Dinar Kelantan. Is it legal?

A good short article to share, regarding Dinar Kelantan by Economic Malaysia.

KOTA BARU: Kelantan paved the way to become the first state to introduce the gold dinar and silver dirham currency.

Speaking when launching the Syariah currency Thursday, Mentri Besar Datuk Nik Abdul Aziz Nik Mat said the state would strive to expand the use of the gold dinar and silver dirham in all transactions, including paying civil servants’ remuneration.

However, there were still many technicalities that had to be addressed by the state government, he told reporters after launching the dinar gold and silver dirham here.

The dinar gold and silver dirham is managed by Kelantan Gold Trade (KGT), a subsidiary of Kelantan Mentri Besar Incorporated (PMBK).

In a symbolic gesture to mark the occasion, Nik Abdul Aziz handed over a gold dinar to PMBK chief executive officer Mustapha Salleh as payment of salaries to PMBK employees for the month.

Nik Abdul Aziz, who is also PMBK chairman, said to date 1,000 traders had agreed to use the gold dinar and the dirham silver currency in their transactions, besides Lembaga Tabung Haji and Bank Islam Malaysia.

“There is no reason why transactions in syariah currency cannot be practised in the state as it was widely used thousands of years before the fall of the Ottoman Empire,” he said, adding that other states were encouraged to use the currency. – Bernama

Economics Malaysia’s view..

From the Central Bank of Malaysia Act 2009 (Part VIII – Currency:

Unit of currency

61. (1) The unit of currency in Malaysia shall be the ringgit, which shall be divided into one hundred sen.

(2) The abbreviated form of the ringgit shall be “RM” or “MYR”.

Right to issue, print or mint currency

62. (1) The Bank shall be the sole authority to issue currency notes and coins in Malaysia and such notes and coins shall only be printed or minted by or under the authority of the Bank.

(2) The Government, any State Government, public authority, financial institution, other institution or person shall not issue, print, mint or authorize the printing or minting of currency or any document or token payable to bearer on demand being documental tokens, which in the opinion of the Bank, are likely to pass as legal tender.

Legal tender

63. Only currency notes and coins issued by the Bank shall be legal tender in Malaysia.

That’s about as clear as you can get legalese to be. Since the Kelantan government is issuing these coins as payment for use in trade and in payment of civil service wages, they are already in violation of Section 62 (1) and (2), as the dinar and dirham are obviously intended for use as “legal tender”. Unless BNM has authorised the Kelantan Gold Trade to issue coins on its behalf, then we’re going to see an early test of the CBMA 2009.