Blockchain Papers

Ambara Purusottama, Yos Sunitiyoso, Togar M. Simatupang

Purpose Blockchain technology has encouraged more transparent transactions process through decentralized protocols and has identified multi-dimensional benefits. However, value innovation–based blockchain for the particular industry requires further elaboration since there appears to be a vague understanding. Therefore, this study aims to provide a profound perspective of value innovation based blockchain, which has the potential to be applied in the halal industry. Design/methodology/approach This study developed a typology model that describes a profound understanding of blockchain adoption for value innovation. Empirical research was conducted using multiple case studies to justify the model. The case selection in this study was based on the halal industry in Indonesia. This study employed few sources to derive sufficient data through in-depth interviews, direct observations, and archival records. In particular, this study drew upon specific theories to elaborate on the blockchain-enable value innovation. Findings A blockchain is identified as having the opportunity to promote value innovation in the halal industry through its features. This study defines a typology model of value innovation-based blockchain for the halal industry that takes place on a particular spectrum. The model built in this study classifies blockchain adoption for the halal industry from specific dimensions: the degree of blockchain-based system complexity and the intensity of value innovation. Then, this study finds that these cases have different classifications and are evenly distributed in the quadrants of the model. Originality/value The typology model in this study can be a reference for decision-making when considering blockchain to leverage a value innovation in particular systems. Although blockchain technology can potentially be applied in vast areas, the decision-makers should understand that technology adoption should provide distinct values to its stakeholders, notably in multi-dimensional areas such as the halal industry. Thus, this study contributes significantly to blockchain technology usage for the halal industry.

M. Kabir Hassan, Aishath Muneeza, Ismail Mohamed

Purpose This paper aims to derive a compatible Shariah opinion on the permissibility of using cryptocurrencies by Muslims by reviewing the opinions expressed by Shariah scholars on the permissibility of cryptocurrencies. Design/methodology/approach This is a qualitative desk review research where the opinions expressed by the Shariah scholars on the permissibility of cryptocurrencies and the issues related to it have been analyzed using the literature. All the Shariah parameters checked pertaining to currencies have been studied and assessed to derive the Shariah opinion. Findings The research findings suggest that cryptocurrencies do not fully meet the characteristics of money according to Shariah principles. Scholars debate their classification as a medium of exchange due to concerns about volatility, intrinsic value and governance. The treatment of cryptocurrencies varies, and their decentralized nature prevents monopolization. Governance and resistance to manipulation are facilitated by blockchain technology. Classifying cryptocurrencies as hard money and their recognition as the primary unit of account face challenges. While they can be a store of value, price volatility and regulations must be considered. The network effect is crucial for their success, and their supply is controlled through complex protocols. These findings have implications for policymakers in Islamic finance. Originality/value The differences in Shariah opinions on using cryptocurrencies have been a major debate in the Islamic financial industry. A clear and comprehensive study is not found on the differences in the Shariah opinions on their reasonings, which is important for researchers and professionals in the field. Therefore, this research provides valuable insights for policymakers, scholars and practitioners in Islamic finance, contributing to the understanding of applying Islamic principles to cryptocurrencies.

