Digital gold currency (or DGC) is a form of electronic money based on ounces of gold. It is a kind of representative money, like a US paper gold certificate at the time (from 1873 to 1933) that these were exchangeable for gold on demand. The typical unit of account for such currency is the gold gram or the troy ounce, although other units such as the gold dinar are sometimes used. DGCs are backed by gold through unallocated or allocated gold storage.
Digital gold currencies are issued by a number of companies, each of which provides a system that enables users to pay each other in units that hold the same value as gold bullion. These competing providers issue independent currency, which normally carries the same name as their company. In terms of the most popular providers, e-gold has the greatest number of users and GoldMoney holds the greatest quantity of bullion as of 2007.
Proponents claim that DGC offers a truly global and borderless world currency system which is independent of exchange rate variations and political manipulation. Gold, silver, platinum and palladium each have recognized international currency codes under ISO 4217. In addition to digital gold currency, GoldMoney and eLibertyDollar also provide digital currency backed by silver.
For example, GoldMoney is accessible and approved for U.S. self-directed Individual Retirement Accounts through The Entrust Group.
All of the other digital gold currency systems can be used to buy, hold, and sell precious metals, but do not promote themselves as an “investment”, as this implies an anticipated return.
Exchanging national currency
Some providers, like e-gold, Pecunix, Liberty Reserve do not sell DGC directly to clients. For those DGCs, e-currency must be bought and sold via a digital currency exchanger such as GoldNow or London Gold Exchange.
Currency exchangers accept payment in national currencies by a variety of methods, including Bank Wire, Direct Deposit, Cheque, Money Order. Some exchangers also sell and fund pre-paid debit cards to make it easier for their clientele to convert DGC into an easily spendable form of national currency.
According to the DGC issuers that do not directly sell DGC to clients, this keeps their system free of any exchange risk, which is instead taken by the independent exchange providers.[citation needed] DGCs are known as private currency as they are not issued by governments.