Halal Cryptocurrency Management
Total Page:16
File Type:pdf, Size:1020Kb
Halal Cryptocurrency Management Mohd Ma’Sum Billah Editor Halal Cryptocurrency Management Editor Mohd Ma’Sum Billah Finance, Insurance, Fintech and Investment, Islamic Economics Institute King Abdul Aziz University Jeddah, Kingdom of Saudi Arabia ISBN 978-3-030-10748-2 ISBN 978-3-030-10749-9 (eBook) https://doi.org/10.1007/978-3-030-10749-9 Library of Congress Control Number: 2019932958 © The Editor(s) (if applicable) and The Author(s) 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifcally the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microflms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specifc statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affliations. This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland This book is dedicated to the remembrance of my most beloved parents Allamah Mufti Nur Mohammad (r) and Ustazah Akhtarun Nisa’ (r) who have nourished me with their love and wisdom. May Allah (swt) shower them with His Love and Mercy and grant them Jannat al-Ferdaus Nuzulah. I would also dedicate this book to my lovely wife Dr. Khamsiah Nawawi and our heart-touching kids Dr. Ahmad Mu’izz Billah, Ahmad Mu’azz Billah, Ahmad Muniff Billah and Akhtarun Naba’ Billah for their continuous support and sacrifces. May all be blessed with Muwaddau Wa Rahmah, Qurratu A’yun and Mardhaati Allah (swt) in the life and the next. This book is also dedicated to the Ummah, the whole of humanity and creatures. Mohd Ma’Sum Billah FOREWORD From the early days of bartering, man was looking for a means to eas- ily exchange when selling or buying basic goods such as food, medicine and clothing. The use of precious metals and stones solved such need until the second half of the seventeenth century when banknotes were offcially introduced in Sweden by a full backing of the state and gradu- ally spread in other European countries to solve the multiple problems of using gold and silver. The establishment and growth of money exchange service providers and banks later with their networks encouraged saving, investment and money transfers, subsequently enhanced cross-border trade. The issuance of banknotes was always based on gold and silver, and issuers were printing on their issued banknotes their undertaking to exchange the units of their currency with a specifc weight of gold to ensure the trustworthiness of their banknotes which must carry the seal of the issuing country’s central bank and the signature of its governor. The use of gold and silver complies with Islamic Shari’ah jurisprudence, therefore, banknotes, as well, were accepted as they were based on gold and silver and later special drawing rights SDR which is issued by the IMF and recognized by its member countries. Islamic fnancial institutions are thriving to establish and promote Shari’ah compliant products, and for the last 55 years, the Islamic fnance has signifcantly secured its global platform with utmost suc- cess. Today, Islamic fnancial products are not confned within Muslim countries and Islamic banking institutions, but crossing the border to non-Muslim world and conventional banks. The asset size of Islamic vii viii FOREWORD fnance hits USD 2.3 trillion while its annual growth rate is about 18% with a signifcant achievement as compared to what in the conventional counterparts. Cryptocurrency is a new dimension in the contemporary economic era, which has been rapidly growing with utmost appreciation from dif- ferent classes of the global market despite numerous shortcomings that are surrounding it. There are number of cryptocurrencies offered in the cyberspace, among them are: Litecoin (LTC), Ethereum (ETH), Zcash (ZEC), Dash (DASH), Ripple (XRP), Monero (XMR), Bitcoin Cash (BCH), NEO (NEO), Cardano (ADA) and EOS (EOS). All those digi- tal currencies offer their coins or tokens in their respective platforms rely- ing on their decentralized policies and strategies. Although the people across the world and particularly the Muslim communities are expecting a Shari’ah alternative cryptocurrency model to meet the demand in the market, it has been observed that, no Shari’ah model of cryptocurrency has so far been effectively in use yet. It is worth noted here that, there are numerous players in the cyberspace claimed to have designed Shari’ah model of cryptocurrency, perhaps in the conceptual level, but not in reality with effective paradigm yet. However, in the Gulf region, Saudi Arabia and the UAE have launched, recently, a joint cryptocurrency which will be limited to banks during