For the past few years there has been a significant increase of people’s interest in crypto-currencies. Seminars and conferences have been organized to discuss the nature and feasibility of cryptocurrencies. Some argue that it is good to have an alternative to the current fiat money system in which the predominant role is played by banks, while a cryptocurrency does not require any bank account, tax payment and auditing. Some others disagree with these arguments and claim that any mode of payment in other than traditionally known instruments such as cash payment, telegraphic-transfers, cheques and so, will open the door to avoid tax and audits, which in turn may seriously effect a government’s budget and may even decrease GDP. This research uses theoretical, descriptive and analytical methods of research and therefore focuses on the following important points: a) defining the place of cryptocurrency in the financial system by determining the extent of its influence; b) reviewing the literature on the topic, which will allow us to determine the current understanding of the problem by modern science; c) unveiling the key requirements of Shari’ah for money and money circulation to formulate a standard understanding of money in Shari’ah; d) comparing the characteristics of paper money and crypto-currencies (using the bitcoins as an example). The authors believe in permissibility of using the cryptocurrencies but with strict reservations.
The article presents the analysis and evaluation of the essence of bitcoin (and other cryptocurrencies) from the perspective of its (their) adaptability to the Muslim concept of money. From an economic point of view in the so-called Western culture, all the classical functions of money cannot be fully attributed to bitcoin. Although it performs the function of an exchange medium and the means of payment, it does not fulfil the role of a value storing instrument and thus proves to be a defective measure of value. In the Islamic world, the perception of bitcoin as money is a more complex problem because its economic presentation overlaps with religious issues. Such relationship results in a situation when the answer to the question: can bitcoin be approached as money, is formulated on the basis of a subjective interpretation of the Sharia law, which is also ambiguous.
Almost a decade on from the launch of Bitcoin, cryptocurrencies continue to generate headlines and intense debate. What started as an underground experiment by a rag tag group of programmers armed with a Libertarian manifesto has now resulted in a thriving $230 billion ecosystem, with constant on-going innovation. Scholars and researchers alike are realizing that cryptocurrencies are far more than mere technical innovation; they represent a distinct and revolutionary new economic paradigm tending towards decentralization. Unfortunately, this bold new universe is little explored from the perspective of Islamic economics and finance. Our work aims to address these deficiencies. Our paper makes the following distinct contributions We significantly expand the discussion on whether cryptocurrencies qualify as "money" from an Islamic perspective and we argue that this debate necessitates rethinking certain fundamental definitions. We conclude that the cryptocurrency phenomenon, with its radical new capabilities, may hold considerable opportunity which merits deeper investigation.
Az Azrinudin Alidin, Abdo Ali Abdullah Al-Wosabi, Zamri Yusoff
Saadiqin is an industrial solution for contract based Islamic core banking which comply with the necessary pillars and conditions related to Muamalah Financial Contracts. The introduction of Blockchain provides new opportunities for financial services to harness the benefits of Blockchain. This paper discusses current problem with financial services particularly Islamic financial, the benefits of Blockchain implementation in financial services and the possibility of Saadiqin integration with Blockchain. Overall structure of integration is presented and initial progress is presented in this paper.
Cloud Computing has powered a wide range disruptive technology that changed the economic landscape of many industries. One of these disruptive technologies is Block Chains and the emergence of cryptocurrencies like Bitcoins. This research explores the Islamic perspective of Bitcoin Mining. For a Bitcoin transaction to be processed it needs to be `mined', which is the process to solving a mathematical equation as well as approve Bitcoin transactions distributing it over various ledgers. The research will highlight the notion of anonymity of the source and destination of the funds in Bitcoin which seen as problematic with Islamic Banking scholars. Especially since anonymity is the cornerstone of Bitcoin and the feature that allowed Bitcoin and other cryptocurrencies to spread. This research will rely on leading Islamic Banking scholars in the Kingdom of Bahrain to evaluate Bitcoin Mining's compliance with Sharia.
