Digital currencies, despite its reputation of not being actual money by conventional definition, has found its way in the market. Although the initial issuer of digital currency like Bitcoin was not known and had no tie with central banks or any financial institutions, the digital currency is trending dynamically despite it being volatile. Many researchers found that its low correlation to stocks makes it a good complementary new financial instrument to be added to traditional assets such as stocks or gold. Owing to the reason, the objectives of this study are twofold; first, to observe the performance of the ânewâ portfolio, and second, to examine the appropriate weight that should be allocated. Considering Bitcoins and conventional resources such as KLSE Index, Emas (gold), and oil price, this research used the return/risk and Sharpe ratio. It is found that a portfolio that combines Bitcoin, KLSE Index, Emas (gold), and oil performed well when the weight allocation for the digital currency is higher (in this context, 30 to 50 per cent). Also, by building an efficient frontier portfolio using the mean-CVaR approach, it is suggested that Bitcoins should be at a minimum of 3 per cent to ensure the portfolio is compensated by the appropriate return.
Ahmed Aliyu, Kamalrulnizam Abu Bakar, Gen Matsuda, Tasneem Darwish · 13 authors
Cryptocurrency has emerged as the most promising digital asset, which serves as a medium of exchange with distributed control and highly secured financial system. This lead to an increase in stakeholdersâ interest in digital currency investment. The cryptocurrencies majorly involve two phases including Initial Coin Offering (ICO) and blockchain creation. These phases have been challenged with criticisms in terms of the Islamic shariah injunctions. These criticisms are based on two fundamental issues including whether cryptocurrency is backed by asset and has a regulatory authority or not. These issues are related to uncertainty, volatility and high speculation of the cryptocurrencies. Although, several cryptocurrencies claimed to have considered the shariah requirements in their proposed cryptocurrency ecosystems. However, a strict analysis of some of the existing cryptocurrencies reveals otherwise. Therefore, this paper presents a review of some shariah-compliant cryptocurrencies focusing on their volatility and speculation. The operations of cryptocurrencies need to follow the Islamic shariah requirements. The proposed review provides an insight regarding the acclaimed shariah-compliant cryptocurrencies to assess whether they comply with the shariah requirements or not.
Al-hussaini Abulfathi Ibrahim Saleh Al-hussaini, Adamu Abubakar Ibrahim, Mohamad Fauzan Noordin, Hazwani Mohd Mohadis
This paper presents a user study of âperception of the cryptocurrency-based transaction from the Islamic viewsâ. The motivation lies with the fact that some users of cryptocurrency-based transaction raised concern on the nature of transactions with Bitcoin. Specifically, some argued that Bitcoin can be easily used for illegal purposes. Therefore, âTechnological Acceptance Modelâ was adopted and quantitative research methodology was utilized, to formulate and test some hypothesis that will lead to an establishment of a model. Sample of 306 participants was used in the study. The result of the hypothesis testing indicates that âBehavioral Intention to Use Cryptocurrency from the Islamic perspectiveâ is influenced directly by Shariâah Compliance, Perceived Ease of Use, Emotionality, Perceived Usefulness, and Financial Concern. As evident from the analysis, Emotionality is influenced directly by Financial concern and Shariâah Compliance. Whereas, Behavioral Intention is influenced indirectly by Financial Concern. The sample is general and does not specify a specific group of study. This study has contributed to understanding the Islamic issues behind the implementation of Cryptocurrency. This study adopted
Takaful insurance is increasing its consideration. Islamic insurance provides mutual aid and protection. However, the different model does not always make the business efficient. Several studies have shown the difficulty of Takaful companies in limiting their operating costs and having efficient borders. To reduce such operating costs and reach economies of scale, this paper assesses the adoption of Blockchain technology as a critical value for the Islamic insurance industry. Building upon a literature review and drawing on the SWOT framework, this paper outlines internal strengths and weaknesses as well as external opportunities and threats. Our analysis reveals that the Blockchain technology can help in the reduction of fraud, increase timeliness of actions for customers, allow for faster and more efficient management of claims and improve the risk management. Theoretical and practical implications are discussed
It is aimed in this study to develop a model of cryptocurrency which is applicable in Turkey and suitable for Islamic monetary and financial system, by presenting the condition of cryptocurrency, which has reached a significant size in the world of finance, in the system of Islamic finance.
