Shariah Compliant Cryptocurrency
Shariah compliance is the practice of adhering to Islamic laws as laid down in the Quran and Sunnah. The term is most often used in relation to business, but can also be applied to personal life. There is no one definitive interpretation of Shariah, and different groups within Islam have different interpretations. Some Muslims choose to follow a strict interpretation of Shariah, while others are more lenient.
Islamic finance sector has an established guideline to assist us when expanding this understanding over to crypto, blockchain and ICO.
What is Shariah compliance?
This is the practice of following Islamic law. Shariah is the religious code of Islam and covers everything from daily life to complex legal matters. Many Muslim businesses, organizations, and governments are required to adhere to Shariah in order to remain operational. While there is no one definition of what Shariah compliance entails, it often includes adhering to principles such as prohibiting alcohol, pork products, and gambling. Effectively everything that is bad for humanity is prohibitted, while things that are good such as charity, are encouraged.
The need for halal cryptocurrency
Cryptocurrencies are becoming more popular every day. However, not all coins are deemed halal. This creates a problem because there is no official ruling on which digital currencies are Shariah compliant. This leaves Muslim investors and traders uncertain about which cryptocurrencies to invest in. There is also a risk of being caught up in activities that are not permissable, so having a Shariah compliant certification or or some form of sharia review board would solve these problems.
Cryptocurrencies From A Muslim Perspective
Cryptocurrency is a relatively new invention, and their legal and ethical status is still being debated. Some people see cryptocurrencies as a new way to make money, while others view them as a tool for financial freedom. From a Shariah perspective, cryptocurrencies are a new kind of investment opportunity.
Like other investments, Shariah prohibits us from taking excessive risks when dealing with cryptocurrencies. We must also ensure that our investments are halal, meaning that they do not involve any prohibited activities or substances. Bitcoin, for example, is often used for online gambling and other illicit activities.
When evaluating cryptocurrency investments, we must look at the underlying technology behind the currency and its ecosystem. If the DiFi project is interest/ riba based, if the wallets are safe and secure, any history of hacking, to the credibility of the project, its CEO and founder/ issuer.
How does a Shariah compliant cryptocurrency work?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Islamic law, or Shariah, is the dominant legal system in the Muslim world. Many Muslims believe that Shariah governs all aspects of life and therefore, adopting a cryptocurrency that adheres to Shariah principles would be a way to participate in the global economy while supporting Islamic values.
The benefits of Shariah compliant crypto coins
Shariah compliant digital currencies are gaining in popularity as a way to increase financial inclusion and improve transparency and governance of financial systems. They offer benefits such as increased security, reduced fraud, and increased transparency. Shariah compliant digital currencies can also help reduce the spread of money laundering and terrorist financing.
The challenges of Shariah compliant cryptocurrency
Cryptocurrencies are becoming more and more popular, but what about Shariah compliant ones? There are already a few out there, but they have some challenges to overcome. One of the biggest is that there is no central authority to regulate them. This means that they can be used for illegal activities as well. Another problem is that they’re not always accepted by mainstream businesses.
What are crypto assets?
Cryptocurrency is a digital or virtual currency that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Cryptocurrencies are built on
What are smart contracts?
Smart contracts are a key component of
These are not simply limited to financial transactions. They can also be used to automate the execution of legal agreements, such as when a real estate contract is transferred automatically if a seller and buyer agree on conditions, a marriage, birth or death certificate, wills etc.
They can be used to create a decentralized autonomous organization (DAO), which are essentially protocols for automating the creation and running of a company without requiring any human intervention. A smart contract can be considered a self-executing digital agreement between two or more parties. It is a computerized transaction protocol that facilitates, verifies, and executes the terms of the agreement. Smart contracts are not yet widely adopted in global commerce due to their complexity and regulatory uncertainty.
What makes a Blockchain Shariah compliant?
There has been a lot of discussion about the applicability of Shariah law to
One of the main issues that arises when discussing Shariah compliance and
Shariah Compliant Crypto Exchange
As the global Muslim population continues to grow, so does the demand for Shariah-compliant products and services. This is particularly evident in the Islamic financial sector, where there is a growing demand for Shariah-compliant investment products and banking services.
In response to this demand, a number of Shariah-compliant crypto exchanges have emerged in recent years. These exchanges allow Muslims to trade cryptocurrencies in a way that complies with Islamic law.
Its imortant to not that there are many scholars that specialise in financial services and fintech that have differing views on crypto. Some beleive it is permissable, while others beleive digital money is not the same as fiat currency or “actual money”.
We are of the opinion that crypto currency as an asset is halal, but individual coins need to be assessed individually to see if they meet certain criteria as detailed in our sharia screening methodology. This type of sharia screening is widely accepted by others well versed in financial markets, passing judgements on stocks, fiqh, sukuk etc and clearly defining the criteria for judgement.
Please use our halal crypto list as a reference to start your own research and buid your portfolio. And dont forget to pay zakat on your profits.