Abdul Karim Aldohni

The Islamic finance industry has demonstrated its ability to grow steadily and secure a strong foothold on the international financial scene. Financial technologies (fintechs) are becoming an integrated part of the financial industry at large, and therefore, Islamic finance needs to adapt and benefit from these advanced digital technologies. The adoption of fintechs by the Islamic finance industry should be guided by the established principles of Islamic law in order for the industry to preserve its identity. The use of fintechs associated with the ‘fourth industrial revolution’ can be broadly classified into three main categories: automation, disintermediation and decentralization. The use of automation and disintermediation by the Islamic finance industry does not pose any challenge to the established principles of Islamic law; it even has the potential of promoting the compliance with these principles. The technologies associated with decentralization are the most challenging to use in the context of Islamic finance. Some of the identifying characteristics of cryptocurrencies and cryptoassets are inherently incompatible with some of the established principles of Islamic law. Therefore, the Islamic finance industry should err on the side of caution when it comes to utilizing these advanced digital technologies. The Islamic finance industry dates back to the early 1970s, which makes it relatively young compared to its conventional counterpart. However, the rate of growth in terms of its assets and markets’ reach demonstrates a noticeable success story. On the one hand, it is estimated that the industry is currently worth $2.2 trillion1 with an expected continuous growth rate in 2022–2023 of about 10 per cent.2 Although in 2020 the global financial market suffered from the double shock of the Covid pandemic and the drop in oil prices, the industry grew rapidly that year albeit at a slower rate compared to 2019.3 This expansion continued throughout the year of 2021 with the rate of growth in total assets reaching 10.5 per cent.4 On the other hand, Islamic finance products are now available in all major international financial centres outside the Islamic world. The industry offers a wide range of financial products that utilizes equity- and debt-based techniques to offer financial alternatives that comply with the teachings of Islam. A prime example of its international appeal is the UK Government sovereign Sukuk al-ijara, worth £200 million, issued in 2014 and matured on 22nd July 2019. Given the success of the first issue, the UK government issued a second sovereignty Sukuk al-ijara on 25 March 2021 worth £500 million with 5 years maturity.5 Since the inception of the industry there has been a dominant trend in its business model, namely the emulation of conventional finance instruments with certain twists. It can be suggested that at the beginning the industry needed to relate to the existing market practices, which are primarily driven by debt instruments. Therefore, the Islamic finance industry relied heavily on more debt-based products rather than equity while attempting to ensure a margin of risk sharing—concerning the potential profits and possible losses as well—to maintain its compliance with the principles of Islamic law. As time moved on and Islamic finance is no longer an alien concept, the industry has not moved on from this format towards more equity-based instruments.6 This would mean more genuine profit–loss sharing among participants, especially those who are providing the capital, in business ventures. Accordingly, the industry has come under heavy criticism for lacking compliance with the spirit of the Islamic doctrines on finance. This was expressed in some of the academic writing7 and by some members of the industry. In 2007, the chairman of the board of Islamic (Sharia) scholars at the Accounting and Auditing Organization for Islamic Financial Institutions, Sheikh Muhammad Taqi Usmani, criticized some of the sukuk structures in the market, sukuk murahaba and mudaraba, for non-sharia compliance. Another example of the problematic use of debt-based instruments in Islamic finance is the saga of Dana gas sukuk, issued in 2007 using murabaha structure (ie debt based) and were declared by the issuer in 2017 as non-Sharia compliant.8 The digital technological advancements, connected to the so-called ‘fourth industrial revolution’,9 brought some new changes to how the financial industry operates its business and interacts with its client base. The term financial technology ‘fintech’ is used to summarize a range of computer-based digital innovations that have been used to utilize financial transactions and services through untraditional means and formats. Fintech has, to an extent, influenced the operations of the global financial industry most apparently in the wake of the 2008 global financial crisis. The Islamic finance industry has already explored aspects of fintech that would broaden its offering and improve its accessibility. However, it is fair to suggest that although the Islamic finance industry has come a long way on the path of standardization,10 the industry has not yet fully addressed some of the major uncertainties concerning the Sharia compliance of a range of its products. With this in mind, there seems to be a worrying trend in the industry that advocates venturing into new fintech territories that are riddled with controversies and uncertainties, namely crypto finance. This article demonstrates that the characteristics of some of the crypto finance products, namely cryptocurrency and cryptoassets, are inherently incompatible with the fundamentals of Islamic law and its finance theory. Therefore, a more cautious approach to engaging with these technologies is needed; otherwise, the industry may further risk undermining its Islamic characteristic that is central to its existence. This article is structured as follows: Section 2 examines the main categories of the advanced digital technologies (automation, disintermediation and decentralization) associated with the so-called ‘fourth industrial revolution’ and maps out their application in the context of Islamic finance; Section 3 provides an overview of Islamic law and demonstrates its inherent incompatibility with two of the decentralization products namely cryptocurrencies and cryptoassets; Section 4 reflects on the future of fintechs in the context of Islamic finance and argues that solutions could be found to address some of the issues identified as Islamically problematic regarding the use of cryptoassets as token to raise equity finance (Initial Coin Offering). For many decades, technology and the traditional financial sector have had a fruitful partnership, which allowed the latter to broaden its reach, improve its services and obtain significant financial rewards along the line. From ATMs and card payment systems to online banking, these technological advances have served well the financial sector and its customers. However, since 2008 there has been a new breed of fintechs that are not all designed to work in partnership with the traditional financial sector, rather some are more designed to challenge and disrupt the sector’s existing business models.11 The use of this new breed of digital technologies can be broadly classified into three main categories: automation, disintermediation and decentralization.12 The technological advancement in automation, namely artificial intelligence (AI) and big data analytics, is owed to the advanced computer processing powers that can analyse large sets of data using complicated algorithms to generate insights and predictions, which inform and drive business decisions.13 The application in the financial context means that established financial institutions, alongside their new start-ups competitors, are using these technologies for making investment and lending decisions at the wholesale and retail levels.14 Further, these technologies are being further developed and used to ensure institutional compliance with regulatory requirements for money laundering, fraud and illicit transactions detection.15 As for disintermediation, the premise is the use of new digital technologies to reduce the reliance on intermediaries for financing and other services. Peer to peer (P2P) finance is a prime example; the creation of a web-based platform that connects businesses with investors directly has challenged the conventional business model that required a financial institution to make the link. The use of this finance model is not exclusive to businesses but it is also utilized for credit consumers. Another example is open banking, which means the sharing of consumers’ financial data, after they consent, with trusted third-party providers (TPPs) in order to tailor services and applications to serve their best financial interests and accommodate for their financial circumstance.16 This, for example, includes applications and websites that provide automatic saving options and budgeting tips.17 Open banking also facilitates online payments in a quicker, easier and more secured way,18 as once the payment is initiated the online retailer website will connect the customer to their banking app to authenticate the payment without the use of a debit card.19 Similar to other segments of the global financial sector, the Islamic finance industry has been influenced by these digital technological advances, and Islamic fintech is a growing part of this industry with great potential. 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SITI KHALILAH BASARUD-DIN, Nik Safiah Nik Abdullah

