Tuesday, June 18, 2024

Why the Islamic Finance Industry Needs Blockchain: Insights from Islamic Coin Experts

Despite the decline in the value of cryptocurrencies by more than $1 trillion in 2022, there is a solution to ensure compliance, protect investor funds, and prevent market manipulations. This solution lies within the fundamental principles of Islamic Finance.

Traditional financial institutions are grappling with the need for more sophisticated machine-learning capabilities to tackle big data, autonomous financial systems, fair practices, and progressive business strategies. Blockchain and DLT-based technologies offer a solution, but are they up to the task?

Indeed, a few challenges have to be addressed before blockchain can recharge traditional finance. First, security concerns, especially safeguarding customer data, are a big challenge for financial institutions adopting blockchain technology. The transfer of data to modern apps brings up concerns about risks like data loss and hacking, which could cause significant financial losses.

Another critical issue faced by the global cryptocurrency market is the lack of regulation, frequent cyberattacks resulting in theft, and drastic price fluctuations caused by speculative behavior. According to CoinMarketCap, these factors have shaken investor confidence, and a massive devaluation of the crypto market has followed, resulting in a 63% decrease in value at the end of 2022.

While these challenges remain unresolved, innovations in blockchain-based finance offer hope.

Islamic Finance, Aligning with Blockchain

Islamic Coin is a Shariah-compliant asset native to the Haqq Network. It positions itself as a digital currency that emphasizes stability, fairness, and the avoidance of speculation, aligning with Islamic financial principles and aiming to provide accessible and inclusive financial solutions to underserved Muslim communities worldwide.

Islamic Coin operates Haqq Blockchain: the first Shariah-compliant decentralized ledger. Tailored to meet the requirements of Halal assets, Islamic Coin boasts a fixed total supply. Moreover, 10% of every issuance finds its way into the Evergreen DAO, empowering investments in ventures related to Islam or making direct contributions to Muslim charities. Notably, in June 2022, the currency received a Fatwa, granted by esteemed Muslim authorities globally.

Sharia Oracle: Ensuring Compliance

To power Sharia-compliant business ventures, Islamic Coin has developed a compliance verification platform called Sharia Oracle. This platform enables entrepreneurs to present their business ideas or projects to the blockchain community for assessment of their compliance with Sharia principles.

The decision-making process on the Sharia Oracle platform involves crowdsourcing or decentralized contributions from a group of Sharia board members selected by Islamic Coin. According to Mohammed AlKaff AlHashmi, Islamic Coin co-founder, this approach allows respected community leaders to approve projects based on Sharia regulations, helping to identify potential red flags in crypto projects before they are implemented.

Through the Sharia Oracle platform, Islamic Coin aims to enhance transparency, promote trust within the crypto industry, and address the concerns as mentioned above.

No to Speculation, Yes to Crowdfunding

According to Malta-based Islamic Financial expert Reuben Buttigieg, the speculation on Bitcoin contradicts the principles of Islamic finance. The utilization of Islamic Coin for financing business operations and collective fundraising aligns with the core principles of Islamic finance, offering potential growth and support to the industry through crowdfunding initiatives.

By embracing crowdfunding, Islamic financial institutions can tap into collective financing, where funds are raised from a large number of contributors. This approach aligns with the risk-sharing principles and community involvement central to Islamic finance. The use of coins or cryptocurrencies in such crowdfunding initiatives provides a technologically advanced platform for fundraising, enabling greater access to capital.

A New Financial Avenue for Muslim Communities

In an interview with Gulf News, Sheikh Mohammad bin Khalifa bin Mohammad bin Khalid Al Nahyan, an Executive Board Member of Islamic Coin, emphasized the company’s commitment to giving back to the community and exploring the potential of cryptocurrencies and blockchain technology with an ethics-first approach. He believes that this combination has the power to create positive change in an industry known for instability and lack of inclusivity.

Regardless of what the future holds, Islamic Coin illustrates how innovative and practical solutions to widespread problems can emerge from unexpected sources. Given the funds the token has generated despite its youth, ethics-based crypto has a promising future in the industry.

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