Dubai: Backing cryptocurrencies with physical assets, namely gold, and regulating them would help ease concerns about the currencies, which have been making headlines recently for their volatility and legal issues.
Dr Fatima Al Arabi, chief executive officer of Alaf Capital, a Geneva-based wealth management company, said that cryptocurrencies also need some backing and endorsement from governments in order to gain more legitimacy.
“One has to be very careful with cryptocurrencies, especially as they’re not regulated, they are not backed by the government, and they are not backed by an asset. If you take Bitcoin, it’s a bearer asset, which means it’s like cash; it’s like having money in your pocket. Does [the money] have your name on it? No. If someone else takes it, the ownership goes to them,” she said.
She was speaking to Gulf News on Tuesday on the sidelines of the Sharjah FDI Forum where was also taking part in a panel discussion on blockchain.
Al Arabi’s argument is one that many sceptics of cryptocurrencies make — unlike most assets, including other currencies, cryptocurrencies are not regulated by a central bank, making them unreliable to many investors.
Bitcoin, the most widely-traded cryptocurrency, has perhaps faced its most prominent critic over the last week when Jamie Dimon, JPMorgan Chase’s chief executive officer, called the currency a “fraud” that “won’t end well.”
His argument was similar to Al Arabi’s who said that investors who have Bitcoin cannot claim legal ownership of it.
“To be honest, this is one of my wishes. Anything that is backed by gold has more legitimacy, and people are more comfortable with it. A lot of central banks insist on having certain reserves in gold, and they keep them — we saw central banks at some point selling gold, others bought gold, or they didn’t touch it. Gold has been a safe haven throughout history,” Al Arabi said.
She pointed that backing cryptocurrencies to gold especially would mean they could be Sharia-compliant.
In Switzerland where she is based, Al Arabi is involved in talks with central banks about finding new ways to back or regulate cryptocurrencies. She did not disclose details on which central banks are taking part in the discussions or what they’re studying with regards to cryptocurrencies as talks are still ongoing.
