How cryptocurrencies can help develop Islamic finance

At a webinar held in Bahrain on Wednesday, experts have discussed how new digital payment means are facilitating transactions, and how cryptocurrencies can help to develop Islamic finance, The Gulf Daily News reported.

A collaboration of Bahrain-based General Council for Islamic Banks and Financial Institutions (Cibafi) and the Islamic Corporation for the Development of the Private Sector (ICD) gathered industry experts to discuss the untapped potential of the new kind of money at the event titled “Cryptocurrencies – a Double-edged Sword: Challenges and Opportunities for Islamic Finance.”

It highlighted how as one of the most innovative and disruptive applications of fintech, cryptocurrencies are generating a series of debates amidst a lack of regulatory clarity in the Islamic financial services industry.

Ayman Sejiny, chief executive of ICD, cited the opportunities that blockchain-driven applications can bring to the development agenda, including the promotion of financial inclusion and the growth of the Islamic finance industry in particular.

Mr. Sejiny noted that the Sharia-compliant adoption of cryptocurrencies could be a major milestone in the industry.

“The new blockchain applications show how the acceptance level for cryptocurrencies and other applications is increasing amongst Islamic banks,” he said, adding: “From the development perspective and with an aim to contribute to financial inclusion, ICD has built a fintech platform to offer blockchain-driven financial services for usually unbanked and underserved individuals and small and medium-sized enterprises. The company will continue exploring practical Sharia compliance opportunities to further enhance its fintech platform with smart sukuks issuance, asset tokenization, zakat, and sadaqah collection for development purposes.”

Dr. Abdelilah Belatik, secretary-general of Cibafi, stated during the discussion: “Today’s global finance industry is confronted with a wave of disruptive trends and important new developments in digital technologies. Cryptocurrencies are an example of these transformative trends for the future of digital and Islamic finance.”

“We are pleased to collaborate for the second time with ICD to highlight how they can be embraced and supported for the growth of Islamic finance,” he added.

To support these technological advances, Dr. Belatik announced that Cibafi “established an Innovation and Technology Working Group (ITWG), which will conduct various initiatives with the aim of strengthening the adoption of financial technologies within Islamic financial services industry.”

“These initiatives include encouraging innovation and product development activities that are in line with the industry developments and Sharia objective,” he added. As reported before, a provincial branch of the large Islamic organizations in Indonesia has declared cryptocurrency “haram.” However, the Indonesian government indicated that the country is not planning to ban crypto.