Bitcoin (BTC) was developed as a digital currency to facilitate online payment transactions between one party or individual and another without using a third party. However, the use of BTC can also be misused for money laundering, fraud in investment schemes, engaging in cyber-crimes, funding activities, etc. Additionally, the highly complex method of calculating BTC makes BTC irrelevant as a measure of value. Although there are inherent advantages and disadvantages to using BTC, it can be subject to zakat. This study explores how zakat institutions can receive zakat in Bitcoin (BTC) transactions. BTC has both advantages and disadvantages, including potential misuse for illegal activities and vulnerability to security breaches. The study employs a qualitative method, including interviews with zakat institutions and BTC practitioners, and document analysis. The aim is to create a model for zakat institutions to receive donations in BTC, contributing to the management of zakat and adapting to technological changes. The study's findings can help prepare a strategy for receiving zakat in BTC and addressing potential challenges. By bridging the literature gap, the study offers new insights and perspectives on bitcoin as a zakat payment asset. Its findings can be valuable for policymakers, religious scholars, and practitioners in the realm of Islamic finance and zakat management. Ultimately, the research seeks to improve the early preparation and strategizing of zakat institutions in the face of evolving donation methods.

Much. Maftuhul Fahmi

<p><em>Non-Fungible Token</em><em> (NFT) Is One Of The Most Popular Digital Assets Transacted By The Global Community. This Phenomenon Is Increasingly Popular With The News That Ghazali Is Able To Earn Billions Of Rupiah. The NFT Phenomenon Attracts Researchers To Conduct An Analysis Related To The Transaction Law In It And Its Validity According To The Four Madhhab Muamalah Fikh. This Research Uses A Literature Study Approach By Collecting Data And Information Related To NFT And The Views Of Several Scholars Regarding The Pillars Of Buying And Selling Contracts (Bay') Which Include: NFT As Ma'qud 'Alaih, Cryptocurrency As Tsaman Or Mal, Sellers And Buyers, and Contract Shighat. This Study Resulted In Two Findings: A) NFT Is A Mal Maknawi In The Fikih Mu'amalah Review And B) NFT Transactions Are Legally Valid Because They Have Fulfilled All The Requirements And Pillars Of A Buying And Selling Contract (Bay'): NFT As A Mall Meaning, Cryptocurrency As A Transaction Tool In NFT (Tsaman) And Entering Into A Hiwalah Contract, Two Actors (Al-'Aqidan), And Contract Shighat. </em></p>

Neeti Misra, Sumeet Gupta, Kawerinder Singh Sidhu, Anil Kumar · 10 authors

Green bonds have gained significant attention in supporting sustainable development goals for achieving sustainability. During the issuance of green bonds, there are a few concerns such as standardization, greenwashing, and lack of benefits that can be gained with green bonds. However, blockchain technology is a promising solution for green bond issuance because it has already shown its impact on different finance activities. This study aims to address and analyze the role and significance of green bond issuance for meeting sustainability with blockchain technology and also suggested recommendations for future research. Decentralized application based on the Algorand blockchain and high-level architecture proposed for the issuance of green bonds is at the primary level. There is no discussion regarding standardizing the environmental data, and the number of benefits gained by the green bond is not addressed in the previously published literature. From the analysis, it has been identified that a similar framework of blockchain cannot be implemented as the geographical and environmental parameters are quite different for every nation. So, every nation needs to customize the framework according to the nation's requirements. This study is the first attempt to combine information from previously published research about green bond issuance and integration of blockchain for green bond issuance, enlightening the disruption caused in the issuance of green.

Timur Kuran

Among the requirements of a liberal order is the ability to pursue collective goals through enduring private organizations. Such organizations contribute to political checks and balances, which sustain individual freedoms. In the Islamic Middle East, a possible starting point for autonomous nonstate organizations was the Islamic waqf, a trust that an individual formed under Islamic law to provide designated social services in perpetuity. Waqfs came to control vast resources. They might have used their enormous wealth to constrain the state and advance the freedoms of their constituents. The resulting decentralization of power could have placed the Middle East on the road to liberalization and perhaps also democratization. However, despite their immense wealth, waqfs remained politically powerless. A key reason is that they were governed according to their deeds, not the preferences of their caretakers or beneficiaries. In these respects, Islamic waqfs differed from European corporations, which were self-governing organizations enjoying legal personhood. In the Middle East, waqfs supplied services that the corporation provided in Western Europe. For instance, whereas churches and universities operated as corporations, mosques and madrasas (Islamic colleges) were financed by waqfs. This institutional difference contributed to the interregional divergence in political patterns.

