Equipped with Shariah certification, a Silicon Valley non-profit organization will bring its blockchain protocol and digital currency to key Islamic markets, joining the growing wave of fintech companies seeking to facilitate Shariah compliant financial services in the name of inclusivity and financial democratization.
Bahrain’s Shariyah Review Bureau confirms the extension of Shariah compliance certification to Stellar.org for the Stellar Network, an open-source distributed hybrid blockchain facilitating cross-asset transfers. In the context of Islamic financial services, the network enables remittance services, payments as well as financial clearing, settlement and execution services. The certification also applies to its digital token, Lumens or XLM.
The Shariah validation for its technology would east Stellar.org’s expansion strategies: particularly in the countries and regions where Islamic finance is concentrated such as the GCC and Southeast Asia. Over the next few months, the San Francisco-based organization will be engaging Shariah financial institutions in the Middle East, Malaysia and Indonesia.
Islamic financial institutions have been increasingly looking to blockchain technology to optimize efficiency – time and cost – and to boost security and transparency of services rendered. In the UAE, Emirates Islamic became the first bank in the region to launch blockchain-powered cheques to stamp out cheque fraud while Takaful Emarat joined a blockchain consortium to develop use cases; and in Saudi Arabia, a growing number of banks are implementing blockchain technology, including Bank AlJazira to manage identity and security and Al Rajhi Bank which concluded the country’s first cross-border money transfer on blockchain. In Indonesia, Islamic microfinance platform Blossom Finance launched the first Sukuk using smart contracts and recently, ArabianChain Technology signed a joint venture with Curiositas to create a platform for Islamic capital markets using smart contracts and legal automation.
While the permissibility of blockchain technology in Shariah compliant financial services is largely undisputed, the use of digital currency remains a divisive issue. Nonetheless, there are already currencies certified Shariah compliant by scholars, with the most notable one being Malaysian start-up HelloGold’s GOLDX, a digital token backed by physical gold. The IDB is also exploring the possibility of introducing a Shariah compliant social cryptocurrency.