- The global Muslim population is estimated to be around the two billion marks and it is being reported that they provide the global economic engine with a total monetary input of US $3 trillion p.a.
- In order to tap into this nascent market, a number of crypto firms have begun to devise solutions and offerings that are Shariah-compliant.
Since its inception around a decade back, the crypto industry has been faced with a number of trials and tribulations. For example, as many of our readers may remember, over the course of 2018, the sector at large experienced massive losses — with premier altcoins such as BTC, ETH shedding more than 80% of their values.
With that being said, the markets have since bounced back in a big way, with Bitcoin recently crossing its all-important $8,000 resistance barrier. However, many industry commentators have noted that while a number of European and Asian countries continue to adopt cryptocurrencies, the Middle-East (which comprises of the biggest Muslim population in the world) has largely stayed away from this unique asset class.
From a purely financial standpoint, we can see that there currently exist 1.8 billion Muslims worldwide who will reportedly contribute around US$3 trillion by 2021 to the global economic sector. As a result of this, if crypto offerings are made more accessible to this untapped population, many analysts believe that the use of alt-assets (such as BCH, BTC, ETH) will increase exponentially within the coming 12-24 months.
Ever since the term cryptocurrency entered the consciousness of the mainstream masses, Muslim clerics and leaders have been engaged in a debate as to whether altcoins are halal or haram — i.e. permissible or forbidden by Sharia law. And since this law scheme is prevalent within a number of Islamic nations, many people from these regions view digital currencies with a lot of religious skepticism.
When looking at the matter a bit more closely, we can see that Shariah law requires all individual investments to refrain from riba (charged interest), maisir (gambling), qimar (investments based on speculation). And as we all know, cryptocurrencies have often been perceived as commodities with an extremely high level of volatility. Thus, many Muslim clerics have likened crypto investments to “gambling and speculation”.
To elaborate further on the issue, we can see that nations such as Qatar, Saudi Arabia, and Jordan have issued an outright ban on the entire industry.
A Change of Perception
Over the course of the past 12 months or so, a number of policymakers from the Middle East have started paying more attention to crypto-based tech offerings. For example, the UAE recently started accepting alt-coins for various retail purposes as well launched its very own blockchain-strategy plan that seeks to process at least 50% of all government transactions through the use of this technology.
Similarly, the UAE government allowed a crypto exchange (CryptoBulls) to commence its operations within its borders last year. As per a number of reports available on the internet, the platform has already registered more than 200,000 daily users/traders.
If all this wasn't enough, last week a spokesperson for Ripple announced that his firm had plans to set up an office in Dubai so as to promote the use of crypto all throughout Asia.
How Should Compliance Be Approached?
A lot of people may not be aware of the fact that the release of various Shariah-compliant crypto and blockchain services have been on the rise over the past 12-18 months. For example, last year Stellar — the crypto finance platform — was given permission by the Shariyah Review Bureau (SRB) to integrate its services into the economic ecosystem of the Middle East. Similarly, X8 AG, a Swiss startup too was given certification by the SRB to commence its operations within the region.
- Meem — Bahrain’s first digital-only banking institution — recently became the first Shariah-compliant entity of its kind in the region.
- The bank is reportedly all set to launch the ‘Qintar’ — the world’s first Shariah-compliant crypto token. As per a number of reports, this offering has been built atop the Islamic Blockchain (ISL).
- In its core essence, the ISL is a secure blockchain ecosystem which ensures that all of the transactions that are being processed by it are in compliance with Islamic religious practices (such as riba or maisir).
In closing out this piece, we should remember that as and when crypto adoption in the Middle-East increases, the value of premier assets such as BTC, ETH will skyrocket accordingly. It now remains to be seen, how the future of this burgeoning industry plays out within this economically untapped region.