In an Islamic framework, the scholars need to verify all aspects of the emerging phenomenon known as cryptocurrency. It works as an agent for the prevailing forms of currencies and substitutes the need to carry it everywhere in its physical form which may become a security threat. The theologians have always disapproved what seem to them innovative, alien and working as an agent of change. However, whatever may be their stance about previous innovations, the society had to act otherwise due to the compelling needs that had to be fulfilled. The difference of opinion between the Muslim Scholars about the cryptocurrency has once again divided the Ummah about its acceptance, substituting other forms of currency like fiat currency, plastic currency etc. No doubt these forms of currency have heavily damaged the financial markets due to their speculative nature. It seems that Muslim Ummah is again standing on the cross roads where it is unable to decide its fate. This article presents the basic concept of cryptocurrency & virtual money, its pros & cons, its status regarding Pakistani & Islamic Perspective. At the end, various conclusions and suggestions have been drawn.
Islamic finance ecosystem could leverage from blockchain technology in order to improve business processes and streamline operations. The characteristics and conditions of blockchain are in alignment with the principles of Islamic Law as it creates the possibility of coordinating institutions' transactional activities within a strong mechanism of trust and transparency. Blockchain technology allows businesses to build decentralized models and opens new horizons for them to conduct transactions and make agreements. And one of the technologies that is proposing an alternative to the traditional model is smart contract. Smart contracts are closer to Islamic contracts with an undiluted focus on avoidance of any kind of uncertainty regarding settlement of the contracts. One would witness a sharp reduction in the element of gharar with contracting between unknown parties that meet on the internet, when Islamic contracts take the form of self-executing digital or smart contracts, with "electronically coded" terms of executions. The contractual terms will execute only if the pre-configured conditions are met. This will automate the entire contractual process for Islamic institutions. The Islamic contracts will now be easy to verify, immutable and secure, mitigating gharar in the form of operational risks arising from settlement, as well counterparty risks. The adoption of Smart contracts by the Islamic finance industry is the most natural thing to do, not just to gain a strong foothold in this technological revolution, but also to be able to fully comply with the Shari'ah in a transparent way. The Shari'ah laws can form the conditions of a smart contract. Honesty, transparency and trustworthiness are qualities that should make a financial transaction in the Islamic finance industry, and smart contracts are inherently all of these. In the era of faster globalization, risk management is of essential importance for banks. As credit risk being the most significant risk in Islamic Finance Institutions' (IFIs), we stressed our attention in this paper on it and as per our opinion we believe that the new ledger technology will add value for IFIs in terms of reducing it. Blockchain and particular Smart contracts would help reducing credit losses; provide more transparent and accurate credit ratings for capital allocation, which could lead to minimization of the required capital allocation for credit loss, as well better and cheaper administration and facilitation of collaterals. All the above will improve IFI's profitability and shareholders value. Not only the Islamic banks will abide fully with Shari'ah rules, but they could gain more international customers seen as the more reliable choice. The purpose of the study consists of analyzing the role of blockchain and smart contracts as a tool for risk management. We used AlInma bank as a case study to show the impact of using new FINTECH in Islamic finance. The main findings of the paper show that using blockchain and smart contracts as a tool of risk management reduces costs for IFIs considerably. The paper is organized as follows: section one will present the introduction and literature review. Section two describes Blockchain technology and Smart contracts and finally we focus on how risk management could benefit from these technologies in Islamic financing. The rest of the sections will present and discuss the use of blockchain in risk management.
