Title

Cryptocurrency: regulatory, shariah and social issues; a systematic review

Submission Type

Paper Presentation

Abstract/Description

Money has evolved into different forms with the passage of time from cowrie-shell and salt to cryptocurrency. Cryptocurrency is a decentralized, distributed virtual currency using cryptographic techniques based on the blockchain. It is also called private currency which is not under control of any government and came into existence after global financial crisis of 2007. Cryptocurrencies are validated by miners working through consensus by investing resources in the form of efforts and computing power. This study is a systematic literature review that has uncovered various themes but has focused on regulatory issues, Shariah issues, the nature of cryptos, and social issues inter alia. Currently, cryptocurrencies are not officially recognized by any government and are not part of the formal financial system. This lack of regulation has rendered crypto highly volatile and is used in illicit activities. This volatility and lack of government recognition have posed Shariah issues which is why some Shariah scholars consider it halal while others deem it haram. In addition to these main issues, there are also some social issues associated with cryptos, such as the level of public awareness, ease of processing, hacking threats, and environmental pollution due to their intense energy use. Interestingly, Shariah scholars who along with Shariah qualifications, also have an understanding of technology especially blockchain consider cryptos halal than those scholars who have just Shariah knowledge. This can safely lead us to say that more awareness and understanding of blockchain technology especially by Shariah scholars will help identify the underlying Shariah parameters in cryptos. Crypto also helps push the social finance which is increasingly being used in charities such as zakat, waqf, achieving SDGs and enhancing financial inclusion among others. There are also criticisms of cryptos as they are used in illicit activities, tax evasion and create environmental pollution due to the intensive use of energy and electronic waste but these activities are not internal to it and can be tamed through proper regulations and the use of green energy solutions.

Session Chair

Dr. Mohamed Eskandar Shah Mohd. Rasid, Associate Professor, Hamad Bin Khalifa University (HBKU)

Session Host

Dr. Rizwan Malik, Head, Standards Implementation & Strategic Developments AAOIFI, Bahrain

Start Date

31-5-2022 4:30 PM

End Date

31-5-2022 4:45 PM

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May 31st, 4:30 PM May 31st, 4:45 PM

Cryptocurrency: regulatory, shariah and social issues; a systematic review

Money has evolved into different forms with the passage of time from cowrie-shell and salt to cryptocurrency. Cryptocurrency is a decentralized, distributed virtual currency using cryptographic techniques based on the blockchain. It is also called private currency which is not under control of any government and came into existence after global financial crisis of 2007. Cryptocurrencies are validated by miners working through consensus by investing resources in the form of efforts and computing power. This study is a systematic literature review that has uncovered various themes but has focused on regulatory issues, Shariah issues, the nature of cryptos, and social issues inter alia. Currently, cryptocurrencies are not officially recognized by any government and are not part of the formal financial system. This lack of regulation has rendered crypto highly volatile and is used in illicit activities. This volatility and lack of government recognition have posed Shariah issues which is why some Shariah scholars consider it halal while others deem it haram. In addition to these main issues, there are also some social issues associated with cryptos, such as the level of public awareness, ease of processing, hacking threats, and environmental pollution due to their intense energy use. Interestingly, Shariah scholars who along with Shariah qualifications, also have an understanding of technology especially blockchain consider cryptos halal than those scholars who have just Shariah knowledge. This can safely lead us to say that more awareness and understanding of blockchain technology especially by Shariah scholars will help identify the underlying Shariah parameters in cryptos. Crypto also helps push the social finance which is increasingly being used in charities such as zakat, waqf, achieving SDGs and enhancing financial inclusion among others. There are also criticisms of cryptos as they are used in illicit activities, tax evasion and create environmental pollution due to the intensive use of energy and electronic waste but these activities are not internal to it and can be tamed through proper regulations and the use of green energy solutions.