Is a WoCU wacko?

There is some debate as to whether the World Currency Unit (WoCU - the people behind it call it Wocu but that seems grammatically flawed) is a virtual currency will no doubt be interesting.

The WoCU is a private currency unit to which users subscribe.

The inventors of WoCU say it has been "developed as a derived world currency unit to allow corporations, financial institutions, governments and even individuals to trade across national boundaries and hold foreign assets with minimal risk of losses caused by exchange rate fluctuations. Whilst international trade is conducted in US dollars or Euros a sharp change in exchange rates causes huge differentials, vastly complicating risk management and forward planning. With the emergence of Russia, China and India into the world markets a less volatile world currency is needed. As the Wocu is a derivative of the exchange rates of the world's top 20 currencies as measured by GDP it substantially reduces the risk factors."

That makes a kind of sense.

But, and here's where the debate will begin, surely that's essentially what e-Gold does.

The difference between WoCU and other virtual currencies appears to be that its value is fixed against a basket of primary currencies, and fixed (actually "weighted") more frequently than SDRs from the IMF.

So who decides on the weighting?

The issuer i.e. WDX Institute which has been created by a commercial body called WDX Organisation.

The company said that Friday saw "the first ever execution and trade conducted in WoCUs). [which] some even see as the answer to the reserve currency issue."

Grand claims, indeed.

The company says "it will be available in a commercially form on 1 January 2010."

That's reminiscent of the Euro - and it has more in common with the launch of that currency: the lack of physical form.

So here it is: as Nigel Morris-Cotterill* has previously argued - there is no money, only the belief of individuals in the value of a promise to make good on a promise."

If people believe in the WoCU, then it will be as real as any other currency, Morris-Cotterill told BankingInsuranceSecurities.Com.

*Nigel Morris-Cotterill is Head, The Anti Money Laundering Network, the ultimate parent of BankingInsuranceSecurities.Com