Sofya G. Glavina, Ravil Ramilevich Asmiatullin

The article states that decentralization is one of the trends in the modern global finance market. The growth and active development of the Islamic finance and banking industry, the growth in the number of Muslims in the world and other factors determine the interest of researchers in digitalization issues. This paper is devoted to the study of the possibilities, approaches and views on the use of digital currencies from the point of view of Islamic finance. Methods of analysis and synthesis, comparative analysis is used. The approaches of various countries of the Muslim world to the introduction of digital currencies are analyzed, ongoing projects are considered. In the Islamic world, there has not yet been a consensus on the permissibility and scope of the possible use of digital currencies. The authors conclude that, in general, digital currencies can be harmoniously used within the concept of Islamic finance. This is facilitated by such factors as the transparency of decentralized finance and digital currencies, the contribution to the protection of the wealth of society, the focus on social benefits, which is in line with the good goals of Islamic finance and its social value.

Bashar Yaser Almansour, Sabri Elkrghli, Ammar Yaser Almansour

Purpose: This study aims to examine the impact of behavioral finance factors on the investment decisions of Gulf investors in the cryptocurrency market. Theoretical Framework: The study is based on the behavioral finance theory, which highlights the role of emotions and cognitive biases in shaping investment decisions. It examines the investment behavior and decision-making of Gulf investors in the cryptocurrency market using a comprehensive set of factors, including herding, heuristics, prospect, market, familiarity bias, and self-attribution bias. Design/Methodology/Approach: Primary data is collected through a survey-based approach using a 23-question distributed at the country level covering the United Arab Emirates, Kuwait, Qatar, and Saudi Arabia. The study analyzes the data collected using statistical methods to study the impact of behavioral finance factors on the investment decisions. Findings: The results show that herding and heuristics strongly influence investment decisions in the cryptocurrency market among Gulf investors. The prospect factor positively affects investment decision-making in KSA and Qatar but not in UAE and Kuwait. The market factor is a significant determinant of investment behavior, and investors in UAE and Qatar are more cautious and risk-averse compared to KSA and Kuwait. The familiarity bias factor has different effects on investment decision making in KSA and UAE. Research, Practical & Social Implications: This study offers valuable insights into how behavioral finance factors impact investment decisions in the cryptocurrency market. These findings can be useful to investors and financial institutions in developing investment strategies that take into account the cognitive and emotional biases of investors. Originality/Value: The study uses a comprehensive set of behavioral finance factors and includes respondents from four Gulf countries. Therefore, the study contributes to the existing literature by providing unique insights into the investment behavior and decision-making of Gulf investors in the cryptocurrency market.

Auwal Adam Sa’ad, Raja Rehan, Abubakar Abukakar Usman, Adnan Opeyemi Salaudeen

<ns4:p>The metaverse is a virtual world that exists alongside the actual world. While the actual world refers to the real, physical world, the metaverse is a digital world that is accessed through technology. Evidently, several international brands have integrated their businesses with the virtual metaverse providing business opportunities. However, there are currently several gaps in the sector of Shariah finance that need to be addressed in order to take full advantage of the potential of the metaverse. For instance, rare studies enlighten the concept of Ijarah, a substitute for conventional leasing in the metaverse virtual world. Undoubtedly, the metaverse has the potential to revolutionize the Shariah finance industry by providing new opportunities for financial inclusion and innovation. Therefore, for the readiness of Islamic finance institutions, this study is an attempt to explore the possibility of executing Shariah principles that could be utilized in the metaverse. More specifically, this study is an endeavor to explore and discuss how Shariah-based leasing i.e., Ijarah integrates with the recent metaverse technologies. Additionally, this study also discusses the metaverse evolution and its integration into international business brands, the metaverse virtual assets ownership, the metaverse virtual leasing, non-fungible tokens (NFTs), and virtual real estate in the metaverse. Indeed, this study is a novel addition to the Shariah finance literature, which helps policymakers to generate new strategies that guide the execution of Ijarah contracts in the virtual universe of the metaverse.</ns4:p>

Authors unavailable

This study investigates diversification potential in the Malaysian and United States (US) Islamic stock indices, Bitcoin, gold, and crude oil prices, particularly amidst economic crises. It uses wavelet coherence and MGARCH-DCC on a dataset spanning 2014 to 2022. The findings revealed that there are diversification potentials for investors. The dynamic conditional correlation (DCC) analysis indicated that the correlation of gold with both indices is generally low, except for a brief period of heightened correlation during the COVID-19 pandemic in 2020. The correlations between bitcoin and Islamic Stock Index Returns (ISIR) of the US and Malaysia respectively are generally weak across the study period except during the pandemic for the US. Hence, it is prudent for investors with exposure to the countries' stock index to incorporate gold within their portfolio to harness diversification benefits. The results further suggested that Bitcoin is also an appealing option for portfolio diversification. Our findings further revealed that during the Russia-Ukraine conflict, crude oil had demonstrated a minimal correlation with both the US and Malaysia ISIR, providing an opportunity for diversification. The results further suggested that Islamic equities can be a buffer against risk and instability, especially during turmoil, offering crucial implications for Shari'ah-compliant investors in Malaysia and the US. The study points to the need for further investigations incorporating additional economic shocks to understand diversification opportunities across varying investment horizons and holding durations.

