The start-up of cryptocurrency, Stellar, has obtained halal certification in Bahrain. This has opened doors to many countries that apply the rules of Islamic finance.
CRYPTOCURRENCY AND RELIGION
In recent years, a question worries researchers and specialists in Islamic finance « are the cryptocurrencies in accordance with the Muslim religion? In other words, are they halal, that is, licit?
At first glance, one would tend to answer « no » since the Islamic finance prohibits speculation and interest. Nevertheless, it is not so obvious because the appreciation is interested in the protocols and not in the derived uses of certain users.
The Islamic finance is now estimated at $ 2 trillion worldwide. By 2020, this figure, according to experts, could double to 4 trillion. The dazzling development of this sector attracts of course many companies and especially those coming from cryptocurrency like Stellar.
STELLAR AND HALAL CERTIFICATION
Stellar is an open source project based on a hybrid blockchain. It facilitates the payment and transport of securities between assets. On July 17, Stellar announced that it has received the approval of Shariyah Review Bureau, a consulting firm specializing in Islamic finance and authorized by the Central Bank of Bahrain.
Because of this accreditation, the price of the cryptocurrency has soared by 32%. However, as Kader Merbarh, the director of a master’s degree on the principles and practices of Islamic finance, explains, « The Shariyah Review Bureau is not a structure that refers to the entire world of Islamic finance. » Furthermore, « Every country has its own participation in the Koranic law. (…) Nothing assures that the announcement of Stellar will allow it to spread everywhere as the company suggests« . Indeed, « there may be reluctance in many countries because the authorities simply do not understand this modern technology« . Some countries may be reluctant while others will be very fond of cryptocurrency, such as Dubai that could become the first « Block chain City ».
A MATTER OF PERSPECTIVE
Thus, it is important to emphasize that each cryptocurrency has its particularity. For example, according to the academic Bitcoin is « adapted to Islam thanks to three of its characteristics: the transparency in trade that allows the blockchain, the financial inclusion of unbanked individuals and the fact that it is based on a real economy« . Yet the great Egyptian mufti Shawki Allam explained that trading with Bitcoin cryptocurrency is illicit under the Koran. « Bitcoin can hurt the country’s economic and social security. This virtual currency presents the risk of bringing down the monetary and financial system that currently governs societies. »
Lawful or sinful? Halal or Haram? Islam defines currency as « everything that possesses an intrinsic value and whose contractual parts are fulfilled« . Whether Bitcoin and other cryptocurrencies fit into this definition is therefore subject to the interpretation of every individual.