Cryptocurrency in Islamic Finance

Potential and Possibility

This book is written for:

  • technologists new to Islamic finance
  • Islamic finance professionals, investors, and customers with an interest in blockchain and cryptocurrency

Two Economies Meet

Bitcoin and the blockchain have kickstarted a new industry. At its core is math and cryptography which are tested, proven, and can run on any device without depending on any one app, bank, or government.

Islamic finance has developed a set of standard contracts comparable to modern finance, especially after a resurgence in the 1970s and crises in conventional finance in 2007-2009. Regulatory approval and enthusiasm for Islamic finance varies between countries, so these banks do not cover all Muslims, nor are they limited to Muslim customers and investors. The key distinction is a ban on interest, and investors getting their returns through equity, bonds, profit-sharing, or fees defined by contracts.

The Economist, October 2018: Why non-Muslims are converting to sharia finance

To outsiders, cryptocurrency may seem like a runaway train that enriches a few and scams others, and Islamic finance may appear as a conservative movement with a focus on tradition. You may be wondering: how can these polar opposites come together? But as the Islamic finance industry grows, it has embraced entrepreneurs and innovators to help with modernization.

I believe that there is unrealized potential for Islamic finance on the blockchain:

  • to automate processes, reducing overhead and fees
  • to make accounting and contract-management transparent to investors
  • to operate globally, reaching populations who are unbanked or without Islamic financial services

There's also much that cryptocurrency startups can learn from how Islamic finance finds customers and investors:

  • profitability and risk outside of the conventional finance system
  • complexities of international regulation

Navigating this Book

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References

Whenever quoting a source, and when possible on other factual points, I provide a link as a reference. Over time, these sources may go offline, or otherwise become outdated.

I do not endorse or research every political and economic view of my sources, but cite them as early and/or influential sources on Islamic finance and cryptocurrency.

This is not an academic study or paper. Commonly-known information (such as you might find on Wikipedia) may be written or referenced without a formal citation. Some sections include text from my previous writing, updated and reworked for the book.

You can suggest edits to the book at: https://github.com/islamicfinance-book/book . I no longer host it at islamicfinance.github.io , so that domain can become useful to someone else.