Issam Tlemsani, Robin Matthews

Are the principles of Islamic finance compatible with cryptocurrency? In the current age of digital transformation, to be followed perhaps by a quantum transformation in computing, plus the involvement of central banks, resource scarcity and climate change, this is the issue addressed in the article. Financial transactions are central to digitalization through fintech and other services. This conceptual article highlights the essentials of cryptocurrency, its history, structure and how it works. Different types of cryptocurrency mining will be examined and explained in detail. The primary purpose of this research is to investigate the extent to which cryptocurrency structure complies with the maxims of Islamic finance. The article discusses the question in relation to sharia jurisprudence and conformity with the views of Islamic finance scholars. Our discussion extends the rapidly growing literature on cryptocurrency by examining its compatibility with the conceptions of Mal (‘money’) in sharia and Islamic scholarship and its status as fiat money. Taking the view that despite recent glitches, cryptocurrency has a future in the financial ecosystem, we sketch the challenges of facing the introduction of cryptocurrency into Islamic finance. The research has profound policy implications: for the protocols and systems adopted by Islamic financial institutions, their regulation and the role of miners. This research is particularly relevant to avoiding the pitfalls that have so often befallen conventional financial institutions.

Suffian Haqiem Nor Azelan, Asmak Ab Rahman, Mohd Shahid Mohd Noh

Penggunaan teknologi baru dalam bidang kewangan ataupun fintech telah mengubah sistem-sistem kewangan sedia ada. Salah satu produk fintech yang memberi kesan kepada persekitaran kewangan global ialah mata wang kripto. Lebih daripada sepuluh ribu jenis mata wang kripto yang berbeza wujud sekarang, dengan jumlah nilai pasaran $1.30 trilion. Mata wang kripto juga dilihat berpotensi untuk menjadi alternatif terhadap sistem mata wang sedia ada. Berdasarkan sejarah, sistem mata wang dunia berevolusi dan berubah sesuai dengan peredaran zaman dan kepesatan perkembangan teknologi. Timbul persoalan adakah mata wang kripto mampu untuk menggantikan mata wang sedia ada suatu hari nanti. Kajian ini akan membincangkan konsep mata wang kripto sebagai mata wang dari perspektif syariah.

Mohammed Nabeel. K, M. Sumathy

The popularity of virtual currencies has increased markedly in recent years. Seminars and conferences have explored the properties and sustainability of cryptocurrencies. Some argue that an alternative to the current fiat currency system would be beneficial, as it would not mandate the use of a bank account, tax payments, or audits as do the said cryptocurrencies. Alternative methods of payment, aside from those commonly accepted like cash, checks, and DD, have been claimed to enable tax and auditing avoidance. However, this view has been contested, given the potential negative impact on the economy and the government budget. The present study addresses the challenges and limitations involved in considering bitcoins to be halal. It has been determined that cryptocurrencies are not considered Halal in Islam because they lack intrinsic value and are subject to significant regulatory oversight. Popularitas mata uang virtual telah meningkat pesat dalam beberapa tahun terakhir. Seminar dan konferensi telah mengeksplorasi properti dan keberlanjutan mata uang kripto. Beberapa orang berpendapat bahwa alternatif dari sistem mata uang fiat saat ini akan bermanfaat, karena tidak mengharuskan penggunaan rekening bank, pembayaran pajak, atau audit seperti halnya mata uang kripto. Metode pembayaran alternatif, selain dari yang umum diterima seperti uang tunai, cek, dan DD, telah diklaim memungkinkan penghindaran pajak dan audit. Namun, pandangan ini telah diperdebatkan, mengingat potensi dampak negatifnya terhadap ekonomi dan anggaran pemerintah. Penelitian ini membahas tantangan dan keterbatasan yang terlibat dalam mempertimbangkan bitcoin sebagai sesuatu yang halal. Telah ditetapkan bahwa mata uang kripto tidak dianggap halal dalam Islam karena tidak memiliki nilai intrinsik dan tunduk pada pengawasan regulasi yang signifikan.

