Indonesians can soon send gold tokens on the blockchain, Sharia-compliant, of course. How much substance is there in the project?
Save and send digital gold tokens. True to this motto, Kinesis is launching a digital payment system in Indonesia with which users can send precious metals such as gold and silver as well as fiat money. The system called PosGO Syariah was created in cooperation with the Indonesian Post (Pos Indonesia). It strictly complies with the stipulations of Islamic law, the Sharia. Because the Islamic legal system also has strict requirements for financial issues, such as the general prohibition of interest (Ribā) and the prohibition of speculation (Gharar). According to a press release, PosGO Syariah is not debt-based, but strictly equity-based.
Initially, all employees of Pos Indonesia, which with 45,000 employees is one of the largest employers in the predominantly Muslim country, will benefit from the new service. Gradually, the service will then be rolled out across the entire country.
Banking the unbanked?
Kinesis focuses primarily on the rural population, who often only have rudimentary access to the financial sector. According to the motto “banking the unbanked”, the service could enable peer-to-peer payments between Indonesians who do not have a bank account and previously relied on cash services such as WesternUnion.
That should then also be financially worthwhile. According to its own information, Kinesis charges a flat 0.45 percent transaction fee and is thus well below the fees that remittance services take on average.
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With the help of PosGold, users also get access to the precious metals section of the app. Here, users can save gold tokens that are physically stored and secured by independent third parties, as well as send them. The function is followed by functions such as “Gold To Mecca”, especially for the Muslim target group. The name suggests it. “Gold to Mecca” is a type of gold savings account that believers can use to make a pilgrimage to the center of the Muslim world.
Gold against rupiah – an unfair test of strength
The latter in particular is likely to be important for one or two Indonesians. After all, the rupiah applies (IDR) not exactly as the most stable of all fiat currencies. The value of the rupiah fell by more than 20 percent against the US dollar (USD) in the wake of the start of the pandemic in March 2020. In the meantime, the value has leveled off at around 1 in 14,600.
Gold, on the other hand, has only known one direction for years compared to the rupiah: northward.
One can legitimately ask oneself whether the Indonesian state is doing itself a disservice with the support of PosGO. It can certainly not be conducive to maintaining the value of your own fiat currency.
To what extent Kinesis will be successful with its project remains to be seen at this point. The gold-based token KAU, which is supposed to be secured with one gram of gold each, can only hold its value as long as Kinesis can make this security credible. Just like other centralized stablecoins, Kinesis users have to accept the counterparty risk that such centralization brings with it.
In short: PosGO may have one or the other real application. Like all other centralized DLT projects, this one too is likely to stand on shaky legs to guarantee the life savings of a significant number of people.
There is a decentralized, peer-to-peer payment system that also works without any third-party risk: it’s called Bitcoin.
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