Category Archives: Islam

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Islamic Business Group Calls for a Cryptocurrency for All Muslim Nations

With Iran’s cryptocurrency waiting for approval from the Central Bank of Iran (CBI) the International Business Forum (IBF) has called for a single cryptocurrency for all Muslim nations.

The concept has been kickstarted by Iran’s current move to alleviate its sanctions dilemma, attempting to combat what it sees as the dominance of the US dollar in world trade by launching its own national cryptocurrency.

The IBF, a Muslim-focused business lobby group, claims that the dollar is being used more of a sanctioning tool rather than a purposeful financial device. The Group’s chairman Erol Yarar is calling for changes to the status quo in international trade, commenting:

“In IBF this year we will discuss the term ‘monetary pluralism’ to create a fairer and healthier trade environment…We will make a cryptocurrency system, that will be used for international trade among Islamic countries, a current issue.”

This call for an Islamic cryptocurrency is only possible now that that recent discussions in the Muslim world have satisfied Islamic countries around the world that digital currency use in no way conflicts with Sharia Law. Matthew J. Martin of Blossom Finance, a fintech startup based in Indonesia clarifies the position:

“As a payment network, Bitcoin is halal. In fact, Bitcoin goes beyond what more conventional closed banking networks offer. Unlike conventional bank networks which use private ledgers where there’s no guarantee that the originator actually owns the underlying assets, Bitcoin guarantees with mathematical certainty that the originator of the transfer owns the underlying assets. Conventional banks operate using the principle of fractional reserve, which is prohibited in Islam.”

Yarar argues that an internationally recognized Islamic cryptocurrency for all Muslim countries around the globe is essential in order for the nations adopting it to “undermine and challenge America’s established hegemony in the global financial system”.

Iran has suggested that its new, as yet unnamed national cryptocurrency will bring “enlightenment” to their economy. When the currency is finally issued to banking institutions, plans for testing payments and internal and interbank transactions will be the first task for Iran’s banking sector before it goes live.

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Islamic Certification for Swiss Firm Opens Middle East Market

A Swiss-based fintech firm has successfully been certified by Islamic scholars, enabling it to trade digital currency in the Middle East.

Sharia law prohibits Muslims from lending money to anybody with the expectation of receiving interest on this amount. It regards 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.

With the news earlier this year that cryptocurrencies wouldn’t, in most circumstances, conflict with Sharia Law, the number of fintech companies moving into Sharia-compliant finance has notably increased. The Middle East, with its large Muslim population, has also become a potential hotspot for blockchain development.

The Swiss company X8 AG claims that its Ethereum-based cryptocurrency will address concerns of some Islamic scholars who are often concerned about the religious validity of cryptocurrency’s price volatility and the types of assets behind them. X8 Director Francesca Greco maintains that the fact that their cryptocurrency is backed by a basket of eight fiat currencies and gold should be a convincing enough guarantee. Greco maintains, “The Gulf region is a really good place for financial technology companies because they all want to become hubs for fintech.”

The Zug-based company which has now gained its certification from the Shariyah Review Bureau (SRB), an Islamic advisory firm licensed by Bahrain’s central bank, hopes to launch a crypto-exchange that would include a Sharia-compliant component. It has recently had meetings with other exchanges in the region.

This follows an announcement last week that another Islamic financial center, Dubai, was about to get its first cryptocurrency exchange after local media Al Zarooni Group and the Crypto Bulls announced the launch of the Crypto Bulls Exchange. Chairman of the Al Zarooni Foundation, Suhail Al Zaroon, stated:

“This will be the milestone for getting global investments opportunity from all over the globe in UAE, as all financial techs and investors are looking forward in crypto and blockchain industry.”

 

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Ripple Enters Partnership with Saudi Arabia’s Biggest Bank

US-based technology company Ripple has announced a partnership with Saudi Arabia’s largest bank, the National Commercial Bank of Saudi Arabia (NCB).

Ripple’s network of banks and payment providers known as Ripplenet plays the predominant role in the terms of the partnership, with NCB agreeing to use the service for connecting with other financial institutions. Ripplenet claims to provide a more economical, standardized and legally streamlined method for international money transfers.

The partnership will open up NCB to companies first in Singapore, then Asia and North America – all regions that the Saudi bank previously did not have access to. The commercial bank was first established in 1953 and claims 400 branches across Saudi Arabia, with over 5.4 million customers globally.

XRP, the Ripple network’s local token, can be used by banks to source liquidity on demand in real time, with no pre-funding of nostro accounts (accounts that a bank holds in a foreign currency in another bank) required. Payment providers can also benefit from using XRP in terms of saving costs on foreign exchange rates and enjoying a faster payment settlement.

According to Ripple, XRP payments can be settled in four seconds, as opposed to the several minutes Ethereum transfers take and Bitcoin payments that sometimes require up to an hour to be approved.

