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 northeastern state of Kelantan began circulating the gold dinar and silver dirham coins last week as an alternative to the ringgit, the main currency of the majority-Muslim country. The state 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.
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.