Ahmad Shauqi Bin Haji Mohamad Zubir, Nur Aishah, Azwadi Ali, Safiek Mokhlis · 5 authors
As the society is becoming more digitised day by day, we are being constantly introduced with advanced smart technologies that transpire changes in our lives. The blockchain technology and cryptocurrencies came in at the appropriate time which has provided pathways and security for many vulnerable internet-connected devices as the technology uses distributed verification of transactions. Due to their unique features, cryptocurrencies carry value on their own and now can be used for trading and transactions. In many established markets, transactions and trading in cryptocurencies have been growing and many have seen them as potential assets and investment option. Nevertheless, in many other countries, cryptocurrencies are not very popular and due to lack of awareness, many of their citizens are yet to own any cryptocurrencies. This study assessed the awareness of cryptocurrencies among selected Malaysian public and tested certain determinants and found almost three quarter of the respondents were aware of them but none is owning even one digital currency. Among the determinants, age group, ethnicity and occupation status were found to have influenced respondentsâ awareness about cryptocurrencies. If it is an interest of the government to promote the use of cryptocurrencies, necessary exposure campaigns as well as guarantee of control and security should be made a priority.
This paper presents a qualitative study that examine the perception of users on Islamic approach toward \npurification of transaction with cryptocurrency. Bitcoin is has been used as a case study which is one of the \ntype of cryptocurrency. There are huge discrepancies from many Islamic school of thought about \ntransaction with bitcoin. Specifically, some school of thought viewed it as a tool used for illegal purposes \nand that the global public already uses Bitcoin mostly for illegal and non-Shariâah-compliant purposes \nunder Islamic perceptions. As a result, this study developed an interview-qualitative research approach in \norder to examine how the negative perceptions of cryptocurrency from Islamic views cnd be purify. Sample \nof Eight informant were used in the study. The finding of this study indicated that the use of cryptocurrency \nas a legitimate as any payment method. It is also argued that it facilitated transactions and cut the normal \ncost of international money transfer, and some Muslim countries are actively encouraging the use of \ncryptocurrency due to its easy use and transparency. This has been also supported by âhadithâ. Finally, the \nanalysis also confirmed that from the Shari'ah point of view, cryptocurrencies are as compliant as fiat \nmoney and ought to be accepted as another mode of payment that can be used in transaction as its value can \nbe measured and quantified. Therefore, this study has contributed in understanding the Islamic views \nbehind the implementation of cryptocurrency.
Although societies are becoming increasingly secularized, religion continues to play an important role worldwide. However, few studies have focused on how religion affects the entrepreneurial emergence novel markets. To address this gap, I examine the impact of Islam, as a decentralized belief system, on entrepreneurship in the context of developing Islamic investment fund markets across countries. I focus on religious diversity within Islam as an instance of intrainstitutional complexity and analyze a country-level panel dataset of Islamic investment funds in addition to complementary qualitative data. Intriguingly, I find that religious diversity within Islam plays a paradoxical role: it promotes the entrepreneurial supply of Islamic investment funds in a country, but it also reduces the investor demand for these funds. This complex effect is moderated by interinstitutional forces: the market logic positively moderates the effect on supply dynamics, whereas the state logic negatively moderates the effect on supply and positively that on demand. This study contributes to the research on religion and market emergence, institutional complexity, and Islamic finance.
The suitability of assets-backed money has been the subject of considerable debate, although hampered in part by lack of theoretical and empirical evidence. Therefore, the motivation of this research is to investigate the perceptions of Shariâah scholars and financial experts on the concepts and salient features of Shariâah-compliant precious metal backed crypto-currency (PMC). To achieve this, this study adopted a qualitative method using semi-structured interview based on saturation technique. The results from Shariâah advisors and financial experts indicated that the informants have differences of views on the assets-backed money, but they agreed that it ensures stability of money and adding the cryptocurrency technology is found to be desirable and recommendable. It is also found that PMC would be subjected to financial regulation challenges and using blockchain technology will increase the transparency. The informants agreed that PMC is closer to MaqÄsid al-Shariâah and there is some form of justice and equality compared to the current interest-based financial system. Therefore, the informants recommended the implementation of PMC.