Islam and crypto

Saudi Arabia’s legal system is founded on the Islamic Sharia law. As Bitcoin News reported earlier this month, the first fully Sharia-compliant cryptocurrency exchange has now launched in the UAE.

While Islam prohibits fractional reserve lending which underpins most fiat currencies, cryptocurrency is based on the logistics of scarcity. Academic discussions on the subject have suggested that cryptocurrencies may be, in fact, more Sharia-compliant than fiat.

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.

As Muslims account for around 23% of the world’s population, they may yet become a powerful force in the market.

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London Mosque Takes Crypto Stance, Accepts Ethereum for Donations

The first mosque for Turkish Cypriots in the UK, the Masjid Ramadan, has decided to accept Ethereum in order to carry out essential repairs, reports London’s Hackney Gazette.

Leaders at the mosque have made the decision to accept the cryptocurrency as part of Muslim observance of Zakah, the annual donation made by all of that faith, requiring that adherents donate 2.5% of their current wealth.

The Hackney mosque hopes to raise at least GBP 10,000 in Ether donations over Ramadan. Erik Guney, the board of trustees’ chairman, said that he hopes that the project can bring attention to the Muslim world that the community needs support:

“I’ve grown up around here and I have watched the community grow and the challenges it’s faced with – it’s a struggle, with housing, food, the cost of funerals and government changes, he said, going on to point out that the wealthy can make a significant contribution.

“We are trying to appeal to a wider audience with the new money. It’s big in the Islamic world, and we have set up a platform for wealthier Muslims outside our community to support and donate to our mosque,” he added.

Founder of blockchain startup Combo Innovation Gurmit Singh has become the mosque’s crypto advisor, outlining how best the funds can be received, stored and sold.

Until recently, there had been concerns among Muslims whether the selling of cryptocurrency was permissible under Sharia Law and if it was possible for Islamic financial firms to invest in cryptocurrencies alongside the rest of the world. At a recent conference in Bahrain, leading Islamic scholars decided that Bitcoin and other digital currencies fell into the category of ribawa. This means that cryptocurrency must be exchanged in equal measure, and with immediate transfer of possession, to avoid breaking Sharia Law.

This argument is key to any decision that might be taken in the future regarding the permissibility of virtual currencies in the Muslim world, as the buying and selling of Bitcoin could be viewed as a type of usury due to its huge profit and loss margins.

It appears that this law is being observed by the mosque, as donations will be transferred straight from the mosque website to the bank’s cryptocurrency hard wallet, which will be visible for all to see. The donation will then be traded for sterling through a currency exchange like LocalBitcoins UK.

“If Muslims, who make up a quarter of the world’s population, hold just 1% of Bitcoins – or GBP 1.04bn – then GBP 26 million in Zakat contributions is due,” said Singh.

Zayd al Khair, a religious advisor at Masjid Ramadan, has been monitoring discussions and debates by Muslim scholars from all over the world:

“Bitcoin is a new phenomenon so scholars are divided,” he said. “Some have taken a practical approach and others have embraced it fully, and we have decided to take their position.”

 

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Bitcoin Permissible Under Islamic Sharia Law, Claims Scholar

Mufti Muhammad Abu Bakar, a sharia advisor and compliance officer at Blossom Finance in Jakarta, Indonesia, has published a paper that indicates that the purchasing of Bitcoin by Muslims can be permitted (Halal) in certain situations.

These comments by come at the end of a week that saw the annual Sharia conference of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) take place in Bahrain. At this conference, leading Islamic finance scholars have been discussing whether there is a place for cryptocurrencies under Sharia Law and whether Islamic financial firms can invest in the cryptocurrencies alongside the rest of the world.

Discussed at the conference is whether new currencies such as Bitcoin fell into the ribawi category, as do gold and silver.  According to Islamic law, items falling under the ribawi category must be exchanged in equal measure and with immediate transfer of possession, otherwise, transactions may involve riba or usury, a major prohibition in Islam.

This argument is key to any decision that might be taken in the future regarding the permissibility of virtual currencies in the Muslim world, as the buying and selling of Bitcoin could be viewed as a type of usury due to its huge profit and loss margins.

The declaration by Mufti Muhammad Abu Bakar that Bitcoin could be compliant with Sharia law has been suggested by some commentators as one possible reason for the hike in the price of Bitcoin over the past 24 hours, as it opens up the market to Muslim investors unsure about their position regarding trading in the digital currency.

An excerpt from Abu Bakar’s paper read:

In Germany, Bitcoin is recognized as a legal currency and therefore qualifies as Islamic money in Germany. In countries such as the US, Bitcoin lacks official legal monetary status but is accepted for payment at a variety of merchants, and therefore qualifies as Islamic customary money.”

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.

 

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