Interview with Dr. Zeno Dahinden, CEO of e-dinar (part 1 of 2)

What is e-dinar?

e-dinar is an exchange system enabling the electronic transfer of gold and silver between accounts. e-dinar and e-dirham are 100% backed by physical gold and silver.

A quantity of e-dinar / e-dirham constitutes title to a precise weight of this physical gold/silver. e-dinar FZ-LLC is a Dubai Corporation which operates the e-dinar system.

The primary function of the e-dinar system is to render payments, in gold (e-dinar) and silver (e-dirham), from one customer account to another. A secure, convenient interface is provided for customer entry of transaction orders. All cleared transactions entail an increment or decrement of one´s e-dinar / e-dirham balance.

The system calculates exactly how much metal belongs to each particular customer.

All gold and silver is held free of lien or encumbrance. e-dinar does not engage in future contracts or any form of leveraged derivatives.

No physical gold/silver is listed unless e-dinar has rendered payment for it.

(Q) When was the original e-dinar company founded?

We founded the original e-dinar company in August 2000 in Labuan, Malaysia.

(Q) Why did you found the original e-dinar company in Malaysia?

The incorporation was purposely timed to precede a large e-dinar conference at the Islamic Arts Museum Malaysia (IAMM) in Kuala Lumpur, November 2000. At that event, both Dr. Tun Mohamed Mahathir (at that time PM of MA) and his successor Datuk Seri Abdullah Ahmad Badawi (the current PM of MA) received complementary sets of gold dinars and opened their e-dinar accounts publicly on stage. They were among the very first and most illustrious e-dinar account holders.

As you probably know, we ´converted´ Dr. Mahathir in the late nineties to become an outspoken champion of the gold dinar which he remains to this day. Being the visionary he is, he transcended the use of gold from reserve currency and coins to international trade - well understanding that the importance of nation states will continue to decline in favor of global trade.

While he publicly advised the Saudis to accept only gold in exchange for oil, he championed the idea of using gold for the settlement of international trade between OIC countries (Organization of Islamic Countries). International trade would thus be accounted for in gold and would be regularly netted against national gold reserves. As a result of each settlement, gold would move physically between countries.

James Turk from GoldMoney shares a similar view when he says that ´gold´s principal use in the coming years will be in cross-border commerce, and principally by companies rather than individuals´. We could not agree more.

(Q) When and why did you mint the first gold dinars?

We actually started to mint the first gold dinars and silver dirhams in 1992, at that time still hammered by hand....

People often asked us why we would ´go back to the Middle Ages´ by issuing a gold and silver currency, in their view a barbaric relic? Our answer in short:

• to offer people real value rather than a promise-to-pay
• to help prepare the grounds for renewed monetary discipline in the face of impending financial collapse, e.g. through the ´subprime´ fall-out

Let me explain: the termination of the Bretton-Woods-Agreement by President Nixon in 1971 represented the end of gold´s traditional role as reserve currency. The obvious reason for this step was to liberate money creation from the constraining ´shackles´ of gold thus allowing central banks to create an unlimited amount of new money out of nothing (paper money is actually created from debt – since debt is an obligation and not a value, new money draws its value from existing money and thereby devalues the currency and creates inflation).

The obvious results were exorbitant interest rates in the US (well above 15% by 1980) and an unprecedented Bull Run in gold (from 44 USD in 1971 to 850 USD per oz by 1980).

The sudden availability of ´unlimited´ liquidity also gave rise to what we call today globalization which feeds off unlimited capital. Globalization started with an unprecedented wave of corporate takeovers in the early eighties (the junk bond era) and is increasingly threatening the ethical and moral basis of the human contract through an extreme form of transnational capitalism which is beyond the control of national laws and regulations - what Loretta Napoleoni refers to in her inspiring book ´Rogue Economics´ as the transmutation of nation states into market states (Seven Stories Press, NY, 2008).

To summarize:

Our aim is to put real value back into the hands of the people and rather than letting it accumulate in the hands of a very few.Our ambition is to help set-up an alternative to today´s out-of-control monetary systems.

(Q) Besides yourself, were there any other original founders of e-dinar?

Apart from myself, the original team included Dato Abdul Rahman Shariff, a Malay business man who helped establish the relationship with the Malay government and Fernando Vadillo who laid the conceptual basis for the gold dinar.

(Q) What type of partnership did the company form with e-gold around 2000?

We made first contact with Douglas Jackson (CEO of e-gold) in late 1998 and were fascinated with the prospect of complementing our physical bi-metallic currency with a digital gold currency (DGC). I then visited Doug Jackson in Florida in 1999 where we hammered out a unique agreement whereby e-dinar became a self-contained front-end sitting on top of the e-gold database. As part of this agreement, the head of our software team was invited to work with the e-gold team in Florida.