Cryptocurrency is a new phenomenon in investment industry in particular and financial world in large. The opportunities and threats come one over another in cryptocurrency debate that left people in perplex state whether to accept or reject the currency. In other view, it also brings advantages and inevitable disadvantages since it is operated online that vulnerable to number of threats and danger. This paper tries to examine maqasid views on this currency relying on SWOT analysis then will be viewed on the mirror of maslahah dan mafsadah as main pillars in maqasid al-syariâah. As a result, this issue needs to be studied further since the maslahah and mafsadah sometime interchange the roles as particular, general maslahah and its counterparty since the system is always been designed for the benefits, that yet created the negative implication simultaneously. Furthermore, this innovation could be designed followed the desire of designers with dynamics structure in fulfilling the marketâs needs.
Marco Valeri, Rosario Fondacaro, Cinzia De Angelis, Andrea Barella
This paper aims to evaluate where the application of new fintech solutions like blockchain and cryptocurrencies can be considered as an opportunity to build bridges between Islamic and western culture in order to create a trusted money transfer with low commission and a big transparency and trust. The research question is: Can an Hawala systems based on DLT technologies be considered compliant both with anti-money laundry regulations and with Sharia values? This is a conceptual paper relying upon an understanding of the literature in the fields of technology, sociology, anthropology, criminology and regulatory, as applied to the topic of Islamic practice known as Hawala and emerging new disruptive technologies like Distributed Ledger Technology. The research has been conducted by a literature reviewing on Scopus data base by searching the following keywords: Islamic finance, cryptocurrencies, hawala, stablecoin, globalcoin, money laundering, blockchain. The searching period was set on the last 10 years. The paper discusses some scenarios to define new fintech Hawala system in an evolving scenario of cryptocurrencies, social network commitments and different type of blockchain where it can be digitally transformed by using new fintech technologies while became compliance with anti-money laundering regulations with the respect of Islamic values. As practical implications, this paper could help to encourage researcher and entrepreneurs to evaluate and propose a digital transformation approach with the aim to maintain ancient tradition and, at the same time, apply new technology that improve the life of citizens. As social implications this paper expands upon the understanding of how new fintech solution can be easily be integrated in the real life by using common devices like a mobile phone to be used as wallet for the daily expenses and to receive money from relatives from western countries. The originality/value of this paper is that it covers the literature gap in the field of new fintech solutions applied to Islamic finance by providing a likely proposal by integrating popular tradition, regulations and new technologies. The research limitations and implications are related to that this is a conceptual paper; case studies havenât been treated, so it is not able to say definitively if the outcomes discussed can be defined as an effective solution and can be developed in the real global society, in a future prospective itâll be possible to continue to make researches in this field of application with fintech technologies and Islamic Finance.
Mahmuod Lafee Obeedan Khalaf and Thamer Ali Alnwairan
Several major developments have occurred in the world in the field of information technology. That led to the occurrence of several changes in political, social and economic areas of life. The most prominent changes are the ones that occurred in economic areas. Such changes include: the development of virtual currencies. The most prominent virtual currency is Bitcoin. There has been a debate about the use of virtual currencies among contemporary economists and the ones specialized on Fiqh3. Some people support the use of virtual currencies, whereas others are against using them. The present study aims at identifying the meaning of (virtual currencies). It aims to identify the stand of Islamic economy on the use of virtual currencies. There is a need to identify these things due to the increasing use and prevalence of such currencies. ItÂs expected that virtual currency shall become number one currency in the future. It was found that the use of virtual currencies is associated with several risks and suspicious issues which may negatively affect individuals and countries. Therefore, such currencies mustnÂt be sold, bought, or exchanged until providing clear mechanisms for controlling their use.
Mousa Ajouz, Adam Abdullah, Salina Kassim Mousa Ajouz, Adam Abdullah, Salina Kassim
Under the fiat standard, money is no longer backed by any assets, but rather it is backed by debt. The implication of such a system is the emergence of many socio-economic problems. Restoring the value of money has long been a controversial topic, hampered in part by the lack of theoretical and empirical evidences.
