LONDON (Reuters) -- World markets need a digital currency that is independent
of national economies, and gold is already showing it fits that bill, a
dot.com firm based on the Caribbean island of Nevis says.
``In the past there wasn't enough gold to finance wars, but there's more
than enough around now to finance commercial transactions,'' Douglas
Jackson, president and chief executive of e-gold Ltd, told Reuters on
Tuesday.
Jackson said the firm turned gold into an online currency and started up its
e-gold system in November 1996, since when 3.2 million
transactions had been conducted via the network.
Jackson said each unit of e-gold as a digital currency was backed by an
equivalent weight in gold metal held in secure third-party vaults. That
meant there was no credit risk or contingent liability in using e-gold for
any transactions.
A Canadian, for example, can pay a German the correct weight of gold for
goods or services as easily as if the price had been quoted in a national
currency.
Internet penetration
Most deals had been done by small businesses in the United States, Canada,
the UK and Australia that could not afford to wait weeks to receive funds
from credit card transactions or were not in the credit card system.
``We've also seen interest from areas where there are weak currencies and
good internet penetration, particularly Malaysia and New Zealand,'' he
added.
Banks could mobilise reserves
Jackson is in London to discuss using e-gold for bullion banks to settle
business among themselves.
He said a digital currency also offered central banks a way to mobilize
their gold reserves.
``The central banks, and the IMF, are sitting there with thousands of tons
of gold as a major part of their assets, but they can't be used for capital
transactions.''
Official gold holdings stood at about 30,000 tons worldwide at the end of
2000, out of total global above-ground stocks of 142,600 tons, according to
industry analysts Gold Fields Mineral Services.
The United States was ranked first with 8,137 tons, followed by Germany with
3,469 and France with 3,025.
``During its recent economic distress Turkey needed to defend itself with
open-market operations, but it was sitting on 100 tons of gold reserves that
it couldn't easily draw into that effort,'' Jackson said.
He added that the absence of credit risk exposure in using digital gold,
rather than a traditional hard currency, could also change the way financial
markets did business -- for example, in allowing the immediate settlement of
securities trades and the clearing of multiple dissimilar financial assets.
``In theory a grandmother in Bangladesh with a few grams of gold could get
access to the global financial system for the first time,'' Jackson said.
Gold was fixed at $267.45 a troy ounce in London on Tuesday afternoon, and
there are 32,151 troy ounces in one ton.
