Cryptocurrency and the Islamic World

There’s approximately 7.7 billion people living today and over 1.8 billion Muslims or nearly 35% of the world’s population, according to a 2019 Pew Research Center story, which cited data from 2015. As a result, the evolving blockchain technology and cryptocurrency landscapes may be influenced by Muslims’ population growth.

For context, “Islamic law, or shari’a, is a series of principles that are interpreted, negotiated, and debated by legal scholars and adapted in the lives of Muslims in order to bring their actions in line with God’s vision for a just and good life,” according to the Religious Literacy Project of Harvard Divinity School. The report continues with stating that “Muslims understand the rules of shari’a to have been sent by God in the text of the Qur’an, but also made manifest in the hadith and sunnah, sayings of and stories about the Prophet Muhammad.”

Traditional Islam serves as a religious, cultural and practical code for life. Sharia law is viewed as the backbone of society for those who live within the strictest of its religious confines. Consequently, Islamic law creates the structure to which lives and decisions are made, thus regulating both personal, business and financial decisions.

The word sharia means “the way.”

Thomson-Reuters projects that the global Islamic economy is to reach upwards of $3 trillion in U.S. dollars by 2021. Within the Islamic market, cryptocurrencies will play a role in the ever-emerging capitalization of global markets and trade. Furthermore, understanding the issues surrounding cryptocurrencies and its compliance with Sharia law is imperative to keep up with the population growth and cultural trends. The Bank of London and the Middle East (BLME), a Sharia compliant bank, states that: “the main principles of Islamic Finance are the avoidance of all haram (harmful) activities such as charging interest. In addition to the prohibition on charging interest, Islamic financial institutions must ensure that ambiguity (gharar) or gambling/speculation (maysair) is minimized in transactions and contracts.” In other words,  cryptocurrencies must meet these standards, as well as additional cryptocurrency regulations.

As of today, there are three main cryptocurrencies that meet BLME’s standards that also comply with Sharia law. The first, and largest of the three, is Stellar’s cryptocurrency, Lumens (XLM). Today, XLM has a market cap of 474,723 BTC or $2.39 billion in U.S. dollars. This market share is projected to grow as the Islamic marketplace opens, and also when cryptocurrencies become commonplace and understood to be Sharia complaint. XLM itself was certified by the Shariyah Review Bureau (SRB), while SRB itself, is licensed by the Central Bank of Baharain.

OneGramCoin (OGC) is the second cryptocurrency that currently received Sharira approval. OGC is a very small coin that is only traded on one exchange (Huulk) and trades at $55.49. It’s total market volume recently was $114.96, which is relatively small. However, it is Sharira complaint, and this shows a trend in the marketplace. Each OGC is backed by at least one gram of gold, and this is what makes it complaint; gold is one of the oldest Muslim trading currencies ever used.

Lastly, the third of the three cryptocurrencies that are relevant for us and the developing Islamic cryptocurrency market is a Stablecoin from Swiss fintech startup X8 AG. This Ethereum-based coin, which was also certified by the SRB, is very new and will have to be watched closely in the coming years in order to grasp its market civilization and saturation within the Islamic marketplace. Just recently, there have been discussions to expand X8 into Abu Dhabi, Dubai, and Bahrain.

There’s further indication that cryptocurrencies will be playing an important role in the future of the global Islamic economy: The UAE-based financial service firm ADAB Solutions will launch a Shariah-complaint cryptocurrency exchange. ADAB is calling its platform FICE, which is short for, First Islamic Crypto Exchange. While this exchange will initially be aimed towards the Muslim population, it will eventually operate globally, and is available to all end users.

Clearly the Islamic-based economy is opening itself up to the digital world of cryptocurrencies, while at the same time, both new and longer established coins are trying to saturate the market by becoming Sharia complaint. It will be interesting to track these developments over the upcoming years, especially as Islam begins to rival Christianity as the world’s largest religion — and thus a globally influential marketplace.