Largely overlooked, but no less vital, is the world of Islamic finance. Currently valued at more than US 2.4 trillion and growing at an annual rate of 10-12%, Islamic finance facilitates the day-to-day transactions of almost 2 billion Muslims globally. Sharia law discourages Muslims from taking interest-bearing investments or loans or speculating on ambiguity despite these factors being cornerstones of traditional finance.
As the rise of Web3 stimulates evolution in the broader financial landscape, it's evident that Islamic finance will eventually need to embrace blockchain and cryptocurrency technology. Yet this transition can’t be reached by the sector’s growth alone. Another prerequisite is the need to maintain high ethical standards inherent to Islamic finance. These standards encompass various activities, from the very nature of money itself to daily financial practices. The religious Muslim community needs more than a payment system — it demands a holistic lifestyle solution.
The Market Meets the Needs: Current Solutions
In March 2023, the Central Bank of UAE announced plans for CBDC to accelerate the digital transformation of the nation’s financial services sector. Dubai’s Virtual Assets Regulatory Authority (VARA) is becoming a magnet for global crypto firms and stands as a bridge between Islamic digital initiatives and crypto.
Meanwhile, Indonesia, the most populous Muslim nation (home to 13% of the world’s Muslims) and largest economy in Southeast Asia, has nationalized the crypto bourses under the PT Bursa Komoditi Nusantara or Commodity Futures Exchange (CFX).
Globally, five out of the top 20 countries in the recent update of the Crypto Adoption Index are Muslim-majority nations, with Turkey, Nigeria, Indonesia, Pakistan, and Morocco leading the group.
Amid this surge of interest, we see the emergence of many crypto solutions oriented toward Muslim people. Some pioneers in this field include Blossom Finance in Indonesia with its blockchain ‘sukuk’ (bond) model for microfinancing at the grassroots level and Finterra in Malaysia with its ‘waqf’ (endowment) platform for social welfare and poverty alleviation.
More recently, a Sharia-certified DeFi protocol emerged in Singapore called ZaynFi. This follows MRHB (or Marhaba) in Australia, a halal DeFi ecosystem that offers crypto staking, liquidity farming, NFT issuance, and a DEX marketplace.
Another project in this lineup is the ethics-first crypto Islamic Coin, which aims to reconcile traditional Islamic finance and Web3 technology. Having an ongoing public token sale, the project has already raised more than $400 million from private investors, not including the ongoing public token sales. Alpha Blue Ocean’s ABO Digital, DF101, Futurecraft Ventures, Optic Capital, A195 Capital, and cross-industry HNWIs have all backed the project.
The reason Islamic Coin has garnered such global attention lies in its holistic approach to the digital transition of Islamic finance ethics. The foundation of this approach is the creation of the HAQQ blockchain, a proof-of-stake Layer1 network compatible with existing ecosystems like Ethereum and Cosmos. To fulfill the ecosystem approach, a range of decentralized applications (dApps) are going to be built upon it. These dApps would fulfill the everyday needs of the Muslim community.
- HAQQ Wallet — Digital wallet to manage Islamic Coin and other products. Has garnered over 1.5 million downloads.
- Islamic Coin — HAQQ’s blockchain native cryptocurrency, that reflects the values of the overall project while offering a token for use in more common transactions.
- HAQQPAD – the launchpad for ethical blockchain projects in the ecosystem.
- Sharia Oracle — an on-chain registry of halal certificates that provides smart contract developers and WEB2 businesses a way to prove their ethical relevance.
- Evergreen DAO — a non-profit virtual foundation of the ecosystem focused on long-term sustainability and community impact.
There are more products that are planned for release in the short term, like an application marketplace in HAQQ Wallet, plastic and mobile cards for retail payments, and stablecoin solutions. The project focuses on creating utility through partnerships and real-world applications in the Islamic world. For instance, Islamic Coin actively collaborates with the UAE government, exploring opportunities in immigration, wellness, medical, and travel.
Islamic Coin is also launching an advance in the B2B direction. The project secured an alliance with the London-based DDCAP Group, opening a pathway to more than 300 global banks. Among the leading drivers of the partnership is the possible creation of a Web3 Sharia-compliant alternative to SWIFT.
Focusing on the Community and Lifestyle
What makes Islamic Coin more than fintech is its commitment to preserving ethical values. The project has established a $40 million grant and investment program for dApps that benefit the broader Islamic community. The fund is overseen by the Sharia Board. Furthermore, 10% of all Islamic Coin minted will be deposited to Evergreen DAO, a community-governed charity entity.
The next significant stage for the project is going to be the launch of its Sharia Oracle, a two-level entity dedicated to whitelisting dApps and smart contracts on Islamic Coin’s HAQQ Blockchain. The Sharia Oracle will ensure the security of users by performing technical audits for onboarding applications and prevent customers from accidental haram investments through digital halal certificates. The Sharia Oracle will leverage the implementation of all crucial Islamic finance practices, such as Murabahah, Mudarabah, Zakat, and the avoidance of Riba.
Such careful attention to Muslim ethical values and Sharia compliance allowed Islamic Coin to receive a Fatwa (ruling in Islamic law), confirming its Halal nature.
An Ecosystem Just Waiting to Be Established
In a world of rapidly growing Islamic finance, digital opportunities have long remained unexplored. Harnessing the power of blockchain and uniting it with centuries-tested Islamic ethical values can prove to be a solution that will benefit Muslims worldwide. In this case, an ecosystem approach should include decentralized applications, and integration with partners that could use the cryptocurrency as an ethical payment method.
Ultimately, the appeal of such an ecosystem extends beyond the Muslim community, providing a new angle on ESG investing, ethical finance, and a more sustainable approach to finance.
The establishment of a Sharia-compliant ecosystem represents a monumental leap toward a financial landscape where ethical principles and cutting-edge technology can coexist. It opens doors not only for the Muslim population but also for individuals and institutions seeking ethical and sustainable financial solutions. As Islamic Coin continues to innovate and collaborate, it has the potential to reshape the future of finance, setting a precedent for ethical and inclusive financial ecosystems worldwide.