Para kavramı ihtiyaçlara ve teknolojideki gelişmelere bağlı olarak tarih boyunca değişim göstermiştir. Elektronik para kavramından sonra şimdi de kripto para kavramı küçük tasarruf sahiplerinden büyük devletlere varıncaya kadar hepimizin gündemine girmiş durumda. Kripto para kavram ve sistemi, bilişim ve ekonominin yanı sıra din ve hukuk tarafından da irdelenmeye muhtaçtır. Kripto para sistemine peşinen taraftar veya karşı olmak yerine, borsa, bankacılık, kredi gibi kavram ve sistemlerin geçirdiği dönüşümü dikkate alarak konuya dair çok boyutlu değerlendirmeler yapılması zaruret arz etmektedir. Bu çalışmada farklı yaklaşımlar arasında karşılaştırmalarda bulunarak İslam hukuku cephesinden konuya temas etmeye gayret göstereceğiz.
The authors’ first challenge is to decipher the complexity of Islamic banking despite the enigmatic aspects of the sector. A second focal point is the agent’s agenda; in the Islamic banking industry, contributors mandate intermediaries (agents) to transfer their contributions to socio-economic causes according to the Shariah; in principle, Islamic financial institutions must create value for their stakeholders by offering Shariah-compliant products and services. An underlying assumption of the agency theory is that agents attempt to maximize their personal welfare and compensation, but such behaviour may not always be in the best interests of other stakeholders. One objective of the article is to identify tools monitoring whether agents act in the best interests of stakeholders and consider if smart contracts are usable for all financial dealings between agents and stakeholders. A qualitative research framework was adopted because of the constraints of the enigmatic, secretive Islamic banking culture. A case study of the debacle of an award winning Islamic bank and the analysis of the 2017 International Monetary Fund Report on Islamic banking shed new light on the sector.
Money is one of the powerful institutions that humankind created and developed and nowadays it affects all of aspects of social human life. Money essentially is production of human socialization and we should think of it as a social reality that although has a special and independent role for each individual, but it has overall acceptance in the society. Bitcoin is a decentralized electronic fiat currency implemented using cryptography and peer-to-peer technology. Because of increasing development of bitcoin and also other similar currencies, our monetary policy-makers should take proper position about it. In this study we make an analysis about value of bitcoin in context of Etebariat theory developed by Allameh Tabataba’i and argue that value of bitcoin is consistent with this context. Our study about monetary and banking schools like metalism, chartalism, money in circle and banking shows that because of peer-to-peer system of Bitcoin, although Bitcoin is inconsistent with all of the abovementioned theories, but it is consist with Etebariat theory because of no need to third party. So Bitcoin is a counter-example to classical theory of money and it verify Etebariat theory.
Yusuf Sani Abubakar, Ahmad Faosiy Ogunbado, Mpawenimana Abdallah Saidi
Bitcoin is a type of cryptocurrency and the most successful in blockchain management. It has become famous in recent years. The critical aspects of cryptocurrency are its legitimacy, source of money laundering, tax evasion, lack of regulation etc. The aim of this study is to explore the view of Muslim scholars on the legality of bitcoin with respect to Shariah. The study adopts doctrinal approach which utilizes descriptive approach of qualitative research methodology which relies on secondary data in form of text books, journals, newspapers, related websites etc. The study found that Muslim scholars are divided on the issue. A part of them completely rejected bitcoin and considered it against Shariah principles. On the other hand, some Muslim scholars believe bitcoin does not contradict Islamic principles and therefore may be used, however with certain conditions. The researchers tend to support the proponents’ view as most of the opponents’ grounds for the rejection are temporary in nature which may be covered through policy regulations.
Aishath Muneeza, Nur Aishah Arshad, Asma’ Tajul Arifin
The emergence of innovative digital financial technologies, namely blockchain and crowdfunding, indicates new ways to reach the poor and economically vulnerable groups. This paper contributes to the emerging literature on financial technology by presenting the case of crowdfunding in financial inclusion. The rationale behind this inquiry is to demonstrate the relevance of crowdfunding to financial inclusion, and how might blockchain technology fuel the development of crowdfunding. This paper also constitutes one of the first attempts to analyse crowdfunding in Malaysia and Shariah-compliant crowdfunding. In this paper, a desk research is conducted where journal articles, books, magazines, newspapers, industry reports published on the subject matter are reviewed critically. To analyse the development of crowdfunding in Malaysia, 6 crowdfunding platforms are examined. The outcome of this research suggests that crowdfunding is a viable means to promote financial inclusion, and blockchain technology could help mitigate the current issues faced by platform operators.
