The leader of ISIS, the so-called Islamic State, apparently has been doing some sovereign financial planning. He is aiming to get his self-declared caliphate into the currency business.
Announcements on jihadi websites say ISIS plans to mint gold, silver and copper coins – to be used as the currency throughout the extensive areas it now controls in Iraq and Syria. The coins will reportedly be based on the Islamic dinar used in early Islamic times, specifically during the Caliphate of Uthman in the year 634.
There are some logistical hurdles for ISIS, like acquiring enough precious metal, minting and distributing the coinage, mandating that people in its zone of control use the coins and not other currencies (such as U.S. dollars, euros, Iraqi and Syrian dinars, etc.).
And then there's the problem of having the currency shunned by the global family of nations, along with international banks and corporations — as proceeds of terrorism and money laundering.
Former Treasury official Ted Truman, now at the Peterson Institute for International Economics, says it would be a "weird, difficult system to manage."
“Prices of bread and so forth would go up and down with the price of copper or gold or silver on the global market," Truman says. "A unit today would buy one loaf of bread, and tomorrow, half a loaf of bread."
That could spread panic and hoarding, because people wouldn’t know how much food or gasoline those coins would purchase on a day-to-day basis.
And then there's the problem of trade: It's based on systems of credit and banking, not the exchange of precious metals and coins, says Fariborz Ghadar, director of the Center for Global Business Studies at Penn State University. This is crucial for ISIS, Ghadar says, which does plenty of trade in black-market oil, weapons and food using international currencies such as the U.S. dollar.
“Imagine somebody wants to buy wheat from a trader in Iraq and wants to use it in Damascus," Ghadar said. "Does that mean then you have to put gold in a truck and ship it and exchange it for the wheat that’s coming? And then what happens if on the middle of the road, somebody steals your gold?”
Creating a gold-and-silver based currency has another drawback for ISIS. The value of the coins would be set by the global metals markets — in New York, London, Tokyo and other international financial hubs. This is exactly what the self-declared caliphate says it’s trying to avoid. Its intent is to isolate its citizens from the ''tyrannical" global financial system that has "enslaved and impoverished" Muslims, according to online communications from ISIS explaining the new currency plan. Having a precious metals-based currency might bind the self-declared state even tighter to global finance.
Patrick Heller, a numismatic expert and owner of Liberty Coin Service in Lansing, Michigan, says minting its own coins could serve a useful political purpose for the militant group, which is governing, providing services and administering justice in territories it controls.
"It's brilliant," said Heller. "ISIS is trying to pretend it's a government. And one of the things that governments do is set a monetary standard, and issue coins and even currency."
Truman speculates that even if the new coinage doesn't end up being adopted as an effective means of day-to-day commerce in ISIS's sphere of influence, it could have a morale-boosting effect. He predicted that ISIS sympathizers around the world would buy and collect the new coins — decorated with images of shields and spears, mosques and minarets — as a way of showing support and expressing their religious affiliation with the group.