A Dubai firm is launching the first-ever gold-backed digital currency

A Dubai-based firm is launching a gold-backed and Shariah compliant digital currency, catering to a previously unfilled niche in the investment and finance market.

OneGram, an Islamic financial services and technology company, has partnered with GoldGuard, an online gold trading platform also based in Dubai, to make the new digital currency a reality. 

Each digital token of the currency will be redeemable for one gram of real gold. The gold will be stored in what will be one of the world's largest gold vaults, currently under construction in Dubai.

"Historically gold is more resilient, and holds its worth better than any fiat money, particularly in times of economic instability. No currency can guarantee absolute stability, but OneGram limits your exposure to the downside risk," the OneGram website says.

The currency will have its initial launch on May 21 and could raise as much as $554 million, making it the largest cryptocurrency crowd sale to date. 

Currently, the Islamic finance sector manages about 1 percent of the global GDP. This share is growing by 20 percent annually, according to Arabian Business.

Investing in gold has historically been problematic under Shariah-compliant Islamic finance guidelines. This is because "gold futures contracts are not backed by physical gold and one can end up paying or receiving interest on your trading account," according to Forbes.

Muslims have gotten around this by purchasing physical gold, often in the form of jewelry or coins. But back in December, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the World Gold Council and Amanie Advisors approved the Sharia Gold Standard. 

OneGram complies with this standard, allowing Muslims to use its service for gold-backed investment opportunities. The new cryptocurrency will also break down barriers that other digital currencies have faced in Islamic countries. 

>Islam is the world's fastest growing religion and Muslims already account for about a quarter of the global population. 

If the growth continues, the Islamic finance sector will expand substantially over the next several decades. At the same time, "fintech innovations including digital tokens and smart contracts" have seen incredible growth in the Middle East over the past few years, according to Ibrahim Mohammed, the CEO of OneGram.

"With OneGram we are providing an opportunity for investors who care about Islamic financial markets and the security of commodity-backed investments to benefit from rapid technological advances in the blockchain industry," he said.