The passage of the constitution (Seventy-third Amendment) Act, 1992 marked a watershed in the history of Modern India. With this amendment, a uniformity structure of Panchayats emerged throughout the country. Similarly, the passage of the constitution (Seventy-Fourth Amendment) Act, 1992 was a land mark in the history of municipal administration in India. As a result of these amendments, Panchayats and Municipalities are now constitutional bodies forming third tier of the federal policy of India.1 India’s decentralization initiative in the form of seventy-third and seventy fourth Amendments poses challenges and offers opportunities. Tenth Finance Commission onwards every Finance Commission allocated the grants funds to Panchayati Raj Institutions (PRIs).
In year 2017, Bitcoin attracted most investors because high return of investment. The system for Bitcoin transaction is known as blockchain. The blockchain is blocks of transaction history that shared publicly using secured cryptography. Each block contains the previous transaction information, timestamp and new transaction data in secured cryptographic hash programming language. This paper evaluates the Bitcoin framework whether the security of the system is satisfied with a definition of reliable computer system. In the same time, this paper discovers the reliability of the programming process that involved in blockchain system. The finding of this paper will help investors to understand the blockchain system properly in developing better understanding of cryptocurrency framework. The better understanding of the blockchain will help investors making proper decision in their investment portfolio to gain better profit and preventing loss.
Cryptocurrencies’ popularity has surged during the last few years. This isespecially the case of bitcoin, one among cryptocurrencies which price has soaredfrom USD1,000 in the first quarter of 2017 to USD20,000 by the end of 2017. Ithas now being used by merchants as a medium of exchange. Upon realizing itspopularity, the CME Group that owns the Chicago Mercantile Exchange launcheda futures contract on bitcoin. Yet, there are cases where bitcoin is banned bythe country. This article examines the implication of bitcoin on Islamic financeand questions its acceptance as a medium of exchange (money) based on itscompliancy with shari’ah. By analyzing its nature and characteristics, the paperconcludes that, strictly speaking, cryptocurrencies that are not backed with realassets are not shari’ah-compliant. However, the majority of shari’ah scholarsare leaning towards approving bitcoin on maslahah basis. Bitcoin is neither fiatmoney nor real money. The absence of an intrinsic value coupled with lack orzero supervision by the central bank will result in misusing bitcoin. Furthermore,we content that it has the elements of maysir and gharar. This can contributetowards socio-economic injustices, thereby jeopardizing the maqasid al-shari’ah.Hence, based on a thorough analysis, we conclude that fiat cryptocurrencies arenot shari’ah compliant. However, gold-backed cryptocurrencies are argued to bedesirable and consistent with the maqasid al shari’ah.
Siti Rohaya Mat Rahim, Zam Zuriyati Mohamad, Juliana Abu Bakar, Farhana Hanim Mohsin · 5 authors
This study examines the two important aspect of latest technology issues in Islamic finance that related to artificial intelligence (AI) and smart contract. AI refers to the ability of machines to understand, think, and learn in a similar way to human beings, indicating the possibility of using computers to simulate human intelligence. Smart contract is a computer code running on top of a block-chain containing a set of rules under which the parties to that smart contract agree to interact with each other. The main objectives of this article are to evaluate the operations of AI and smart contract, to make comparison between the operations of AI and smart contract. This article concludes that AI and smart contract will have a huge impact in future for Islamic Finance industry.
