The gold rush: Islamic fintech firms giving ICOs the Midas touch

At a time when the traditional investment space is being flooded by Shariah compliant gold-based/backed investments with many claiming to be ‘firsts’ of new instruments following the introduction of a global Shariah standard for gold last year, a Dubai venture is also making a name for themselves in the digital space with what could very well be the first gold-backed cryptocurrency within the parameters of Islamic law.

Spearheaded by Islamic fintech firm OneGram and gold bullion trader GoldGuard, the physical gold-backed OneGramCoin (OGC) tokens will be up for sale in an initial coin offering (ICO) on the 21st May, an offering expected to raise at least US$554 million if 12.4 million of the tokens are taken up at the spot gold price. This would make it the largest digital currency crowdsale ever, greatly overshadowing the successful Ethereum sale (US$18 million) in 2014. Each token is redeemable for one gram of gold, or equivalent fiat currency.
While the success of the ICO has yet to be seen, however, it is understood that the firms have already received commitments amounting to almost half of their funding goal; and the fact that GoldGuard is building one of the world’s largest cryptocurrency gold vaults inside the Dubai Airport Free Zone may be enough to capture the interest of investors. Not forgetting that the Shariah compliant flavor of OGC could very well attract Shariah investors who have been actively seeking for alternative investment options.

The appeal of an Islamic ICO — a fresh asset class — is one also being mulled by another Islamic gold trading platform as IFN Fintech has learned. Kuala Lumpur-based HelloGold, certified Shariah compliant in December 2016, is currently looking at another round of capital-raising (including a potential ICO) to support its ambitious expansion plans: the firm in April forged an alliance with AEON Credit Service (Malaysia) to offer Islamic investment opportunities in physical gold to the Malaysian retail market. HelloGold, which stores its gold in Singapore, has its eyes set on the Asian market, particularly China, Indonesia, the Philippines and Thailand.
123s of OGC

Engaging Shariah scholars to ensure the entire value chain is Shariah compliant end-to-end from the provision and storing of the assets (physical gold) to the trading of the assets, GoldGuard will host the sale on its exchange, while OneGram will manage the OGC, develop the blockchain and regulate the exchange.

The ICO will last for 120 days or when all 12.4 million OGCs have been sold out. Should there still be an excess of tokens after the offering period, new OGCs equaling the amount sold in the ICO will be issued again; no more will be released after that. All transactions can be tracked in the OneGram wallet app and through the GoldGuard website. The firms intend to list OGC on other cryptocurrency exchanges on the 15th August. This is after the launch of an OGC transaction test network at the end of June and the implementation of multiple OGC block explorers in early July.

ABCs of ICOs

Often compared to IPOs, ICOs refer to the sale of blockchain-based coins or tokens to raise money outside of the traditional venture capital world. Not regulated by any financial authorities, any firm or start-up — with the right technology — can create their own cryptocurrency backed by a variety of assets and these digital tokens can be traded over various cryptocurrency exchanges. Not without controversies due to the lack of regulatory oversight (which has led to significant fraudulent and failed deals), ICOs are gaining in popularity in part because of their democratization characteristics: transparency through the blockchain, and the removal of intermediaries (brokers, etc) which in theory means a lower cost of fundraising and insulation from regulatory intervention.


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