Spinning gold into dollars: how BitGold intends to become a new standard
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One of the financial world’s newest innovations – digital currency – has run full tilt into one of its oldest concepts, gold as a medium of exchange
Don’t let the moniker fool you, says BitGold co-founder Josh Crumb, he’s not trying to turn gold into bitcoins. ‘We think that’s a bad idea.’ Photograph: Bloomberg/via Getty Images
When Josh Crumb and his colleague started out, they just wanted to figure out a way to allow people to pay for a cup of coffee with gold. Yes, you read that correctly. With gold.
In the more than four decades since president Richard Nixon abolished the gold standard – the pledge that a dollar was worth 1/35th of an ounce of gold – there has been no formal link between the value of the precious metal and that of the dollar or any other of the world’s other chief currencies. That has driven a group of economists and policymakers crazy; they argue that the demise of the gold standard lies behind all of America’s economic woes since Nixon’s 1971 edict. Rand Paul, one of the current crop of Republican candidates for president, is among those arguing that it’s time to at least study the idea of linking the dollar to gold.
For Crumb and Roy Sebag, the founders of BitGold Inc, whatever the world’s politicians and central bankers choose to do about gold and the dollar (or gold and the Euro, or gold and the yen) is interesting, but irrelevant to their own business plans. They’ve already married gold and the dollar, in what Crumb describes as “a personal gold standard”. The Toronto-based company’s product is simple: it offers clients the ability to deposit gold in their BitGold accounts, and then use those funds (or their value in their local currency) to make mortgage or car payments – or simply to pay for a coffee.
Essentially, in BitGold, one of the financial world’s newest innovations – digital currency – has run full tilt into one of its oldest concepts, gold as a medium of exchange. The idea for the latter probably predates recorded history, while digital currencies are in the midst of radically redefining the very meaning of the concept, and in the very earliest stages of what could prove to be an enormous shakeout in the way global financial systems function today.
Bitcoin, of course, is the most familiar variant of these digital currencies. Now six years old, it has been the focus of considerable turmoil over the last several months. Law enforcement officials shut down the Silk Road underground marketplace where, allegedly, users could even hire hit men and pay for their services using the digital currency, bypassing central banks and pesky tax reporting requirements. US district court judge Katherine Forrest sentenced Silk Road’s founder, Ross Ulbricht, to life in prison on Friday.
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