contrary to growth to depend on the currency of another country such as the United States. “Its use will make us too dependent on the United States which can impose sanctions against us and will affect our economic growth,” he said.
He pointed out that gold would be a far more stable currency for trade compared to the currency of a single nation as a common denominator.
“We now have to use one currency as an international currency – almost – the USD. But the USD is also not stable, sometimes strong, sometimes weak. But gold has a certain value for all countries in the world. If we use gold as a standard, we can call our currency by whatever name, but they must relate to the value of gold in your country. So, if you know the value of gold in your country and the value of gold in the trading partner, we know how much gold is being traded,” Mahathir said.
“That is the gold dinar standard, that was what was proposed. So we will look at it carefully because using USD hampers trade,” he said, adding that this had been brought up in the past, “but there was a lot of effort to prevent it from being realised.”
However, this is unlikely to be feasible. According to a Free Malaysia Today article, the likelihood of Mahathir’s idea being taken up appears to be low, with experts citing that major Islamic nations such as Saudi Arabia and Qatar, which deal in oil and gas, are more likely to prefer the USD to back their debts.
Furthermore, banking institutions worldwide already have an efficient, interlinked system in place for global transactions based on the USD, and switching to a new, untested system could spell havoc and chaos.
At the same time, the proposition that gold be used as a standard was not clarified, with no elaboration on whether it is physical gold, futures, or digital gold, said business analyst and consultant Hoo Kee Ping, who pointed out that one reason for the Great Depression of the 1930s was the reliance on currencies backed with gold.
Recall that Kelantan had its own dinar as well, back in 2006, though it was not recognised as legal tender by Bank Negara Malaysia, with the central bank going as far as to say the people of Kelantan were being misled. It is also unconstitutional for the states of Malaysia to trade their own coin. – Jan 2, 2020