its frst stages. The currency operates on the use of a distributed database between the central banks and the participating banks from both sides, among which several Shari’ah compliant banks that have to observe directions set by their Shari’ah boards in this respect. There are writings, comments, views and thoughts on Islamic model of cryptocurrency available particularly in the social media, but compre- hensive academic or professional writing is not suffciently produced yet in meeting the global desire among the academia, industries or policy makers. Thus, the initiative of Prof. Dr. Mohd Ma’Sum Billah (a renowned Islamic fnance scholar) in producing this book Halal Cryptocurrency Management is timely to meet the demand of the contemporary world to be benefted with Halal Cryptocurrency solution. I found this book, which addresses the subject with comprehensive analysis, intellectual dis- cussion and empirical solution as a pioneer guide and reference for the academia, researchers, professionals, industrialists, entrepreneurs, deci- sion makers, promoters, programmers, students and people in general who are involved or have interest in cryptocurrency, digital currency or Halal cryptocurrency. FOREWOrd ix Further, I urge him to expand on this interesting subject by writing on a practical solution for Halal Cryptocurrency endorsed by the Islamic Development Bank IDB using its nominal Islamic Dinar (ID), which is a recognized, unissued, currency by its 57 country members and can be used as the base for secured new Shari’ah compliant cryptocurrency. Finally, it is to my great honor to write this foreword for this pres- tigious title. May we all be blessed with true knowledge and its rightful practices. Kingdom of Saudi Arabia Saleh A. Alawaji Alghamdi March 2019 Secretariat of the Council of Ministers Offce of the Advisor PREFACE Halal cryptocurrency is a Shari’ah compliant digital currency operated within the ambit of Maqasid al-Shari’ah (divine objectives) through cryptography based on a blockchain technology (platform). A crypto- currency business is a peer-to-peer transaction by encryption thus ena- bling the transaction to be nodded and recorded in the ledger account. Through such action of encryption the user creates own e-wallet for ena- bling him or her to manage own account in the cyberspace within the ledger. Its blockchain technology, system, model, objectives, operational mechanisms, technicalities, culture and all activities shall be in total com- pliance with the Shari’ah principles (Halal standard), which shall regu- larly be advised by the company’s board of advisors, screened through by the company’s technical experts prior to the approval by the Shari’ah advisory board (SAB) of the company and thereafter shall be operated or executed accordingly. Cryptocurrency through the blockchain technology is a cyber-space economic revolution in the twenty-frst century. Numerous players are in the market globally to offer cryptocurrency platforms, but with many shortcomings like, lack of regulatory supports, poor strategic planning, uncertainty and mostly with no backing asst, but only on virtual assump- tion. The Halal model of cryptocurrency is timely to fll the gap of the ongoing shortcomings in the cryptocurrency market. A Halal cryptocur- rency model thus shall be backed by valued asset or be an asset-backed platform, operated based on valued assets (coins); transactions are based on Shari’ah hybrid instruments of al-Bai wa al-Shira’ (trading), xi xii PREFACE al-Wadiyah (deposit), al-Amanah (trust), al-Ijarah (service charge), al-Mudharabah (co-partnership), al-Wakalah (agency), al-Ju’alah (reward) and al-Tabarru’at (donation), concerns about humanitarian well-beings, regulated by the standard Shari’ah principles al-’Aqd and other related rules, opposes to uncertainty in any component and liberty in enjoying with legitimate (Halal) investment return. Thus, the Halal cryptocurrency model has the greater opportunity to attract the global cryptocurrency market with sustainable existence in the emergence of blockchain technology. The prime objective of a Halal cryptocurrency model is to create an enterprising and entrepreneuring based community for all across the world through Halal cryptocurrency management and participation globally. This may ultimately fght the poverties, jobless, domestic eco- nomic crisis and world eco-catastrophe. A Halal cryptocurrency manage- ment is with universal character welcoming, encouraging and benefting to all mankind regardless of one’s religion, race, status, gender, color or even nationality.