Suadiq Mehammed Hailu, Ömer Faruk Tekdoğan

The notion behind Islamic finance is providing alternative Shariah-compliant financial services and products for those who do not willing to access conventional finance as it contravenes Shariah principles. Currently, Islamic finance is expanding throughout Muslim and non-Muslim countries. One of the most critical challenges of the Islamic financial sector is the extent of the compliance of Islamic finance practices with Shariah principles. Therefore, there should be a control mechanism for ensuring the compliance of the products and services provided by Islamic financial institutions with Shariah principles. Scholars argue that a Shariah governance framework should be applied by institutions engaged in Islamic finance in countries where Islamic finance is being practiced. Shariah governance framework is mainly categorized into two approaches centralized and decentralized Shariah governance framework. The availability of a centralized Shariah governance framework is essential in ensuring the application of Islamic finance in accordance with Shariah principles. Ethiopia is one of the countries that accommodated the application of Islamic finance through exclusively interest-free banking windows by conventional banks in 2011 and fully-fledged interest-free banks in late 2019. However, the National Bank of Ethiopia (NBE) did not specify any Shariah governance framework in any of its legislations. The unavailability of an established Shariah governance framework may expose the sector to Shariah non-compliance risk. This study investigates how to ensure Ethiopia's Islamic finance applications' compliance with the Shariah principles. Semi-structured interviews and document studies were conducted with 15 respondents, including experts in Islamic finance, Shariah scholars, and Islamic finance practitioners, to collect the needed data for this endeavor. The findings indicate that interest-free banks, especially interest-free banking windows, do not give the necessary attention to the issue of the Shariah governance framework. The presumed manifestations of Shariah compliance in Ethiopia are having Shariah advisory committee, using Arabic words and names for their products and services, declaring they are following the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Islamic Financial Services Board (IFSB) standards, and participating in corporate social activities. However, these claims are insufficient to argue that their products and services are Shariah-compliant, as long as an external authorized body should oversight and control their application. In addition, the results indicate that adapting the AAOIFI standards to the extent of industry development is recommended to ensure Shariah compliance in Ethiopia. Besides, considering responsible stakeholders in ensuring Shariah compliance, government/NBE and financial institutions engaged in Islamic finance are identified as primary stakeholders. On the other hand, the Ethiopian Islamic Affairs Supreme Council (EIASC), religious scholars and institutional Shariah advisors, interest-free professional associations, academicians in Islamic economics and finance, and educational institutions are considered secondary stakeholders. In addition, the findings also indicate that the policymakers' approaches of Türkiye, Malaysia, Kenya, and South Africa to the Islamic finance industry could be the best model for policymakers in Ethiopia. Establishing a centralized Shariah advisory committee under the NBE is recommended to ensure the compliance of interest-free finance applications with Shariah principles in Ethiopia. To this endeavor, all stakeholders such as government/NBE, financial institutions engaged in the Islamic finance industry, EIASC, religious scholars and institutional Shariah advisors, interest-free professional associations, academicians in Islamic economics and finance, and educational institutions should play a significant role by fulfilling their respective responsibilities.

Oishi Chowdhury, Md Al Samiul Amin Rishat, Md. Al-Amin, Md. Hanif Bin Azam

Shariah-based banking aims to apply Islamic finance while adhering to Shariah principles.The primary distinction between conventional and Islamic finance is that Sharia law explicitly forbids several of the activities and principles applied in conventional banking.According to Sharia law, "Paying or charging an interest (Riba)" lending with interest payments as an exploitative practice that benefits the lender at the expense of the borrower, "investing in businesses engaged in banned activities" like producing and selling alcohol or pork, "speculation or gambling(Maisir)" That means financial institutions are prohibited from participating in contracts where the ownership of goods depends on an unpredictable future event, and Participation in contracts with a high level of risk or uncertainty is referred to as "uncertainty and risk (Gharar)", which are strictly prohibited.As a result, consumers must be aware of whether they are taking Riba, Gharar, Maisir or if their money is invested in a halal firm.Because of its qualities, blockchain would be useful in this situation.This research tries to determine how blockchain technology can be used to make investments and profit or loss returns more transparent, more secure, Immutable and sharia compliant.Blockchain networks can be utilized in the financial industry, such as banking, to provide safe sharia banking.

Muhammad Adib Samsudin

There are various views concerning the cryptocurrency issue. The majority of scholars and world Islamic bodies, such as Dar al-Iftā 'al-Miṣriyyah (Egypt), Dar al-Iftā' al-Falasteeniyya (Palestine) and the Turkish Directorate of Religious Affairs, do not permit cryptocurrency for various reasons, including the existence of uncertainty (gharar), risk (khatar) and the fact that it facilitates (wasilah) the crime of fraud and money laundering. However, some Islamic financial and religious scholars do permit it. One scholar who views cryptocurrency positively and believes that it should be permitted is Mohd Daud Bakar, who is the Chairperson of the Shariah Advisory Council of Securities Commission Malaysia (SC) and former Chairperson of the Shariah Advisory Council for Bank Negara Malaysia (BNM). He is also former President of the International Islamic University (IIUM) and the chairperson or international Shariah advisor at various financial institutions around the world, including the S&amp;P Islamic Index and Dow Jones Islamic Market Index (New York). His extensive experience of more than 25 years in this dynamic field has made him a leading and important reference expert. In 2015, in a report released by the Global Islamic Finance Report (GIFR), he ranked sixth among the world’s 10 Islamic finance experts. This success has made him an expert, not only in the field of Usul al-Fiqh which is the core knowledge base of Islam, but also beyond the field of Islamic finance and law. This paper analyses the validity of Mohd Daud Bakar’s views on cryptocurrencies within the scope of Usul al-Fiqh according to the ‘illah, ‘urf, sad zarai’ and fatḥ zarāi’ methods. This qualitative study had obtained data from Facebook Live video recordings, reports and articles, which were then analysed using the descriptive content analysis method. It can be concluded from an ‘illah (legal operative cause) aspect that there is no acceptable ‘illah for banning this currency. From the point of view of al-’urf, cryptocurrencies are acceptable and do not contradict the principles of Shariah. Whereas from the point of view of sad zarāi’, this study found no solid evidence that it could lead to deleterious circumstances other than mere conjecture and assumption, hence, the introduction of cryptocurrencies should be permitted or made accessible. He also suggested the use of the fath zarāi’ method, which is better suited for creating opportunities for innovation and creativity of financial products based on financial technology (fintech). Finally, he mentioned about the permissibility of cryptocurrency as a medium of exchange even if it does not become the legal currency of a country.

