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Malaysia’s Kelantan State issues its own gold and silver currency

August 16, 2010

Inteltrends.
August 16, 2010

Kelantan State in Malaysia has started issuing gold dinars and silver dirhams as an “official currency” alongside the Malaysian ringgit. The new currency is deemed compliant with Islamic shariah law.

According to an article in The Malaysian Insider, “the state would strive to expand the use of gold dinar and silver dirham in all transactions, including paying civil servants’ remuneration.”

Kelantan State has set a high financial standard by issuing these coins for daily commerce and trade, rather than as collectibles. So far, 1,000 traders have agreed to recognize the new currency in their transactions, including Bank Islam Malaysia.

“There is no reason why transactions in syariah [shariah] currency cannot be practised in the state as it was widely used thousands of years before the fall of the Ottoman Empire,” The Malaysian Insider quotes Kelantan Menteri Besar Inc. (PMBK) chairman Nik Abdul Aziz. The new currency is being managed by PMBK subsidiary Kelantan Golden Trade (KGT). Other Malaysian states are being encouraged to use it.

The following announcement is currently posted on KGT’s website:

KELANTAN LAUNCHES DINAR & DIRHAM ON 12TH AUGUST 2010

This is the first time in the last 100 years, since the fall of the Ottoman Caliphate, when a Muslim government introduces Shariah Currency. Indeed there has been four generations of Muslims who have not seen Gold Dinar and Silver Dirham; four generations of Muslims who have been divided into little national reservations and sentenced to permanent robbery first by local, then by international Masters of Riba [interest]; four generations of Muslims who haven’t known what is their Deen. The introduction of Gold Dinar and Silver Dirham in the state of Kelantan is not a new idea or experiment, it is the return to the medium of exchange that has been known for 1400 years throughout Dar al-Islam as Money of Shariah taking its legislation from Allah’s Revelation and Rasul’s Sunnah.

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As if in response to being threatened from abroad by the issuance of the new gold and silver based currency, a scathing commentary appeared in today’s Arab News — an English language newspaper from Jeddah, Saudi Arabia. The commentary, by Mushtak Parker titled ““Islamic gold dinar move sparks debate about legitimacy of dollar”, reads in part:

The Islamic gold dinar move has … resulted in an unintended debate in some of the most unexpected circles about the legitimacy of the U.S. dollar as the international currency. This is a legitimate and pertinent debate which has attracted the likes of Nobel laureates to the bleary-eyed barefoot economists to some of the delusional Islamist economists.

There is a case for the replacement of the U.S. dollar as the new international currency. But whether it will be a going back to the Gold standard pre-Bretton Woods must remain a moot point. The Chinese, the world’s largest capital owners today, have long argued for this. But for the moment they are a hostage to their massive holdings of U.S. Treasury bonds which together with the Japanese holdings effectively underwrite the obscene U.S. budget deficit, which in reality is not fully payable.

The commentary continues:

As for the Kelantan government move, no sooner had the Kelantan Chief Minister Nik Abdul Aziz Nik Mat announced the launch of the currency, his Economic and Finance Minister Husam Musa was forced to issue a humiliating retraction that the gold dinar is not a currency but an alternative to barter trade in the state.

Regardless of whether you call the new gold dinars and silver dirhams “currency” or “barter” the fact that a Malaysian state took the initiative to issue “shariah compliant” precious metal coinage — presumably without consulting the Saudis for an opinion beforehand on how this would affect Islamic finance in general — must surely have ruffled some feathers in Riyadh. It’s no secret that the Saudis have a significant financial stake in U.S. Treasury bonds along with the Chinese. (What did P.T. Barnum say was “born every minute”?)

The new dinars weigh 1.06 grams and contain gold of 91.7% purity. (I’m not sure about the specs for the silver dirhams.)

According to the Asian Tribune in an editorial dated 14 August 2010:

The coins came into circulation Thursday and can be purchased at various locations in Kelantan. Their worth is currently about $180 per dinar and $4 per dirham.

The gold dinar and silver dirham coins would provide an alternative to Malaysia’s currency, the Ringgit, the state official said. The northeastern Kelantan state is governed by the Pan-Malaysian Islamic Party, a conservative opposition group that promotes religious policies in its rule.

Kelantan authorities also say the use of such coins is encouraged in the Quran. The gold dinar was the official currency of Muslim societies for centuries.

Whereas the value of each coin is contained within the coin itself, the new currency should gain rapid acceptance not only in Malaysia but throughout the region.

Inteltrends.

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