UAE Bank Officially Becomes First Banking Institution to Issue a Blockchain ‘Sharia-Compliant Bond’

United Arab Emirates based Al Hilal Bank recently made history when it became the world’s first Islamic bank to facilitate a Sukuk (Sharia-compliant bond) transaction using blockchain technology.

In relation to the above mentioned case, it is worth noting that Al Hilal Bank was able to resell and settle a portion of a USD $0.5 billion Sukuk that is reportedly set to mature by the end of 2023. Talking about this latest achievement, Alex Coelho, the CEO of Al Hilal Bank, said that by incorporating DLT into Sukuk it will become easier for the followers of the Islamic faith to conduct their monetary dealings in full compliance with existing Sharia rules and regulations.

Via a statement released by the bank a few days back, Coelho was also noted as saying.

“The advantages of using smart contracts range from safer transactions with robust Shariah compliance, to the unlocking of new opportunities,”

More On The Matter

While on this subject, it is worth mentioning that with the introduction of ‘smart Sukuks’, it will now become easier for Muslims to process transactions as well as reduce large overhead costs that are often incurred during processes such as issuance and settlement.

Lastly, it is worth noting that while Al Hilal is the world’s first Islamic bank to execute a Sharia-compliant bond transaction, this is not the first time a bond has been settled on a blockchain. For example, earlier this year the World Bank settled a two-year bond worth US$73 million on the Ethereum network. If that wasn't enough, a little under 3 months back, the Austrian government too was able to raise a whopping sum of $1Bln Euros through a bond auction (whose notarization was then carried out on the blockchain).

In regards to the move made by the Austrian parliament, Angelika Sommer-Hemetsberger, an executive at Oesterreichische Kontrollbank AG, was quoted as saying:

“Blockchain technology offers great potential for increasing efficiency and ensuring the quality of bank processes. Therefore, we have been dealing with this topic intensively for some time now and have already tested several prototypes. Starting the real operation on behalf of OeBFA is a pleasing and logical next step,”

Final Take

With so many positive developments still taking place within the world of cryptocurrency and blockchain, it now remains to be seen how the future of this burgeoning market domain plays out from here on end.