Publication:
Application of precious metal-backed cryptocurrency in Islamic finance
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Date
2021
SDG:
Abstract
Finance industry has become an essential part of the digital transformation in the perspective of Industry 4.0. The objective of this research is to find out the prospects of applying precious metal-backed cryptocurrency (PMBC) to Islamic finance by exploring its application to the different Islamic finance contracts for structuring Islamic finance products. A qualitative methodology is employed in conducting this research where relevant literature on the subject matter was reviewed. By using doctrinal approach, the paper presents Shari'ah compatibility of and issues in application of PMBC to Islamic finance contracts. The outcome of the research reveals that there is scope to use PMBC backed by gold to replace the function of fiat currency in Islamic finance contracts. However, there are specific Shari'ah rules applicable to each of the contract as derived from AAOIFI's Shari'ah standard No. 57 published in 2016. For the sustainable development and practical implementation of PMBC in Islamic finance, it is observed that there are certain inhibitions that need to be eliminated such as lack of political will in acknowledging it as a legal tender and development of an adequate and effective infrastructure with legal, regulatory and governance frameworks. It is anticipated that the outcome of this research will assist the policymakers and stakeholders of Islamic finance to prepare themselves to utilize PMBC in Islamic finance industry and to conduct further research in resolving the issues identified for adoption of PMBC backed by gold in a Shari'ah compliant way.
Keywords
Cryptocurrency , Gold standard , Islamic finance , Precious metal-backed cryptocurrency , Shari'ah
Citation
Hassan, M. K., Muneeza, A., Abubakar, M., & Haruna, M. A. (2021). Application of precious metal-backed cryptocurrency in Islamic finance. Journal of Islamic Finance Accountancy, 5(1), 17-26.
Publisher
AAOFI