To my knowledge, nobody else was ever granted such an ´intimate´ relationship with e-gold.

(Q) There seems to be some hint of an ´unknown international corporation´ from the Middle East purchasing a large position in the e-dinar company near the end of 2003. Can you give us any more details on this purchase, such as what company and what is their participation in the operation?

The partner company is an international real estate developer with offices in Dubai and other Middle Eastern countries. The main contribution of the partner company is to open Saudi Arabia for e-dinar where they own prime properties in Mecca and Medina – key places to promote the gold dinar to millions of pilgrims passing through every year.

As a result of this partnership, we founded a new e-dinar company in Dubai Internet City (DIC) with an onshore Trade license which I manage as CEO and in which I continue to hold a controlling interest.

(Q) When did the company formally separate from e-gold and what were the reasons for the separation?

We amiably separated from e-gold at the end of 2004. The main reason for the separation was our growing realization that, while having learned a lot from e-gold, our continued dependence on e-gold´s backend database and processes (e.g. bullion purchase and storage) was preventing us from reaching our full potential. And the longer we waited, the more customers we would loose during the separation.

To enable the separation, we developed our own backend software and established our own bullion procurement and storage processes. Today, we operate as follows:

• Bullion purchase and dinar/dirham mint: Emirates Gold in Dubai
• Bullion storage: Emirates Gold in Dubai and Embraport in Switzerland
• Transport: VIA MAT Securitas in Switzerland
• Custom orders (custom bars, medallions): Emirates Gold (e.g. State Opera; Berlin Philharmonics)

The owner and CEO of Emirates Gold, Mohamed Shakarchi, is a close personal friend, whom I have known for well over 10 years. Since I am Swiss, it probably helps that Mr. Shakarchi lived 25 years in Switzerland, at that time the owner and CEO of Shakarchi Trading.

Even though I could never identify with certain aspects of e-gold´s business model (e.g. their support of HYIP schemes and online gambling sites which we do not allow in e-dinar), I admire Doug Jackson as a true pioneer of DGC. With the exception of James Turk from GoldMoney, almost all DGC players have modeled their operations based on Doug´s ideas and concepts.

(Q) Are any of the customer online transactions reversible?

Online transactions (spends) are not reversible. Once the transaction is complete, the sender cannot undo it.

(Q) What are your transaction fees in comparison to credit cards or PayPal?

Transaction fees are 1% of the transferred amount, but not more than 0.015 e-dinar (~ 1.90 USD) for transactions in gold or 0.5 e-dirham (~ 0.88 USD) for transactions in silver. This represents only a fraction of the fees charged by credit cards or PayPal.

(Q) Every e-dinar account holds two balances, an e-dinar balance (gold) and an e-dirham balance (silver). I´m going to assume that the e-dinar(gold) is the most popular with customers, do many users transact in silver e-dirham?

Your assumption was certainly true until we added silver on request by one of our largest customers some two years ago. Since then, silver has really taken off and we buy in a typical month up to one ton of silver and growing. In our opinion, silver is still substantially under priced as compared to gold. On the downside, the silver market is much smaller than the gold market and thus lends itself more easily to manipulation by a small number of large traders.

In recent months, we observe a growing number of clients who add a silver balance to their account and use it for payments.

(Q) Does the value of an e-dinar or e-dirham account move up or down with the prices of gold and silver?

Yes, it moves proportionally to the price of gold and silver. When funding an account with e-dinar or e-dirham, the customer buys physical gold or silver. Thus the account balance is recorded in gold and silver (by weight). All other currencies which are displayed in the account balance fluctuate with changes in the gold and silver prices.

(Q) I like to keep the bulk of my personal funds in digital gold accounts, but occasionally I need a fast wire out to pay for something, if I have a gold balance in my e-dinar account and need to send a wire to a friend in the UK, can I sell my gold and direct the wire payment to him?

You can certainly do that. But please let me qualify my statement. One of the ways that we are different from other DGC systems is that e-dinar is for the time being used primarily as a store-of-value rather than a payment system (this is to some extend intentional). As a result, most out-exchanges go back to the bank account the funds originally came from. If third-party out-exchanges occur (> 1000 USD), we first request an explanation for the reason of payment before releasing it.

This is done to prevent money laundering at its root:

We do not allow third party in-exchanges into e-dinar accounts. In other words, in-exchanges are only accepted from the e-dinar account holder. We have in the past returned third-party in-exchanges for that reason. We carefully track and monitor the comparatively small number of third-party out-exchanges.

continued in part 2

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