Blockchain, Fintech, and Islamic Finance: Building the Future in the New Islamic Digital Economy

278 Pages·2022·39.047 MB·English

by  Hazik Mohamed, Hassnian Ali

HazikMohamedandHassnianAli
Blockchain,Fintech,andIslamicFinance

Hazik Mohamed and Hassnian Ali
Blockchain,
Fintech, and
Islamic Finance
Building the Future in the New Islamic Digital Economy
2nd edition
ISBN978-3-11-074489-7
e-ISBN(PDF)978-3-11-074501-6
e-ISBN(EPUB)978-3-11-074514-6
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Dr.HazikMohamed:
Idedicatethisbooktomydaughters,AliyaandNadrahuda.andtoalltheir
cousins,youngandold.
Thisbookcontainstheshiftingtrendsoftheworldthatyou’regrowingupin.
Prepareyourcontributionsfortheworldtocome.. .andtheHereafterthat
awaits.
HassnianAli:
First,tothemostdevotedandconscientiouspersoninmylife,nooneelse,
mylatefatherGhulamHussain.

Advance Praise for Blockchain, Fintech, and Islamic
Finance
Theauthorsaretobecongratulatedforthisbook.Itisanimportantpioneeringeffort.
TheworkisonthefrontierofknowledgeinthenewareaofFintech.Asiswellknown,
the financialsector issufferingfromlow levels of trust in a trust-intensive industry.
Islamicfinancetooisfacingalow-trustenvironmentthathasdeniedittheuseofthe
strongestofitscharacteristics:risk-sharing.Asaresult,ithasresortedtodebt-based
financing. Blockchain/smart contracts provide potentially powerful tools to address
thelow-trustchallenge.TheauthorshavedoneagreatservicetoIslamicandconven-
tional finance by producing a book that should be read by anyone interested in fi-
nanceandeconomics.
–Prof.Dr.AbbasMirakhor,formerHolderoftheFirstChairofIslamicFinanceat
INCEIF;formerExecutiveDirectoroftheInternationalMonetary
Fund(IMF),WashingtonD.C.
This is an important contribution by the authors to two emerging fields – Islamic
financeandFintech.Inthisrespect,ittouchestwo frontiersasthisresearchcould
pave the way for the development of both fields. Fintech offers great potential for
reapingthebenefitsofIslamicfinanceandthisbookprovidesanexcellentoverview
of the issues and applications. I am confident that researchers, policymakers, and
practitionerswouldbenefitfromthisimportantwork.
–Dr.ZamirIqbal,VPFinanceandChiefFinancialOfficer(CFO)ofIslamic
DevelopmentBank(IsDB),Jeddah;formerHeadofWorldBankGlobal
IslamicFinanceDevelopmentCenter,Istanbul
In this digital era, new technology has proven to bring agility, scalability, innova-
tion,and efficiency inoperations andmeans of doingourwork. Thisbookargues,
persuasively, that the Fintech and Blockchain applications are not only the chan-
nels of fusing technology with Islamic finance; it also lays the foundation for new
Islamic digital economy, while keeping in view the Maqasid Al-Shariah. This book
isafirst-of-its-kindcontributiontotheliteratureonconstructingtheIslamicdigital
economy.
–Dr.HussainMohi-ud-DinQadri,Patron,InternationalCentreof
ResearchinIslamicEconomics(ICRIE)MinhajUniversity,Lahore
While the growth of fintech firms has already become a game changer in the con-
ventionalfinancialsector,itsapplicationinIslamiceconomyisstillinanincipient
stage.The authorsof thispioneeringworkdeserveappreciationto notonlyoffera
historical perspective on these exciting developments but also suggest ways to
buildingIslamicdigitaleconomywiththeuseofthesetools,especiallydistributed
https://doi.org/10.1515/9783110745016-202
VIII AdvancePraiseforBlockchain,Fintech,andIslamicFinance
ledgertechnology.Iwouldrecommendthisbooktoallthosewhoareinterestedin
buildingatrusted,just,andefficientIslamicdigitaleconomy.
–ZahidurRehmanKhokher,IslamicBnakingExpert
CentralBankofOman,Muscat
Theauthorshaveaccuratelydeterminedthattechnologyneedstobecomepartand
parcelofeconomics,finance,andpolicyacrossMuslim-majoritycountries.Itiscriti-
calfortheecosystemtounderstandwhatblockchainisanditspotentialapplication.
Theauthorslaythegroundworkinthisbook,anditisamust-readforthebroadaudi-
ence whose desire is to focus on a next generation technology, its adoption, and
implications.
–AhmadMagad,formerChairman,MDIS,Singapore
Asapioneeringeffort,thisbookcontinuestobeapopularreadformanyresearch-
ers and industry practitioners. This second edition is further illuminated by two
new chapters that are often talked about or researched but not satisfactorily ad-
dressed. One focuses on the unified Islamic currency which has various implica-
tions on trade and cooperation, while the other demonstrates risk management
applicationsforIslamicfinancialinstitutionsthroughadvancedtechnologies.
–Dr.AshrafulMobin,FounderandManagingDirector,iFINTELL,Malaysia
TherealbeneficiaryoftheCOVID-19pandemicistechnologyingeneralandFintech
inparticular. Inthepost-COVIDworld,IslamicFinancewillremainrelevantto the
needs of the Muslim communities around the world, if it not only adopts modern
technologies,liketheblockchain,butratherexcelsinit.Theauthorshavecovered
a wide range of topics under the broader theme of Islamic Financial Technology.
This edition includes some new areas that were excluded in the first one, namely
Decentralized Finance (DeFi), Securitized Token Offerings (STOs) and Quantum
Computing, etc. There is a completely new chapter on Data Risk Management for
Advanced Islamic Financial Institutions. All the changes and additions make this
edition an improved resource for those interested in understanding the role of Is-
lamicfinanceinafuturisticcontext.
–Dr.HumayonDar,Chairman,
DirectorGeneral,CambridgeInstituteofIslamicFinance
Acknowledgments
AllpraisestoAllah,theAll-Compassionate,theMostMerciful,withoutWhomnoth-
ing is possible. Blessings upon our beloved Prophet Muhammad and upon his
familyandcompanions.
WeacknowledgetheadviceandrecommendationextendedbyProfessorAbbas
Mirakhor, Nick Wallwork in the first edition, and Steven Hardman in the present
secondedition.
We also want to express our appreciation to Jaya Dalal and her team again,
whohavebeenverysupportiveandresponsiveinmakingthissecondeditionmeet
ourexpectationsafterahighlysuccessfulfirstmanuscript.
Hassnian would like to express his profound gratitude to his mother, Muniran
Bibi, and his late father. Their forbearance, guidance and support has been excep-
tional, and hewould not be whoheistodaywithoutthem. Hassnianalso acknowl-
edges his wife, Hadia Hassnian, dear sister, Rakhshinda Parveen, his elder brother,
ArfanAli,andespeciallyhistwinbrother,MuhammadSaqlain,whounderstandsand
encourageshimtoachievegreatthings.
Dr Hazik recognizes his family for being the heart of inspirational support, es-
peciallyhiswife,AnisaHassan;hissiblings,theirspouses,andhisin-lawsfortheir
generosityandprayers;andhisbelovedparents(deceased)wholaidthefoundation
ofbelief,endeavor,fairness,andjustice.
https://doi.org/10.1515/9783110745016-203