Purpose: The paper aims to review the academic research work done in the area of Islamic financial technology. The Islamic FinTech area has been classified into three broad categories of the Islamic FinTech, Islamic Financial technology opportunities and challenges, Cryptocurrency/Blockchain sharia compliance and law/regulation. Finally, the study identifies and highlights the opportunities and challenges that Islamic Financial institutions can learn from the conventional FinTech organization across the world. Approach/Methodology/Design: The study collected 133 research studies (50 from Social Science Research Network (SSRN), 30 from Research gate, 33 from Google Scholar and 20 from other sources) in the area of Islamic Financial Technology. The study presents the systematic review of the above studies. Findings: The study classifies the Islamic FinTech into three broad categories namely, Islamic FinTech opportunities and challenges, Cryptocurrency/Blockchain sharia compliance and law/regulation. The study identifies that the sharia compliance related to the cryptocurrency/Blockchain is the biggest challenge which Islamic FinTech organizations are facing. During our review we also find that Islamic FinTech organizations are to be considered as partners by the Islamic Financial Institutions (IFIâs) than the competitors. If Islamic Financial institutions want to increase efficiency, transparency and customer satisfaction they have to adopt FinTech and become partners with the FinTech companies. Practical Implications: The study will contribute positively to the understanding of Islamic Fintech for the academia, industry, regulators, investors and other FinTech users. Originality/Value: The study believes to contribute positively to understanding of Fintech based technology like cryptocurrency/Blockchain from sharia perspective.
This research aims to evaluate the suitability of cryptocurrency as money from the Islamic perspective. Money, in the Islamic perspective, has specific characteristics and requirements, such as stability and is based on assets. Cryptocurrency may not fulfil this as it has queries as money from the Islamic perspective. The research method applied data of 23 cryptocurrency prices and related information. The result shows that cryptocurrency is hugely volatile and has limits to being called 'money,' as it is limited and used for speculation, which is prohibited in Islam. The research implies that Muslims would be reluctant to use cryptocurrency as money, as a currency of transaction. This reason raise an expectation that the cryptocurrency will not develop rapidly in Muslim countries.
Smart Sukuk structure is the new generation of Sukuk issuances structures. It uses Blockchain technology to allow more investors in both retail and corporate sectors to participate in Sukuk issuances. Through this technology, all financial institutions can issue their Sukuk. All types of documents and information related to the issuance of Sukuk are kept with the issuer's chains and the chains of the Central Registration Institution. Limited research was conducted on the transactions of smart Sukuk structures, such as Sukuk issuance model, traded Sukuk transactions and committed transactions market, from the Sharia compliance perspective and its financing benefits. This paper presents an in-depth study of the AAOIFI Standards, the decisions of Islamic Jurisprudence Academies and Sharia Boards, that related the Sukuk structures, applied in the Islamic bank of the paper's study society and the transactions of smart contracts from Sharia compliance perspective. On the other hand, this paper presents how to apply proposed smart Sukuk structures models that use Blockchain technology and smart contracts, within the largest Islamic bank in Turkey, in order to find out its financing benefits. The research findings indicate that from the Sharia perspective there are some issues in some applicable Sukuk models, such as the issue of capital guarantees. The use of Blockchain technology in smart Sukuk structures reflects several benefits on the financing markets, as it gives more capacity to access to more investors and markets, faster processing capability, transparency, invariance, and low transaction cost.
M. Ruslianoor Maika, Fidiana Fidiana, Irwan Alnarus Kautsar
Cryptocurrency is predicted to have a bright future as a new form of \nmoney becomes more popular. This research analyses the \npotential disruption of cryptocurrency from an Islamic perspective. \nHowever, this promising Islamic cryptocurrency has shifted from \nnon-asset backed to physical asset- backed of cryptocurrencies. We \nproposed design implementation the most straightforward way of the \ntransaction with cashless wireless payments using one device \nthrough Distributed Ledger Technology (DLT) of blockchain \ntechnology. We use digital currency with underlying asset Dinar and \nDirham for a commercial transaction. However, the disruption of \ncryptocurrencies may adapt Dinar and Dirham tokenization in \nexchanging services in the conversion of fiat money into \ncryptocurrency that complies with Islamic. Except comply with \nIslam, it also needs a Special Purpose Vehicle (SPV) as a party who \nguarantees the existence of assets. It concludes that the \nintermediation function of third parties such a bank will be disrupted \nin the profound shift of digital money based on Islamic \ncryptocurrency