Reflecting the growing acceptance of blockchain-based assets in the Islamic finance universe, Shariah scholars have given their stamp of approval to an oil-backed digital token, making it the first Shariah compliant oil-backed crypto asset globally.
Permian Holding, which invests in the acquisition of proven oil reserves, has received a Fatwa from Bahrain-based Shariyah Review Bureau (SRB) ensuring its development activities — ranging from tokenization to acquisition — are compliant with Muslim laws. The company will be monetizing oil assets via PermianChain Technologies, a platform-as-a-service facilitating working capital requirements of oil exploration and production companies while allowing investors equity benefits from the value of proven reserves. It uses blockchain to link the energy trading supply chain under a closed-loop-B2B [business-to-business]-exchange.
“With only a few weeks until PermianChain’s blockchain platform goes live, we look forward to helping ensure that all issued tokens, proven oil reserves, equity crowdfunding, income generation and related activities are compliant with Shariah principles,” shared Yasser S Dahlwai, CEO of SRB.
It is understood that the blockchain start-up, currently in the process of applying to become a regulated trading and investment platform, already has a pipeline of over 200 million barrels of oil equivalent in potential reserves to be listed on its platform. Its reserves portfolio includes basins in Texas, Louisiana and Permian.
Should it come to fruition, the platform would be the first Shariah compliant avenue for digitalizing oil reserves. Conceptualized in 2018, the move toward Shariah compliance was a calculated strategic measure to broaden its pool of potential investors.
“Fused with our blockchain technology, our commitment to Shariah compliance will become our competitive advantage and help us to meet the needs of Islamic investors,” said PermianChain Co-Founder and CEO Mohamed El Masri.
The use of distributed ledger technology would also be a boon for Islamic finance, as it could close the inefficiency gaps in commodity finance. Major oil players such as BP and Shell have begun exploring implementing blockchain to optimize efficiency through digitalization; energy consultant Wood Mackenzie estimated that energy firms could save US$73 billion a year within five years in oil and gas exploration and production with the right digital strategy.