Cryptocurrency, as it is known today, started with Bitcoin as the first decentralised cryptocurrency in the modern world. The first Bitcoin transaction took place as far back as 2009 and ever since Bitcoin has grown into a global phenomenon bypassing traditional finance systems and banks. Islamic cryptocurrency, also known widely as Islamic coin, began to emerge in the late 2010s as the demand for Sharia-compliant digital assets grew.Islamic coin is Sharia-compliant cryptocurrency that adheres to Islamic finance rules relating to financial transactions and exchange. This article will examine the benefits of Islamic coins and their relevance in the modern world of finance.
CRYPTOCURRENCY AND ISLAMIC FINANCE
Over the years Islamic finance and the world of cryptocurrency exchange and platforms have become increasingly interconnected. Islamic coin merges the traditional with the modern, uniting decentralised currencies with Sharia principles.
Not only does the Islamic coin stand as a testament to the thriving impact of Islamic finance on the modern world, but it also offers Muslims an alternative and innovative way of managing their money.
Two notable initiatives relating to Islamic coin are the First Islamic Crypto Exchange (FICE) and project Onegram. Project Onegram is a project that aims to create an Islamic cryptocurrency coin that is backed by gold reserves. Users of the coin are able to store their coins in a digital wallet and transact securely.
FICE is an Islamic initiative aiming to provide an Islamic digital platform for cryptocurrency transactions that are fully compliant with Islamic finance rules.
The main features of FICE are:
- it employs ethical screening
- it incorporates community governance within its structure and operations
- it offers Sharia-compliant trading
MAIN FEATURES OF ISLAMIC CRYPTOCURRENCY
There are some key features that differentiate Islamic coin from other cryptocurrencies:
- Asset backing - Islamic coin is based on a system of asset backing. This not only provides intrinsic value but also stability in line with Sharia rules. Often the digital coin is pegged to assets that are tangible such as gold, real estate, silver, and commodities.
- Transparency: Islamic coin transactions must be transparent if they are to comply with Islamic finance rules. This means any trade, investment, platform being used, sales, prices, return, market, service, and exchange involved must be halal and transparent.
- Sharia law: Islamic coin must be Sharia compliant. This means the coin itself cannot be involved in any form of interest, uncertainty, or speculation.
- Governance: the governance relating to Islamic coins is usually decentralised. This is looked upon favourably by Islamic finance as it means there is more scope for the community to be actively engaged in the governance structures and processes.
- Regulation: Islamic coins, whether in the UK or abroad, must comply with regulatory frameworks that govern digital assets and finance. Digital assets are seen as a valuable commodity and many countries already have robust regulatory frameworks in place.
WHAT IS AN ISLAMIC COIN?
Islamic coins are essentially a form of cryptocurrency that is Sharia compliant. Muslims have an incentive to partake in Islamic coin trades and investment as they can be reassured that the coin is fully halal.
Of course, this means the coin must be certified as Sharia-compliant by experts with knowledge of Sharia law and rules.
For example, Islamic coin cannot be aligned or involved with any industry or market that is prohibited in Islam such as the gambling or alcohol industry. There is also a requirement that Islamic coin investment considers social benefit and social purpose as per Islamic finance rules. The ethics of the management and investment of Islamic coin are also important for adherence with Islamic finance.
WHAT ARE THE BENEFITS OF ISLAMIC COIN?
Islamic coin offers many benefits to its users:
- It is Sharia-compliant and aligns with Islamic principles
- It is transparent
- It is stable
- It facilitates the creation of strategic partnerships and ethical investment
- It provides innovative financial solutions
- It supports marginalised communities
- It uses ethical investment criteria
- It facilitates and enables financial inclusion
- It enables cross-border transactions
- It operates on a profit and loss sharing arrangement
- The HAQQ platform screens for Sharia compliancy
WHAT IS THE DIFFERENCE BETWEEN ISLAMIC COIN AND BITCOIN?
When considering cryptocurrency, the question always arises about the difference between Bitcoin and Islamic coin. The main difference is that Islamic coin adheres to Islamic finance principles. The very existence of Islamic coin is to ensure that Sharia rules are complied with and there is no such obligation on Bitcoin.
Whilst both coins operate on decentralised platforms, Islamic coin should incorporate more transparent structures of governance leading to greater accountability and proof of adherence.
In addition, another key difference is that Islamic coin needs to follow ethical investment screening and criteria in order to the compliant with Islamic finance. Islamic coins operate on the HAQQ blockchain.
Whilst there are similarities in the nature of both Bitcoin and Islamic coin, the main difference is that Islamic coin adheres to a different set of values and principles. Users of Islamic coin will therefore seek assurance of compliance with Islamic rules relating to finances.
WHAT IS THE FUTURE OF ISLAMIC COIN?
More and more Muslims are looking to invest in and trade in Islamic coin. The Sharia Authority which was formed for the purpose of making decisions on the validity of cryptocurrency has stated that Islamic coin is a financial asset that can be traded whether that is by sale and purchase, or traded for goods and services.
Islamic coin holds great potential in the crypto world. As the crypto ecosystem and infrastructure continue to evolve there are some trends that suggest Islamic coin will see great growth in the coming years:
- Global financial inclusion: Islamic coin is playing a central role in making sure underserved Muslim-majority regions are able to partake in digital currencies. The demand is already there and is growing.
- Islamic finance growth: as the Sharia compliant finance industry grows so too does the demand for the accompanying digital ecosystem.
- Evolving markets: as the dynamics of markets in the world continue to grow and develop, Islamic coin is predicted to grow alongside them. Collaboration and innovations are already being seen across many different regions.
- Adoption: increased adoption of Islamic coins will lead to greater liquidity, market development, and acceptance.
WHAT ARE OTHER HALAL COINS TO INVEST IN?
Whilst the list of halal cryptocurrencies is growing, it is important to note that cryptocurrencies as digital assets are not deemed to be automatically compliant. They need to be screened by experts against Sharia principles. Some coins that have been deemed to be halal include:
- ZRX
- ELF
- Aion
- Alchemy Pay
- ASTA
- BEAM
- Cardano ADA
- Chainlink