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Are digital currencies compatible with the Islamic economic system?


Are digital currencies compatible with the Islamic economic system?

One of the most important issues to be discussed in the Bitcoin market and digital currencies is whether digital currencies can be compatible with the Islamic economic and banking system or not? , And can standards be established to assess whether this currency is in line with the Islamic trade rules? In this regard, the blogger "Marco Rossi" published a long article on his blog on the Media site in an attempt to answer this question

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"Subject Details"

Marco Rossi begins by talking about the history of the financial system of what is known as the Islamic economy.

Islamic Sharia-compliant Islamic financial systems were developed under the name Islamic Banking or Islamic Banking in the 1970s. This system gained more and more ground in this sector due to its ability to attract a large number of customers. That Islam is considered the fastest-spreading religion in the world. Even traditional banks and other financial institutions open or intend to open a special section dealing with Islamic banking in order to expand their services and customers. However, Islamic as an interesting option is the Boycotted the financial services provided by these banks, and Islamic Sharia law, known as Sharia.

Ways of working Islamic banking banks in the financial system

In fact, the principles underlying the financial system and Islamic finance are generated in order to avoid any form of haraam activity - for example - the imposition of interest on transactions, which is a form of usury in accordance with the Islamic financial system, and therefore, this is unacceptable Religiously.

Source: Masjid Pogung Dalangan at Unsplash
In this case, the Bank imposes a transaction at a price higher than the actual market value, as this represents the risks assumed by the Bank in carrying out the transaction. This is especially true for the Murabaha type schemes, whereby the customer entrusts the Bank to purchase the asset on its behalf.

Moreover, financial institutions of all kinds can not invest in illicit industries such as alcohol, pork, gambling or pornography. Banks must ensure that uncertainties, guesswork and contract skepticism are minimized. And the transactions you make.
The most interesting feature of the Islamic financial system is the focus on purely commodity transactions, so new developments in the world of digital economics are seen as anti-Sharia, as digital currencies are a software product designed for artificial intelligence on the Internet - an electronic product - is born of the modern financing system, and not of course a traditional commodity.

Previous attempts by companies tried to comply with the rules of Islamic commerce in the issuance of their digital currencies

Since digital currencies are speculative and speculative, it may seem unacceptable to be subject to the rules of Islamic commerce. However, attempts to circumvent these rules have already been explored. Even with a certain degree of success, for example, one gram is a digital currency on behalf of the same company (one gram Coin, abbreviated as OGC). One currency of Onegram Coin is supported by at least 1 gram of gold.
This means that in that case the company trades in a physical commodity - especially traditional goods in the history of Islamic commerce -, but through the use of digital currency exchange kiosks, and many companies followed this example, such as the Malaysian company HelloGold.

Other companies, such as Halal Chain, have created non-gold-linked digital currencies but are linked to data on Islamic goods. In addition, HelloGold's finance director, Manuel Ho, has also provided an important function to the digital currency Which they called HGT.
In fact, it only records transactions that occur in a given period of time, making them less risky, and enables the company to deal with price uncertainty issues that are not suitable for an Islamic financial company.

Image source David Rodrigo at Unsplash
Therefore, according to the writer, there are already digital currencies that are compatible with Islamic trading rules. Companies may even be forced to require the services of consulting firms to help companies understand whether their products and tools are suitable for Islamic law.
This is the case with companies such as Al Maali Consulting, based in Dubai, and Amanie Advisors, based in Kuala Lumpur.
However, although consulting firms can provide services and approve the company's financial operations, local governments do not have the capacity to establish certain criteria for financing and the Islamic banking system.

Different opinions between supporters and opponents of the acceptability of digital currencies within the Islamic financial and banking system

This leaves the issue in the hands of a group of "experts" in Islamic law, Islamic finance, and some such as the Dar al-Ihsan Center, based in Durban, or Shawki Allam, the Grand Mufti of the Greater Arab Republic of Egypt - Religiously, while others - such as Professor Munther Kahf, an academic writer and an Islamic banking thinker based in California - believe that they - any digital currency - are legitimate (and subject to manipulation) and Digital currencies are considered acceptable for the Islamic financial system.
"There are hundreds of digital currencies, each with its own specifications, and there simply can not be a single" legal standard "for all these digital currencies, says Professor Farouk Habib, research officer at the International Academy for Islamic Financial System Research in Malaysia.

However, the inclusion of religion does not preclude the possibility of developing digital currencies compatible with the Islamic economic cryptocurrency. We have already seen how banking transactions using digital currencies can give room for the emergence of Islamic banking sector for digital currencies or the use of digital currencies in sectors In 2015, Charles W. Evans, associate professor of finance and economics at Barry University, said in his article published in the Islamic Banking and Financial System, that digital currencies actually conform to the principles of the usury ban and incorporate the principles of interest social benefits are positive) for foreign affairs.

In many Islamic countries, the main reason many people do not have bank accounts is the lack of a banking network or the presence of expensive intermediary services. In this sense, the digital currency system can include this part of the population. The only thing that is required to start trading and the exchange of funds on an equal basis with other users is access to the Internet only.

Financial services based on the use of smart mobile phones such as M-Pesa in Kenya demonstrate the potential of such virtual services in cash-only communities, said Yousuf Ikram, Head of Credit Risk and Banking Supervision at DIB.
At the end of this topic, we would like to quote the words of Mr. Youssef Ikram, who provides a great summary of what the future of digital currencies can be in the Islamic banking world:

"In conclusion, it seems that the currency of etherium and other digital currencies underpinning the development of the blockbuster network has very favorable conditions for its use in the Islamic financial field, because it is not dependent on debt, lack of control over the investor, the borrower, In addition to sharing profits and losses in a parallel way in the general sale of crowd sales.
More importantly, the technique is an ideal medium for clarifying and activating the Islamic values of justice, equality, trust, and clarity in the financial system that embodies the spirit of Islamic principles

And now dear Continental, after reviewing this article, how do you see the use of digital currency in the banking system, Islamic finance, share your opinion and let us listen to your voice in the comments box below the article.