By Margarita Vznuzdaeva
December 18th, 2018

Shariah-compliant crypto business: what should it look like?

Shariah-compliant crypto business: what should it look like?

By Margarita Vznuzdaeva
December 18th, 2018

If in Europe, Asia, and USA cryptocurrency businesses most frequently meet resistance from the financial regulators and legal authorities, Muslim countries have it worse. Here, religious factor lays down the law. Back in 2009, PwC in their Asset Management report underlined that, at the time, Muslims represented nearly a quarter of the world’s population and yet less than 1% off financial assets were compliant to Islamic law. Now the field is expanding, and companies that satisfy Muslim-world criteria exist all over the world.

Flickr, Attribution: Descryptive.com

Still, the Eastern market is much less occupied by foreign companies and remains an attractive harbor for expanding or launching your own business. So, we tried to figure out which requirements should a cryptocurrency firm adhere to in order to become Shariah-compliant.

The role of money in Islamic financial system

Here we substitute the “cryptocurrency” concept for “money,” showing the general attitude towards trading and flow of funds. Digital coins are also involved in these processes, so all restrictions concerning fiat money apply to crypto as well.

  • Prohibition of charging interest. As stated by the Financial Times, Bank of London in the Middle East, being a Sharia-compliant, reported that the main principles are avoiding all harmful activities such as charging interest. The prohibited way of earning interest is called “riba.”
  • Money as a medium of exchange. Referring to the Guardian interpretation, the Islamic financial system views money as a mean of sharing that doesn’t have any additional value. A Muslim cannot receive more money from lending it – be it a loan shark (usury) or a bank.
  • Banks offer services to create benefits. Therefore, Islamic accounts and their funds must be treated differently to standard bank accounts.  For example, instead of traditional accounts with given rate hikes, these financial institutions offer accounts that use profit and loss sharing method. The bank has to acquire clients money assets first, then receive profits.
  • Uncertainty is an enemy of the good. Risky investments with a high level of uncertainty (or gharar) also aren’t Shariah-compliant. All possible risks and losses must be disclosed to a client with nothing hidden or concealed. Moreover, these risks are shared between the client and the bank on agreed terms with the following division of the profits.
  • Social responsibility first. From a Muslim investor’s perspective, all the projects connected with gambling, adult entertainment, and other socially irresponsible areas are more likely to fail on the market. Those, who will try launching a useful business will probably make a fortune.
  • An approval from a certain authority. Businesses connected with financial operations and flow of funds have to get certified by the Shariah advisory firm to be recognized as Shariah-compliant.

Crypto business meeting restrictions

According to the Islamic Finance Development Report 2017 made by Thomson Reuters, crypto economy seems to be one of the key innovative spheres in Islamic finance in spite of wary attitude towards its nature, dubious reputation, and future perspectives.

Flickr, Attribution: Descryptive.com

Observing the role money plays in the Islamic world, two restrictions stand out as more likely ones to affect cryptocurrency businesses trying to enter the Middle East market.

Here they are:

1. The unreliability of cryptocurrencies and their volatile nature;

2. Ethical aspect, social usefulness of the products produced by the crypto businesses.

However, the devil is not as black as he is painted. The issue of unreliability isn’t even a problem for the stable coins projects. These digital coins backed by oil, gold, fiat money or other stable assets are closely linked with low volatile holdings and cannot be called risky. Indeed, this type of cryptocurrencies has its specific weaknesses like a problem of centralization and third parties involvement or proof of remaining a cryptocurrency, not a derivative.

The ethical aspect significantly narrows down the number of spheres for the business, but at the same time, it creates a competitive environment for the projects aimed at areas of social significance.

Shariah-compliant crypto businesses on the market

According to Business Insider, in August 2018 ADAB Solutions company announced its plans to launch the First Islamic Crypto Exchange that would be the first Shariah-compliant crypto exchange, making Muslims involved in the digital coins economy.

In October the same news was published by the Cointelegraph as a sponsored material, now the platform is on the pre-sale level. Nonetheless, the company expects to reach $146 million level of daily trading and $4.4 billion of monthly turnover by 2020.


By investing in FICE, you will not only support a needed and timely project for the Islamic Ummah of the world but also make a valuable acquisition that can bring a decent profit. Our team is dedicated to its business and will do their best to achieve all the goals set.

Timur Turzhan, founder and CEO of ADAB Solutions


Another already functioning project is called OneGram, listed on the Huulk exchange since the 17th of September. It is an example of stable coins backed by one gram of gold at launch. Each transaction made with the mentioned cryptocurrency produces a small fee that can be reinvested later to increase gold reserves and the amount of gold connected to a single token. According to the official webpage, this business is Shariah-compliant, “inherently regulated by rules imposed on financial operations in the Islamic world.”

Speaking of the ethical aspect, from the one hand, OneGram claims to be expanding the volume of gold backing their cryptocurrency (reminiscent of hoarding), yet from the other, enrolls into charity with its OneGram foundation financed by 2.5% of the transaction fee (which is 1%).

Recently, OneGram project was twice awarded Islamic fintech leader by two different organizations – the Islamic Retail Banking Awards and WIFA People’s Choice Award. About a month ago, a Swiss cryptocurrency company X8 was certified by the Shariyah Review Bureau as well. Its digital coins are also related to the stable ones, mitigating risks of devaluation, combining with fiat, gold and risk management software.

The following product is backed by 8 fiat currencies and gold, calling itself “the most stable cryptocurrency.” It is hard to understand the mechanisms of the cryptocurrency price regulation and its stability seems to be a bit questionable. Though, perhaps, it is just a question of the company’s further achievements and… time?