Kelantan Introduced Real Money

KUALA LUMPUR, Malaysia – A Malaysian state's attempt to revive use of gold and silver coins common in early Islamic societies has run afoul of the country's central bank, which said Friday that local governments have no authority to issue their own currency.

The gold dinar and silver dirham coins provide an alternative to Malaysia's currency, the ringgit, in the northeastern state Kelantan, which is governed by the Pan-Malaysian Islamic Party, a conservative opposition group that promotes religious policies in its rule.

The gold dinar was the official currency of Muslim societies for centuries. The value of the coins used in Kelantan can fluctuate according to market prices, but officials say it remains a better alternative to currency affected by the U.S. dollar and other foreign currency.

Kelantan authorities also say the use of such coins is encouraged in the Quran.

State officials have produced coins worth about $630,000 for use at about 1,000 outlets in Kelantan's capital, said Nik Mahani Mohamad, executive director of Kelantan Golden Trade, which mints the coins.

"It's a great, great moment for Muslims," Nik Mahani said. "We are providing an alternative means for the people to trade with."

The coins came into circulation Thursday and can be purchased at various locations in Kelantan. Their worth is currently about $180 per dinar and $4 per dirham.

But the plan hit a snag when Malaysia's central bank said in a statement later Friday that the ringgit remained "the only currency that is the legal tender for payment of goods and services in Malaysia."

The bank said it "has the sole right under the law to issue currency in Malaysia." It was not immediately clear how the bank planned to block the use of the coins for transactions.

The state government also plans to give employees the option of receiving part of their salary in this currency, as well as introduce gold bars for large investments. Muslim alms can also be paid with the coins.

The Pan-Malaysian Islamic Party has governed Kelantan since 1990. Some of its policies over the years include banning gambling, nightclubs and rock concerts, and requiring Muslim female state employees to wear headscarves at work.