Regulation and regulatory clarity is something the crypto space needs and is actively seeking because it will allow institutions and big “players” to invest in cryptocurrencies. An important part of this clarity is how Sharia views cryptocurrencies and whether it is allowed to invest in crypto.
Sharia, Sharia law, or Islamic law is a religious law forming part of the Islamic tradition. According to Sharia, investments which are in accordance with the Islamic Principles are called Shariah-compliant.
The Shariyah Review Bureau (@ShariyahReview twitter handle), licensed and regulated by the Central Bank of Bahrain, is a proxy for institutions seeking Sharia Supervisory Board services, Product certification, Audits and Equity screening.
Back in April 2018, the SRB released a research paper, “The Shariah factor in Cryptocurrencies and Tokens”. A guide meant to prompt and engage global Islamic finance bodies, Shariah scholars and Muslim economists to analyse, comment and build upon the arguments expressed.
The guide seperates cryptocurrencies in two main categories: Coins and tokens. As mentioned in the paper, “A coin is a unit of value native to a blockchain. It is a means of exchange within the blockchain to incentivise the network of participants to use the blockchain. The sole purpose of a coin is to exchange value, and it has limited functionality beyond that. Cryptocurrencies like Bitcoin, Ether, Ripple, and Litecoin are all examples of native coins”. This is not something new and has been reported in the past, at least within the XRP community.
Although this does not clarify whether currency coins are Shariah compliant, recently some new information has come to light. Within a twitter discussion, the official SRB account clarified that coins (like XRP) which are being used for the exchange of value and remittances are generally Shariah compliant. However, due to the infancy of this industry and as knowledge increases, as a precaution, scholars prefer a full sharia review prior to pronouncements of sharia compliance.
Although this is not an official certification, this clarifies that it is highly likely that XRP will obtain Sharia compliance in the future. This coincides with a Dilip Rao (Global Head for Infrastructure Innovation at Ripple) statement made in the end of October 2018, at the Global Islamic Economic Summit in Dubai. He stated that “a lot of this technology aligned “very well” with Sharia principles”.
Another “interesting” comment made by the SRB when asked if we can expect a review of XRP soon by the Shariyah Review Bureau was that “they are being used for internal remittances in Islamic Banks”. Although it is unclear whether they were referring to XRP, it is quite clear that things are moving quickly in the region and more developments are to be expected.