The Independent on Sunday
By Leo Lewis
24 June 2001
Struggling to find its feet after a disastrous 12 months, the dot-com world has turned to the depths of the old economy for inspiration.
In an attempt to prompt more e-commerce activity across the globe, internet companies are hoping to establish gold bullion as an international web currency.
The idea, which was first devised about six months ago, has finally started to blossom. A variety of gold-based 'currency' exchanges have now opened and the online bookseller Amazon.com is among a large number of websites that have now signed up to trade using the new system. Bought online, the going price for a Palm Pilot is 1.7oz of gold.
The thinking behind the project is to provide a secure, internationally recognised, unit for buying and selling goods over the web. Several Caribbean-based companies have begun storing gold in vaults in the main metals trading centres of London, Zurich and Dubai.
Instead of relying on credit cards, internet users can then buy pieces of that stored gold to make purchases anywhere in the world. The gold never actually leaves the vaults, making the whole transaction instantaneous.
As the inventor of this trading system, the Bahamas-based GoldMoney, has given the currency its name. A single GoldGram represents a gram of gold held in safekeeping, and at the current market price of $272 an ounce, a gram is worth about £6.
Although GoldGrams are aimed at all internet users, GoldMoney believes that the currency will be of most interest to businesses. Most transactions in cyberspace still involve national currencies, and companies doing business online have found the experience fraught with exchange-rate risks. The commission charge of $1 per trade is also far cheaper than bank fees for wiring currency.
GoldMoney, backed by the New York investment group Hyde Park Holdings, is now just one of several groups that believe gold is the future of the internet. E-gold, based on the island of Nevis in the Caribbean claims to have $14m worth of gold in circulation, and Virgin Islands-based Standard Reserve is equally bullish on its prospects. The idea of creating a global currency for the internet is not new. Cybercash, Digicash and Beenz all tried to set up digital money that could be used anywhere, but all three are now out of business. The founders of the various digital gold ventures argue that humans have used gold throughout the ages, and will turn to it in the new economy.
But the project has attracted the concerns of various crime-fighting organisations, and the US Treasury Department. They worry that the ease of hiding ill-gotten gains in virtual gold creates 'tremendous opportunities for money laundering'.
The digital currency entrepreneurs claim they seek only legitimate customers, but the speed and volume of transactions have left authorities fearing that the system will be virtually ungovernable.