Category Archives: Adab Solutions

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Blockchain Eases the Way in World of Islamic Finance

Islamic banking which carries with it higher administrative costs than conventional banking could be benefited with the implementation of blockchain technology.

The two basic principles behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest.

Blockchain-based banking is considered the next frontier in banking that will usher in a new era of decentralization and disrupt the centralized banking system. Islamic banking is a USD 3 trillion industry worldwide particularly popular in North African, South Asian and Middle Eastern countries. Its principles involve zero interest rates and focus on more control of one’s finances than the conventional banking system.

Financial Institutions such as Hada DBank, a promising new startup, will help increase transparency and bring back control to the average Islamic Bank user. For this purpose, Hada DBank is involved in various corporate partnerships that are cementing the bank’s status as the premier blockchain Islamic bank.

However, fees are an issue in traditional Islamic banking, the main reason being that the system requires higher transactional costs which cover some legal and administrative processes not required in conventional banking.

Blockchain banking in automating some of these processes due to encoding terms and including them in its smart contract system can alleviate some of the associated legal and administrative processes, reducing both cost and the risk of fraud.

In Islamic banking, all financial transactions must comply with Sharia Law, where debt cannot be created unless backed with underlying assets. Mining is acceptable as there is no aspect of either debt or lending involved in the process.  According to Islamic law, items falling under the ribawi category (such as gold or silver) must be exchanged in equal measure and with immediate transfer of possession, otherwise, transactions may involve riba or usury, a major prohibition in Islam.

UAE-based startup Adab Solutions has launched the world’s first cryptocurrency exchange that operates with full Sharia law compliance. The exchange will be overseen by an in-house Sharia Advisory Board (SAB) comprised of independent experts that will ensure the operations unfailingly remain within the jurisdiction of Islamic law.

As the fastest growing religion in the world, with Muslims now representing 23% of the world’s population, Bitcoin has become an important issue for financial authorities. Last year, the International Monetary Fund (IMF) held its first formal discussion about Islamic banking needs in the Muslim community for the first time.

 

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First Sharia-Compliant Islamic Crypto Exchange Launches in UAE

UAE-based startup Adab Solutions has launched the world’s first cryptocurrency exchange that operates with full Sharia law compliance.

The exchange will be overseen by an in-house Sharia Advisory Board (SAB) comprised of independent experts that will ensure the operations unfailingly remain within the jurisdiction of Islamic law. The project cites its purpose as bringing a quality assets exchange to the Islamic community for the first time.

Adab Solutions plans to begin an initial coin offering (ICO) in September, with the tokens distributed functioning in the platform’s internal ecosystem as the tool for accessing services. All of the exchange’s commissions will also be issued using the tokens.

Crypto may be more compatible than fiat

Sharia law prohibits Muslims from lending money to anybody with the expectation of receiving interest on this amount, regarding fractional reserve lending that the majority of fiat currencies operate with as usury.

Cryptocurrencies differ in this respect as they are underpinned by logistics of scarcity, appreciated by those practicing Sharia as it acts similarly to commodity trading such as gold that they adhere to.

In April, Islamic scholar Mufti Muhammad Abu Bakar published a paper detailing how the majority of the time Bitcoin is Halal (permissible), with the caveat that illicit use of the cryptocurrency or use of it in countries where it is prohibited by local laws are not Sharia-compliant.

Several of the shared principles between Bitcoin, blockchain, and Sharia cited in the paper include a goal of reducing excessive uncertainty, as well as their primary application of payments and exchanges.

Speculation following the published report attributed a USD 1,000 price surge of Bitcoin to Bakar’s statement that Muslims can participate in Bitcoin trading.

Comprising around 23% of the world’s population, Muslims can indeed be a powerful market force as they choose to enter the community.

 

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