Although Islamic scholars have been trying to solve the problem of whether cryptocurrency is halal for a long time, what if it is really not allowed legal tender?
Islam has strict regulations on finance. Historically, it has defined currency as a commodity with intrinsic value—gold, silver, or salt. Waseem Mamlouk from Nimbus, a DeFi platform, believes that the government-issued legal currency has no intrinsic value and may not be consistent with the careful interpretation of Sharia law. This will cause problems for the emerging Islamic finance industry, which aims to generate financial returns based on religious laws.
“Mined cryptocurrencies have intrinsic value because of the cost of producing them-but legal tender digitally printed on the balance sheet has no intrinsic value.”
Mamlouk sees cryptocurrency as a viable alternative.As Vice President of Capital Markets Rain cloud, Mamlouk is working hard to obtain Shariah certification for some businesses in order to attract more and more investors who hope that their investment conforms to their religious beliefs. While this will definitely bring profits, Mamlouk also sees Islamic finance as a way to promote responsible long-term investment.
Mamluk’s argument that fiat currency has no intrinsic value is of course a controversial argument. If his assessment is more widely accepted, it will have a huge impact on the Islamic finance industry. In fact, he is saying that coins are not halal food.he is Not first person Question the potential incompatibility between fiat currency and Islamic finance, because there have been academic discussions for a long time on Desire to return to the gold standard-just like the classical era Byzantium.
“So, right away, if we were to talk about someone operating a U.S. dollar-denominated sharia-compliant fund, it really didn’t make sense from the beginning. However, it actually does make sense for mined cryptocurrencies.”
It is an honor to participate in the panel discussion on Challenger Bank and Fintech Subversion at the First International Islamic Fintech Summit 2019 hosted by the following organizations @ashurst London. Great ideas/opportunities for fintech and encryption in Islamic finance. pic.twitter.com/oJKi4eKaSo
— Dr. Kingsley Udofa (@DrKUdofa) February 15, 2019
Mamlouk believes that cryptocurrency is the key to better implementation of Islamic banking. In short, this refers to financial and banking services that comply with Islamic religious teachings.In these religious teachings, the core is the prohibition fish, Which is usually equivalent to loan sharks-or charging interest.
Since interest is a major part of the current DeFi landscape, Islamic DeFi must not involve interest, so customized solutions are needed. In Islamic banking, Mamlouk explained that bank fees sometimes replace income that should have come from interest, but he is not a fan.
“Banks like to play with people with different words and terms.’We will charge you, but we will not charge you interest’-we know what that is.”
Islamic economics contains a broad idea that money must be earned through fair and legal work rather than unfair exploitation. Usually Comparison of Labor theory of value. For the same reason, the money from work must have real and intrinsic value.
Although there is no exact figure, economist have estimated Islamic Finance’s annual revenue is US$2 trillion and is expected to “reach US$3.69 trillion in 2024” according to To the Gulf business. Considering that the global Muslim population “is expected to increase by 70%-from 1.8 billion in 2015 to nearly 3 billion in 2060” according to The Pew Research Center believes that financial services for Islamic sentiment will certainly continue to attract capital.
Although Islamic finance has existed for longer, it is unlikely to be the brother of the cryptocurrency industry. They are all fast-growing financial industries—each industry controls approximately 1% of the world’s assets—and hope to capture a larger share in the next few years.
What are the rules?
Most of the rules of Islamic banking revolve around fish, Generally understand Means loan sharks.This makes it possible to pay or earn interest Forbidden place, The meaning of prohibition. “You don’t get interest on a certain amount of money you deposit,” Mamlouk said.
According to him, it is forbidden to sell things you do not own, which means that short selling, derivatives, and even possible intra-day trading of stocks are not considered, because stocks are usually not settled until the end of each business day, and People may even resell the stock before they “receive” it. At least as far as custodial issues are concerned, the immediate settlement of swaps in the cryptocurrency market is likely to be an answer.
Although many cryptocurrency traders will be shocked by the prospect of restricting themselves to multi-day spot trading instead of high-profit day trading, Mamlouk doesn’t think he missed it. “I’ve never done any of them myself, you know, I’m here, alive and well-it’s not difficult to follow the rules,” he said with a friendly smile.
Gambling, known as Maisir, Too Prohibit. This is partly because it means obtaining money by accident rather than by legal effort. A comparable concept, Bay Algarar, Including any transactions involving excessive and unreasonable risks-this is also a forbidden zone.
