Every new technology that involves the use of money in Islam, goes through a long process before it can be widely used.
The Islamic world is just too big to be ignored by international investors coming from all parts of the globe. More than 2 billion people live in this vast and complex region that is extremely different (to say the least) when compared with western societies; not only in religious beliefs but also by its political, social and economic systems.
Blockchain technology and cryptocurrencies had the now popular ups and downs of 2016, 2017 and 2018, these successes and failures have brought hard consequences in their path through the Islamic world. Leaders, scholars and politicians from the Gulf have expressed scepticism, but real changes have begun.
Stellar, an American open-source protocol that works as a payment network using its own blockchain, has received more than a green light, a certification from the Shariyah Review Bureau (SRB), a relevant Islamic advisory firm that is licensed by Bahrain’s central bank. This gives a strong lead to Stellar in order to implement their services (including its own currency called Lumens) in the Middle East and Southeast Asia, areas where the mentioned certification is necessary to operate.
Islamic bankers see the blockchain as the new solution to reduce costs in processes and transactions, even the Emirates Islamic from the UAE (United Arab Emirates) became the first bank of the region to use this technology to prevent frauds.
Islamic Finance is different because:
- It forbids the collection and payment of interest according to the concept of Riba.
- Banks can create debt that is backed by the goods and services of the borrower, or real measurable assets like gold.
- Does not work with futures or derivatives.
With this new approval from the SRB, blockchain and cryptocurrencies can have more influence in Islamic countries where the conception of money is far different from the West. Stellar now can trade, depend on price certainty dictated by scholars, and verify its own transactions on the blockchain, something that can promote or break the validity of these digital tools in this part of the world.