Well-known Muslim scholars and financial advisors have released a whitepaper in which they have declared Ethereum permissible, or “Halal,” according to Islamic Sharia law. With Muslim buyers more clear now, Ethereum demand may rise further.
It has been a lingering question whether Ethereum is compliant with Islamic Sharia law. Virgil Griffith, a programmer and special products head at the Ethereum Foundation, did the initial study on the topic in Oct. 2017. And now this white paper released by Amanie Islamic Finance and Shariah Advisor of Oman points out that Ethereum actually adheres to Shariah law.
In Islam, lending money for making profits in the form of interest payments, often referred to as usury, is deemed “haram,” or a sinful act. However, earning profits with appreciation of some physically-backed asset, such as gold or real estate, is in compliance with Shariah law.
Most of crypto assets are deemed haram as there is no physical asset to back them. Rather, crypto coins are considered a pseudo-investment in some corporation. As most of the cryptocurrencies are considered securities, as the US SEC has declared, the impression of interest raises some eyebrows among those who take Islamic Finance seriously.
On the contrary, Ethereum is considered more of a “utility token” which works as a typical currency powering Ethereum, Amanie claims. Hence, owning Ethereum is deemed “Halal.”
Besides that, the scholars reserved their thoughts on certain Ethereum use cases because various tokens run on the protocol. For times when these tokens are used for raising money for companies, which is more like interest, such an activity would be illegal and haram according to the Islamic law.
For most part of their analysis, however, the authorities declared that Ethereum’s proof-of-work and proof-of-stake both are compliant with Sharia law. The proof-of stake, however, will still remain in debate once ETH 2.0 is launched.
Amanie is a highly-appreciated voice of Islamic finance industry. Even though their opinion isn’t final at all, it still holds enough weight among devout Muslims. With around 1.8 billion Muslims around the world, the decision is expected to have serious ramifications for ETH demand in the foreseeable future.
This new ruling relates closely to the recent comments from the US SEC chairman, affirming that Ether has a closer resemblance to a commodity instead of a security.
Atif Yaqub, a blockchain expert stepping up to help Amanie with some technical particulars, said:
“Individuals who are more faith conscious can now engage without any doubt that the emerging tech is fully permissible to use.”