In this article, I shall examine the compatibility of Bitcoin and other cryptocurrencies within the context of Islamic law. I shall begin by an introduction of Bitcoin and other cryptocurrencies. I will then discuss the history of money in Islamic history, with an emphasis on the importance ethical financial dealings. I will then argue that Bitcoin and other cryptocurrencies are highly compatible within Islamic finance, and in many cases, actually provide solutions to problems of government institution controlled currencies, arguing that Bitcoin and other cryptocurrencies better address several problems that early Islamic finance scholars were concerned with. Unlike traditional fiat, the supply of Bitcoin and many other digital currencies are fixed, thereby eliminating potential for gharar (deception), and also inflation. In addition, unlike fiat and precious metal coins, digital currencies cannot be altered, forged, or manipulated. Moreover, cryptocurrencies’ peer-to-peer transactions remove the need for any banking institution, thereby eliminating any risk with a third party controlling one’s money. I shall then conclude with a summary of the main points of the article, and examine future possibilities with regards to the role of digital and cryptocurrencies.
The relationship between economic growth, growth volatility and financial sector development continues to attract attention in the theoretical and empirical literature. Over time, some studies hypothesize that finance has a causal linear relationship with growth. Recently several other authors contradict this claim and argue that the relationship that exists between finance and growth is nonlinear. We investigate these claims for Nigeria for the period between 1970 and 2015, using semi-parametric econometric methods, Hansen sample splitting techniques and threshold estimator. We observed no evidence of ‘Too much finance’ as claimed by many researchers in recent times. We show that the relationship between financial development and economic growth is U-shaped. This is equally true for the relationship between financial development and growth volatility. We also discuss policy implications of our findings and recommend financial innovations and decentralization of stock exchanges to boost access to financial services, in addition, improved regulation to enhance financial market efficiency.
The purpose of this study is to investigate one of the types in Fintech area, which is cryptocurrency from the perspective of Shariah. Until now, there are around 1,600 types of cryptocurrencies around the world. However, one of the most sought cryptocurrency in Malaysia is Bitcoin. Since it is still a new in Malaysia, the in-depth study on this has not yet been fully completed. By the realization to study this issue, a research has been conducted to become an eye-opener for those who want to dig deeper to gain the knowledge about this especially on the views from Islamic perspective or to be specific, from Shariah views. On the other hand, many issues arise regarding this cryptocurrency especially bitcoin. Therefore, this research will investigate the concept of money with its characteristics, and analyze if cryptocurrency does have all the characteristics of real money in it. Move forward to the next objective, this study will also explain on the Islamic perspective, and to be exact, Shariah views of cryptocurrencies as the currency or as a medium of exchange. Until now, there is still not much current views from the current scholars on this exact matters. Most of the views are regarding on whether their countries accepting it to be used or not, and the majority are the views from the government. Still, there is no specific hukm on the uses of cryptocurrencies. So, the outcome of this study will provide an important insight for potential customers who still want to invest their money in cryptocurrencies.
Zakat is not only one of the pillars of Islam, but also one of the pillars of Islamic economic and finance, as part of Islamic social economic and finance, which significantly contributes to poverty alleviation, holistic financial incclusion and integrated commercial and social economic and finance towards equtable distribution of income and wealth. Zakat in indonesia has a great potentials up to 3.4% of GDP, or Rp4620 trillion in 2017. However, the real zakat collection recorded in 2017 has only reached Rp6.2 trillion. This study aims to investigate the root causes of this low zakat collection in Indonsia and propose alternative solutions using Delphi-ANP methods. The results show that The main ‘System’ problems are: 1) Regulation; 2) Strategic-S; 3) Dualism; and 4) Traditional Amil, while its main solutions are: 1) Strategic-S; 2) Regulation; 3) Dualism; and 4) Decentralization. The main ‘External’ problems are: 1) Government; 2) Strategic-E; 3) Society; and 4) Muzakki, while its main solutions are: 1) Strategic-E; 2) Government; 3) Society; and 4) Muzakki. The main ‘Internal’ problems are: 1) Management & Governance; 2) Strategic-I; 3) HR; and 4) Communication & Socialization, while its main solutions are: 1) HR; 2) Strategic-I; 3) Management & Governance; and 4) Communication & Socialization. Each cluster of problem and solution has several detailed elements to be considered. The solution to the problem of low zakat collection in Indonesia can be started from clusters Strategic-S (System), Strategic-E (External), Regulation (System), HR (Internal) and Government (External), followed by Strategic-I (Internal), Management & Governance (Internal), Community (External) and Communication & Socialization (Internal).