Unreasonable risk sounds a lot like cryptocurrency, especially in the early days. Dogecoin is a cryptocurrency based on speculation and memes, which seems to fit the description of gambling or excessive risk. Is Dogecoin taboo? Mamlouk estimated that it would be cautiously inferring that it “has no project” and that “this is pure speculation.” This is a denial of Doge from Mamlouk (but the jury is still out).
Mamlouk said that another important aspect of Islamic finance is to ensure that funds that comply with Sharia law are not mixed with non-compliant funds. He went on to say that this is a very difficult requirement for the modern financial system because banks contain funds from many different sources.
“That may be blood money-it may be the money of an arms dealer of a foreign bank.” Bank officials cannot know where the customer’s money really comes from, so they cannot tell other customers that the funds held by the bank come from legal and permitted sources. .
Mamlouk believes that cryptocurrency is the key to solving many of these problems. Foremost among them is the inherent traceability of many cryptocurrencies. People can mine or obtain newly mined or minted coins with verifiable ancestry—and therefore moral purity—can be absolutely certain.
The strict practice of Islamic finance may only provide a balance and open the door for the 1 billion Muslims around the world to participate in the blockchain revolution.
Mamlouk was born in the District of Columbia, USA, but grew up in the Kingdom of Saudi Arabia, where his father worked for the state-owned Saudi Aramco. He described the environment in which he grew up-still living in it today-as a highly “international society of intellectuals.” When he was young, he remembers being taken to see a supercomputer, one of only three computers in the world at that time. This experience impressed him and inspired his interest in technology, encryption and financial solutions.
He returned to his hometown of Washington to study business law at an American university. He graduated in 1994 and began to pursue a career in financial IT consulting (early financial technology) and IT security-away from the courts, and provided his advice to finance, the Middle East and the world. Technology and telecommunications companies.
He said that in the past, investment banking did not really exist in the Middle East. Mamlouk participated in the founding of Atlas Investment Group in Amman, Jordan, which was later sold to Arab Bank, which he called “the largest bank in the Middle East.” As his career progressed, he saw the growing dominance of computers and the Internet, which inspired him to return to the United States, study IT at the University of Virginia, and graduate in 1999, which led to the notorious Y2K vulnerability.
Mamlouk’s next goal is to get some of Nimbus’ solutions to be Sharia-compliant in order to reach a wider user base. Nimbus is currently located in Malta and is a platform managed by DAO that allows users to access many DApps, thereby opening the door to a variety of potential revenue streams, including crypto betting, trading, and lending.
So, how does a financial company obtain certification in compliance with Shariah law?
The procedures and requirements are not standardized. For example, Islam is not a centralized religion like Catholicism. On the contrary, each country—such as Pakistan, Iran, Malaysia, and members of the Gulf Cooperation Council—will have its own systems and procedures.
These systems may be different, as evidenced by the Shariah Advisory Committee in Malaysia Praise the “huge potential” of cryptocurrency. And others, including the Egyptian Grand Mufti and the Palestinian Fatwa Center, used to Announcing that cryptocurrencies are banned.
Mamlouk set his sights on Saudi Arabia or Bahrain, and he said that the regulations of the two countries are largely interchangeable.Bahrain, its central bank recently A licensed cryptocurrency exchange that complies with Shariah law, It is more flexible in terms of innovation. The plan is to submit a proposal to the local sharia committee.
“The committee must consider all aspects-basically auditing,” Mamlouk explained. They may then make a decision or “give you some instructions” about what needs to be changed in order to be approved. After a successful audit by the Shariah Committee reviewing the proposed practice, the project can be declared in compliance with Sharia law.
“We expect it to be blessed, but we don’t expect to have the Shariah Commission because it is a burden… For us, it is more about social responsibility.”
From Mamlouk’s point of view, the guidelines surrounding Islamic finance can be considered more than just the rules of a particular religion. This is because he believes that they generally promote responsible practices, emphasizing transparency and honesty while preventing excessive risks.
“This is a responsible investment, and it’s very realistic,” he said of this approach.
The idea of the Shariah Council to approve business practices and investment tools is fascinating and can encourage fascinating co-creation between financial technology innovators and religious scholars.
This may herald the future. The Shariah Council will review all types of cryptocurrency projects, tokens, and smart contracts, and then comment on whether they are suitable for Muslim investors. Mamlouk agreed, saying that all types of rating and ranking services have huge opportunities because “we don’t have any of these.”
As for the entire DeFi industry, Mamlouk is very optimistic. He believes that the global adoption rate will soar in the next few years.
“In the next five years-every year-the average growth rate of DeFi cannot be less than 100%, and it will compound. Five years from now, people will see it and they will say,’Wow, why didn’t I see it? This will happen’.”