Zaheer Anwer

This study explores the dynamic co-movement of Islamic asset classes and cryptocurrencies for the period 01 March, 2017 to 15 June, 2022 by employing Wavelet methodology. The Islamic investment classes are represented by Islamic equities, Islamic Socially responsible investments, Real estate investment trusts and Sukuk. The results reveal that in normal times, there is negligible co-movement of both the asset classes. By contrast, both the investment classes exhibit significant spillover effect during the health crisis period. An important implication from these findings is that both the asset classes offer diversification opportunity during normal times but not during extreme times.

Roslina Othman, Mohamad Fauzan Noordin, Mahfooz Ahmed, Nadzrah Ahmad · 5 authors

Abstract: Muslim scholars and experts have given their views on issues related to the permissive and prohibitive use of cryptocurrencies. Scholars and experts’ decisions were of three categories: permitted the use of cryptocurrency; prohibited its use based on Islamic principles; and tawaqquf, yet to make their final decision on the acceptance or otherwise. The main objective of this study was to systematically examine and organize the various studies and research that explored known common ideas among Muslim scholars and experts on issues related to the use of cryptocurrency in Muslim communities. This study adopted the PRISMA guideline of reporting a systematic literature review, where it identified and explored available literature in Scopus, Emerald Insight, and Google Scholar, related to Muslim scholars' and experts’ decisions on the use of cryptocurrency. With the increasing use of cryptocurrency globally, the topic has also rapidly grown among Muslim scholars and experts, which has created a need for a real conclusion and justification for the people to hold on to. The systematic literature review revealed that the Muslim scholars and experts’ views on cryptocurrencies can be sub-categorized further: permitted its use (requirements compliant, regulations, justified reasons, wide acceptance, and gold-backed), prohibited its use (speculative nature, restrictions by authorities, fewer benefits, and religious beliefs), and tawaqquf (potentials for improvement, PMBC, Islamic cryptocurrencies, and backed Dinar and Dirham crypto). The conceptual contribution of this study was that views expressed by Muslim scholars and experts on cryptocurrencies be categorized for public consumption and guide in understanding issues. Abstrak: Sarjana dan pakar Muslim telah memberikan pandangan mereka tentang isu berkaitan permisif dan larangan penggunaan mata wang kripto. Keputusan ulama dan pakar terdiri daripada tiga kategori: membenarkan penggunaan mata wang kripto; melarang penggunaannya berdasarkan prinsip Islam; dan tawaqquf, belum membuat keputusan muktamad mengenai penerimaan atau sebaliknya. Objektif utama kajian ini adalah untuk mengkaji dan menyusun secara sistematik pelbagai kajian dan penyelidikan yang meneroka idea-idea umum yang diketahui di kalangan sarjana dan pakar Islam mengenai isu-isu yang berkaitan dengan penggunaan mata wang kripto dalam masyarakat Islam. Kajian ini menerima pakai garis panduan PRISMA untuk melaporkan tinjauan literatur yang sistematik, di mana ia mengenal pasti dan meneroka literatur yang terdapat dalam Scopus, Emerald Insight dan Google Scholar, yang berkaitan dengan keputusan pakar dan sarjana Muslim tentang penggunaan mata wang kripto. Dengan penggunaan mata wang kripto yang semakin meningkat secara global, topik ini juga telah berkembang pesat dalam kalangan sarjana dan pakar Muslim, yang telah mewujudkan keperluan untuk kesimpulan dan justifikasi sebenar untuk dipegang oleh orang ramai. Kajian literatur sistematik mendedahkan bahawa pandangan ulama dan pakar Muslim tentang mata wang kripto boleh dikategorikan kepada: dibenarkan penggunaannya (mematuhi keperluan, peraturan, alasan yang wajar, penerimaan meluas, dan disokong emas), melarang penggunaannya (sifat spekulatif, sekatan oleh pihak berkuasa, faedah yang lebih sedikit, dan kepercayaan agama), dan tawaqquf (potensi penambahbaikan, PMBC, mata wang kripto Islam dan kripto Dinar dan Dirham yang disokong). Sumbangan konsep kajian ini ialah pandangan yang diutarakan oleh para sarjana dan pakar Islam mengenai mata wang kripto yang dikategorikan untuk kegunaan awam dan panduan dalam memahami isu ini.

