Singapore, SINGAPORE – Shariah-compliance when applied to investment products is a term as misunderstood as “halal” when applied to food. Under Islamic law or Shariah law, Muslims can only invest in Shariah-compliant investment products which have three requirements. First, Shariah law forbids usury, or the charging of interest on deposits. Second, there must not be any “unethical concerns” in the investment product, which Islamic scholars have defined to include alcohol, banks (which charge interest), gambling, pornography, tobacco or any other businesses which derive more than 5 percent of their income from any of these unsavory activities. Third, Islamic finance places great emphasis on the validity and transparency of the contracts so any contract which fails to pin down its key components, for example price, subject matter or delivery date, would potentially cause dispute and be null and void in the eyes of Shariah law. Which is why the Stellar Development Foundation’s announcement yesterday that it has obtained compliance from the Shariah Review Bureau (SRB), an agency licensed by Bahrain’s central bank is so significant and opens an entirely new pool of investors for Stellar Lumens (XLM) tokens.
The Middle East, with its large Muslim population has represented tremendous potential for cryptocurrencies, with aspiring global financial center and Shariah-compliant financial center Dubai taking the lead. Last year, one of Dubai’s largest property developers had even launched a Shariah-compliant cryptocurrency with which to purchase some of the city’s hottest properties. But while many devout Muslims may be interested in purchasing cryptocurrencies, their ambiguous status with regards to Shariah-compliance has left many on the sidelines. Stellar’s move therefore would be a welcome one by Muslim cryptocurrency enthusiasts, in particular Islamic financial institutions in the Gulf Cooperation Council, which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Indonesia and Malaysia, in Southeast Asia also represent huge untapped pools of Muslim cryptocurrency investors, who may see Shariah-compliance as the tipping point for their participation in digital assets.
The announcement caused a massive surge in Stellar’s tokens, with a 27 percent rise in 24 hours according to data from CoinMarketCap.com. The Middle East as well as Southeast Asia have huge migrant worker populations and the possibility of using Shariah-compliant Stellar tokens as a form of frictionless value transfer presents a tremendous opportunity for workers who can sometimes lose as much as 10 percent for traditional money remittances. And Stellar tokens being ranked the world’s sixth largest cryptocurrency by market capitalization should go someway to assuring liquidity, which is crucial for its use in cross-border value transfer.