Islamic Finance on Blockchain: Halal or Haram?
Blockchain technology has the potential to revolutionize how we do business, but does it have halal and haram implications? This is a question that is still being debated, as there is no definitive answer yet. Some people believe that blockchain technology is halal because it does not involve any physical transactions, while others say that it could be haram because of its reliance on virtual currencies. In this article we explore some of the shariah topics and opinions from many islamic scholars on their fatwas.
What is blockchain technology?
Blockchain technology is a distributed database that allows for secure, transparent and tamper-proof transactions. The technology is best known for its use in cryptocurrencies such as Bitcoin, but can be used for a variety of other applications. Blockchain is often described as a “distributed ledger”, meaning that data is stored and verified by multiple participants rather than a single central authority. This makes it ideal for secure transactions and recording information.
How is blockchain technology being used in the halal industry?
The halal industry is a large and growing market, and blockchain technology could be used to help it run more smoothly. Imagine a technology to create a tamper-proof ledger (record) of all the ingredients in a product, as well as the certifications from all the relevant authorities. This could allows customers to be sure that they are buying a truly halal product. Customers could know the farm the meat was sourced from, the date of process, despatch etc giving them a level of transparency and trust only possible through digital assets. As an exampe Jordan River dates are produced in illegal settlements contributing to the disposession of Palestines as detailed in AlJazeera, while being marketted as if they are from Jordan and being consumed by Muslims.
A global database of certified products that will be accessible by everyone would be a significant change to purchasing habits for Muslims, and in turn could benefit the entire halal economy. This will make it easier for consumers to identify halal products and for businesses to sell them worldwide.
Any Benefits for Muslims using blockchain technology?
Yes, there are benefits to using blockchain technology in the halal industry. For one, blockchain can help Muslim consumers identify assets that have been certified as halal. Additionally, blockchain can help digitalize the halal certification process, making it more efficient and transparent. This could help reduce costs for businesses and increase trust among consumers.
In addition if you look at the charity sector, there is a lack of transparency in terms of where your donations are going. Using smart contracts charities can document the entire cycle and the donors can see exactly which specific cause their donation has supported. Imagine donating £100 to build a water well in Africa, and be able to see, when the funds moved from one location to another and trace it down to the actual well in Nairobi that it went towards and know when the well became operational. The trust in donations and charities would be greatly improved.
Can Islamic Finance work on Blockchain?
Islamic finance is a form of finance that complies with the religious law of Islam. This type of finance is often used to fund projects in Muslim-majority countries. Islamic finance has been growing in popularity in recent years, and many experts believe that it could play a major role in the global economy in the future.
One area where Islamic finance could have a major impact is blockchain technology. A number of startups are working on platforms that allow for the issuance and trading of Islamic assets using blockchain technology. These platforms could make it easier for Muslims around the world to invest in Sharia-compliant assets.
The potential for halal investment and blockchain technology is clear, and it will be interesting to see how this market develops over the next few years.
Some Islamic Scholars say Cryptocurrency is haram
Cryptocurrencies have been around for less than a decade, but they have already caused divisions among religious scholars. Some Islamic scholars say that cryptocurrencies are haram, or forbidden, because they are based on speculation. Other scholars say that cryptocurrencies are halal, or permissible, because they can be used for transactions that are considered lawful in Islam.
The debate over the legality of cryptocurrencies is complicated by the fact that there is no clear consensus among Islamic scholars about what constitutes haram behavior. Some scholars say that any form of gambling is forbidden, while others argue that specific activities, such as trading in pork or alcohol, are haram. There is also disagreement about whether it is permissible to invest in cryptocurrencies.
Some Muslims believe that it is their religious duty to only use currencies that are considered halal by all Islamic scholars.
What are permissable cryptocurrencies?
The term derives from the Arabic word halal, meaning permissible, legal or permitted. It is used to describe a currency that has been sharia certified as being in compliance with Islamic Law. The concept of halal has been applied to other types of assets and assets markets, including commodities, futures and stock. In the case of commodities, it refers to a commodity which has been approved by Islamic scholars or muftis for use as a means of exchange. A similar screening methodology using shariah principles has been applied to digital currencies on our halal crypto list so you can invest in cryptos that are aligned with islamic banking and finance rules.
While there is no overall shariah compliance comittee body with the authority to pass judgement on whether cryptocurrency, or just bitcoin it halal or haram, there are many expressing their views for an against the legitimacy. These include mufti Faraz Adam, Sheik Joe Bradford, Mufti Muhammad Abu-Baker, Shaykh Haitham and many more. They all look at bitcoin and crypto using islamic financial rulings applied by banks and financial instutions before passing judgement on something being lawful or unlawful.
So is Blockchain halal or haram?
This is a bit like asking, is an iphone halal or haram. Blockchain as a technology is like a fancy version of an excel worksheet with a wikipedia type log recording all changes. Except that its not a single worksheet, its a shared worksheet distributed across hundreds of desktops where identical records are kept. Bit of a stretched analogy but we discuss more on other articles about this. Put simply, blockchain as a technologic innovation is not haram and therefore can be deemed halal.