Azlin Alisa Ahmad, Mat Noor Mat Zain, Ranitya Ganindha, Reka Dewantara

Smart contracts are contracts that are executed using blockchain technology and operate in a decentralized, pseudonymous manner and recorded digitally based on computer protocols. However, their implementation raises concerns from an Islamic perspective due to potential ethical and legal issues, such as ambiguous contractual terms, lack of transparency, and potential manipulation of the system by malicious parties. These issues can lead to activities that contradict Islamic principles. This qualitative study, which employs the content analysis for collecting data, aims to examine the potential for manipulating smart contracts from an Islamic perspective. Smart contracts are permissible in Islam as long as they fulfill all the fundamentals and requirements of a contract as well as do not contain elements that may contradict an Islamic contract, including uncertainty of the contracting parties, as well as manipulation of the autonomous system, contract’s subject matter, and the contract’s objectives. This paper found that smart contract transactions contain several elements that are inconsistent with Islamic contract principles, including elements of uncertainty on the part of the contracting parties, as well as manipulation of the autonomous system, and the contract’s subject matter and objectives. Therefore, the controller of smart contracts needs to design an approach that is Shariah-compliant to prevent conflicts and enable its widespread use, especially by Muslims.

Vishwanath Hiremath

Abstract: The public and private sectors are both in control of a wide range of security-related issues, and Blockchain is a promising technology that is gaining popularity for doing so. Charitable organizations are growing more and more interested in Blockchain technology. Due to the lack of transparency in the transactions involving donations, which hinders donors from understanding whether their contributions are being used properly, people have lost faith in charity. A decentralized Blockchainbased donation tracking system is proposed in the article, which will provide total transparency,accountability, and direct access to the intended receivers. It will be used in Ethereum Blockchain implementation.

Ahmed Bossman, Mariya Gubareva, Тамара Теплова

The attractiveness of the equities of the Islamic faith-compliant companies as a hedge or possible diversifier has been underscored; however, there is a lack of empirical research on their safe-haven and hedge attributes against changes in the level of cryptocurrency environmental attention (ICEA). We examine whether various distributions of the ICEA possess a significant predictive power on various quantiles of Islamic sectoral stock returns by employing weekly data on the ICEA and Shariah-compliant stocks from 10 sectors of economic activity and base their multi-scale analysis on the complete ensemble empirical mode decomposition (CEEMDAN) approach. We present the asymmetric causality-in-means and quantile-on-quantile regression between the ICEA and Islamic stocks. The empirical results show a significant predictive power of the ICEA on various quantiles of Islamic sectoral stocks in the medium- and long term. We find that the safe-haven and hedging attributes of investments in Islamic stocks are sector-dependent across the medium- and long-term scales. Hence, our findings emphasize that based on market states, possible safe-haven attributes, diversification opportunities, and hedges for cross-sectoral investments with Islamic stocks are viable along various investment horizons for diverse levels of cryptocurrency environmental attention. These findings provide original valuable insights for portfolio management and improving financial stability.

Ajay Raut, Prof. Sumit Shevtekar

Abstract: NGOs in developing nations get financing from donor agencies for various goals, including disaster assistance, education advancement, women’s empowerment, and economic development. However, due to reports of fund misuse and record irregularities, some donor agencies have lost faith in these NGOs.For example, in education funding, some students appear onthe records of multiple NGOs as beneficiaries, even though only one NGO should be paying for a specific student, so here blockchain plays an important role, The lack of transparencyin charities has resulted in a decrease in social investment and a decrease in donor confidence, as donors are frequently uninformed of how their donations are being used. Corruption exacerbates this skepticism. To address these challenges, the Charity-Chain decentralized network has been suggested, which will use the Ethereum blockchain and smart contract-based incentives to validate the impact of social organizations. This improved transparency would help funders, such as charitable organizations, impact investors, and small donors, to more readily monitor their transactions and re-establish trust in these social organizations.

S. Yu. Babenkova

The widespread use of innovative technologies in the Arab countries began relatively recently; the COVID–19 pandemic became a powerful impetus to their promotion. However, the crises experienced by global financial markets have forced investors to look for more «safe havens» for their investments. In this regard, the development of the (non–fungible tokens, hereinafter — NFT) in the last two years has become a relatively safe place to invest. NFT technologies were originally designed for the world of art, artists, clip makers, people of creative professions and admirers of their creations, but NFT went further and began to become popular in the world of finance becoming one of the instruments for making transactions. The Arab countries did not stand aside from such innovations actively participating in the development, testing and search for new innovative areas of NFT application. However, you should not forget about the strict rules of Sharia which apply to all types of financial activities. The necessary interconnection and problem points are yet to be analyzed by experts in the future as the market develops but at the same time it is already worth talking about the rapid introduction of NFTs into Islamic finance.