In a new wake of events the Shariyah Review Bureau, which is an Islamic advisory institution licensed by Bahrain’s central bank, issued certification to X8 AG, a Switzerland based financial technology firm, for its Ethereum based stablecoin and related tokens according to statement provided by a senior executive to Reuters, November 12.
Stablecoins, as their name suggests are a form of cryptocurrency which is tied to another stable estate, for example the U.S. dollar or gold. It is a currency which is accepted across the world and at the same time it is not pegged to a central bank. What makes them unique is the fact that they have low price volatility. As a result their practical usage to perform transactions becomes very convenient.
Sharia Review Bureau is the leading consultancy in matters regarding the Sharia and audit agency licensed by Bahrain’s central financial institution. According to reports the bureau possesses market share of more than thirteen percent of Saudi funding firms licensed by the Saudi Arabia’s national Capital Markets Authority (CMA) and has its hold in twelve locations across the globe, and over twenty one percent of the Cooperative Insurance Coverage Corporations listed on the Saudi stock-exchange market.
The dispute over whether cryptocurrencies are or are not compliant to the Islamic principles is based on their compatibility with the interdiction provided by Islam on downright financial conjecture. According to Reuters few students undertaking studies in Islam have considered buying and selling of cryptocurrency to be similar to the “switch of rights”, which is a valid act when viewed in light of the Sharia legislation.
According to X8 director Francesca Greco, who is also the company’s co-founder, X8’s Ethereum based crypto asset is a stablecoin which is supported by a bunch of seven fiat cryptocurrencies and gold. Its backing by these financial assets was able to mitigate the reservations Islamic advisors had against its high volatility and conjecture.
X8 is reportedly planning to set in place a Shariyah compliant financial exchange platform to put in motion a crypto trade as part of its plans to expand its operations in the Middle East. In statements given to Reuters by Greco, she stated that the company had accomplished exchanges in countries Dubai, Bahrain and Abu Dhabi. She said:
The Gulf area is a very good place for monetary expertise corporations, as a result of all of them need to develop into hubs for fintech.
As regulators and financial exchanges in the Middle East are eager to engage new business and innovation in the crypto sector, numerous financial technology firms are trying to make their technologies in accordance with the regulations of the Shariyah.
Cryptocurrencies other than that of X8 such as altcoin Stellar (XLM) also acquired a certificate validating its Shariyah compliance within the cash switch and asset tokenization area, according to reports from July, which according to Stellar was the primary blockchain protocol to have completed the task. Similarly NOORCOIN, which was licensed by the World Sharia Advisory Committee in March, is another crypto related corporation claiming first spots in the Shariyah-compliance venture.
According to a private advisor, on matters related to the Islamic Shariyah, to financial technology startup Blossom Finance cryptocurrency Bitcoin (BTC) was recognized as “usually permissible” considering the Shariyah legislation. As compared to debt Bitcoin is mostly based on proof-of-work which means that it could be more compliant to the Shariyah than fiat currencies while being a cost community.
Blockchain is a technology that holds the potential to revolutionize the Islamic finance world. The business processes could undergo radical improvements due to the possibility of coordinating institutions’ transactional activities while enforcing a strong mechanism of transparency and running a trustworthy system. Blockchain, with sufficient careful consideration, could be the key to open up multiple opportunities, as it being the future of low cost technology, with support from Islamic scholars enabling its adoption by local communities through it being acceptable in light of the Shariyah.