Kinesis Money, the makers of a decentralized blockchain-based currency whose value is 1:1 tied to underlying physical gold and silver stocks, has taken a big step forward in its goal of providing a superior alternative to the current fiat monetary system regulated by central banks.
Thanks to a close collaboration and partnerships with a number of key regional organizations, including the Indonesian government, regulators, the state-owned post office, and the Jakarta Futures Exchange, Kinesis is starting the launch sequence of its offering which targets, in particular, the under-banked Indonesian market.
What is Kinesis’ Monetary System?
Kinesis stablecoins combine the versatility and convenience of new digital systems with the traditional “gold-standard” concept. The currency corresponds 1:1 to physical gold and silver, and K-stablecoins holders can redeem their holdings physically whenever they wish. At the same time, it is built to be as conveniently spent and used as the case is for fiat currencies with any debit card connected to a conventional, modern bank-deposit account—even for smaller transactions and micropayments.
Representing two of the world’s most secure and efficient value stores — gold and silver — gives kinesis stablecoins a significant advantage over similarly blockchain-based, highly volatile cryptocurrencies. High processing speed and percentage-based transaction fees linked to real-world payment systems ensure that it is an ideal currency for daily real-world use, as opposed to a financial trading tool. The currency separately offers a mechanism to invest directly in precious metals in such a way that it produces a return, as opposed to simply incurring in a storage cost.
In a country like Indonesia, the need for such a currency is especially acute. Although the country possesses tremendous economic potential — particularly, in relation to its young and burgeoning middle class — 2/3 of its 260M population do not have a bank account. On the other hand, gold is a big part of the savings culture of the country and is seen as a legitimate investment under Sharia law, as Indonesia has the world’s largest Muslim population. The monetary solution provided by Kinesis is well suited to these circumstances.
Thomas Coughlin, the CEO of Kinesis Money, said that blockchain-based currency is a brilliant concept with many possible applications, but the possibilities have been squandered so far. The panoply of so-called “cryptocurrencies” that have come onto the market in recent years is highly volatile, seldom based on any underlying assets, and very difficult to use for ordinary transactions. Therefore, cryptocurrencies have become artefacts of frenzied speculation, rather than something permanent and useful.
In comparison, Kinesis’ stablecoins can provide a more secure and credible source of value than many conventional, central bank-backed currencies. This is because its value is connected directly to physically owned amounts of gold and silver, thereby resurrecting the gold standard, while maintaining the ease of usage of fiat currencies. Kinesis penetration into the Indonesian market shows how far this is from a pipe dream or blue-sky idea; big, prestigious institutions across Indonesia have bought into the vision, and the use of the new monetary system by millions of ordinary Indonesian people will soon become a part of everyday life.
The Indonesian implementation is a good illustration of how the program can be used to accelerate financial inclusion in traditionally under-banked regions and countries that still have a high level of adoption of mobile technology. Kinesis assume that, in an increasingly uncertain global economic climate, the possibility of a convenient gold- and silver-backed currency that simultaneously offers a way to invest in such precious metals for a return would be increasingly enticing.
What Does the Indonesian Launch Entail?
To build the right conditions under which to launch the appropriate infrastructure to make the digital gold currency a success, Kinesis has worked closely with key stakeholders, including the government of Indonesia, and has collaborated with a number of major national-distribution organizations.
Kinesis worked closely with the Indonesian government and financial regulators to foster the regulatory environment required to allow the implementation of Kinesis’ monetary system, which culminated in new rules regarding physical gold-trading in February 2019. To this end, together with OZL, which is part of the Liechtenstein Precious Metals Group, and the state-owned post office (PT POS Indonesia), Kinesis has agreed to build, construct, and operate the first purpose-built bullion vault for Indonesia, in compliance with international best-in-class standards.
Kinesis has partnered with the Allocated Bullion Exchange (ABX) and the National Commodity Exchange/Jakarta Futures Exchange (JFX) to create Jakarta Sharia Gold (JSG) spot contracts to allow Sharia-compliant physical-bullion trading. PT Kliring Berjangka Indonesia (KBI), Indonesia’s state-owned commodity clearinghouse, will have supervisory responsibilities. Kinesis will be responsible for the Indonesia vault facility, and ABX and PT POS will serve as the physical bullion agent and logistics provider, respectively.
Kinesis has collaborated with PT Bullion Ecosystem International (BEI), a leading Indonesian e-commerce and financial technology business that offers mobile applications for gold-trading, collateral gold-financing, and Sharia gold-financing, in terms of distribution and widespread use. BEI’s technology will allow the delivery of millions of white-labelled Kinesis products.
Kinesis’ affiliate BEI has an exclusive arrangement with Indonesia’s state-owned postal service, PT POS, to provide various mobile applications for gold and collateral financing. With a robust and extensive delivery network across Indonesia, covering more than 58,700 point-of-sale service points, PT POS is the world’s third-largest postal service. It provides a wide variety of financial services and is Indonesia’s largest non-bank financial institution, serving a 10M active customer base and facilitating more than $10B USD annually in cross-border remittances alone. PT POS will integrate the Kinesis Monetary System with BEI to allow Kinesis Digital Gold (KAU) as an agreed method of sending and receiving cross-border value for its clients, including migrant workers.
Kinesis has collaborated with the Nobel Prize-nominated Muslim organization Nahdlatul Ulamsa (NU), which has agreed to introduce Kinesis stablecoins as a Sharia-compliant alternative for its members to further facilitate their takeover. NU will serve as an investor base for more than 100M active participants, additionally facing millions of downstream consumers.
Gilarsi Setijono, Chairman of PT POS Indonesia, said that gold is a very important class of investment and savings assets in Indonesia across all segments of society, and the first and only purpose-built vault facility will provide significant market access and trust. Together with Kinesis and OZL, this vault project — along with other government-related gold-saving initiatives — will have long-term benefits for Indonesia and its people.
Stephanus Paulus Lumintang, President of the Jakarta Futures Exchange, said JFX is dedicated to providing the best products and services in the industry of futures and derivatives. They are becoming increasingly aware that the benefits of distributed ledger technology (or “blockchain”) can create vast amounts of wealth for Indonesia and its citizens. Blockchain regulation is currently underway in Indonesia, and this is a very critical but challenging task. However, in Indonesia, JFX is prepared to be a blockchain exchange service in accordance with all legal and regulatory requirements. Not only will their future collaboration with Kinesis and ABX allow JFX to take advantage of these benefits; it will also allow them to build a stable and open blockchain network that offers a credible alternative to existing exchange systems.