1 month ago- News -
Cryptocurrencies in the Islamic World?
It may seem like an odd question, but today, November 12, Reuters reported Swiss cryptocurrency firm X8 obtains Islamic finance certification, detailing a Sharia-compliant finance, with regulators and exchanges in the Middle East, the development is in the hope to tap the latent crypto market in Islamic countries.
As published today in Pakistan's oldest, leading and most widely read English-language newspaper, Dawn, Validity of cryptocurrencies in Islamic finance?, “Owing to diverse approaches towards Islamic law, there is no agreement among Muslim scholars regarding the legality of cryptocurrencies.”
According to Dawn, Islamic authorities in Turkey have deemed digital assets un-Islamic as their value is open to speculation and can be used for illegal activities. In Egypt, cryptos have been compared to gambling as well as to undermine the state as “minting and issuing currency is an ‘absolute right’ of monetary institutions and one of the most specific functions of the state” and are therefore un-Islamic according to religious scholars.
Perhaps the only reason cryptocurrency firm X8 have been able to obtain the Islamic thumbs up, is due to the Ethereum-based cryptocurrency being fully backed by eight fiat currencies and gold. While the crypto is not explicitly stated as a stablecoin, X8 director and co-founder Francesca Greco noted there is more opportunity in the region for stablecoins than traditional tokens.
As mentioned in Dawn, other crypto projects have fulfilled Islamic standards via similar methods, OneGram, was ruled in line with Islam by Al Maali Consulting, a Dubai-based advisory firm that determines whether a financial instrument or product is Islamic or not. Each crypto token is backed by one gram of gold in a vault. Also in Malaysia, a gold-backed cryptocurrency has been launched by HelloGold, which has been certified as Islamic by Amanie Advisors, which is based in Kuala Lumpur.
Speaking with Reuters, “The Gulf region is a really good place for financial technology companies, because they all want to become hubs for fintech,” Greco said, also noting the company would be opening a regional office in the Middle East later this month, and has plans to launch a Sharia-compliant crypto-exchange and has held discussions with local exchanges in Abu Dhabi, Dubai, and Bahrain.
As mentioned above, Islamic clerics have brought a plethora of pronouncements to cryptocurrencies as religious readings and regulations vary between states and variants of the religion. According to Reuters, the debate is “narrowing” “as some have compared the trading of cryptocurrencies to the transfer of rights, which is deemed permissible in Islam.” While Dawn notes “there are various cryptocurrencies with peculiar features; therefore, it is not appropriate to have a single ruling for all” and therefore permissibility is a case-by-case basis.