Stellar Corners the 1.6B Muslim Market with Shariah-compliant Blockchain

Chynge leverages Stellar in Muslim markets starting with Indonesia, the United Arab Emirates and Brunei Darussalam

The certification of Stellar as Shariah-compliant blockchain is a shot across the bow of Bitcoin, Ethereum, Ripple, and others that Stellar is a formidable player in the payments protocol. The Stellar decentralized ledger technology (DLT) coupled with its Stellar Lumens (XLM) cryptotoken meets the requirements of Islamic financial products and solutions, and suddenly opens up to the financial markets of 1.6B Muslims.

The certifying authority of the Shariah Review Bureau (SRB) in Bahrain is one of the six countries in the alliance of the Gulf Cooperation Council (GCC) countries. The certification is portable and is recognized worldwide thus accelerating the adoption of Stellar in North Africa, South-East Asia, and other Muslim-predominant markets in addition to the GCC. Muslims constitute the second largest religious group, after the Christians, and they make for a market that cannot be ignored and that can be carefully acquired with cultural sensitivity.

The annual haj pilgrimage of Muslims at the Ka’aba in Mecca, Saudi Arabia. Credit: Encyclopedia Britannica.

The key tenets of attaining Shariah certification with respect to payments include:

1. Riba: in its simplest form, the charging of interest is forbidden. In payments, this is typically float where interest is charged or earned while holding funds overnight. It could also be in the form of credit facilities where funds are delivered to the recipient before the sender has credited the payment account. Cryptocurrencies such as Chynge, Bitcoin and Ethereum, and cryptotokens such as Stellar and Ripple do not bear any interest.

2. Gharar: are transactions that are clear and unambiguous. In payments, this would be the value of the cryptocurrency as a store of value and means of exchange (Bitcoin, Ethereum, Chynge), or the cryptotoken as a utility token to conduct a transaction on the platform (Stellar, Ripple). The features of the cryptocurrency or cryptotoken are clearly defined (no ambiguity) with three main ways for price appreciation: HODL, utilize, or invest. One makes money from buying low and selling high without any occurrence of riba.

Another aspect of gharar is clear and unambiguous transactions. The delay in the verification of payment is considered non-compliant in gharar. Time is relative, and Bitcoin may take hours to validate a transaction, and Ethereum may take up to thirty minutes. The transaction time of within seconds for Stellar increases the compliance with gharar.

3. Zakat: is the corporate social responsibility (CSR). Zakat is a form of property tax and allows the distribution of wealth. The stated CSR objective of financial inclusion of Stellar is a clear indication of zakat. The financial inclusion of Chynge extends beyond the unbanked and underbanked to include the digital identities of refugees and the distribution of humanitarian aid that stems financial leakages within the supply chain.

4. Haram: are the forbidden activities, and haram activities that pertain to payments include pornography, prostitution, gambling, pork, and intoxicants such as drugs and alcohol. Conversely, activities that are deemed permissible are known as halal.

Dato’ Mahdi Rahman presents his credentials to the United Nations. Credit: United Nations.

Shariah compliance also makes for good business practice. Dato’ Mahdi Rahman, Brunei Darussalam Ambassador to the United Nations (UN) in Geneva, Switzerland, and a former Permanent Secretary to the Ministry of Religious Affairs (MORA) in Brunei Darussalam, reminds us that

“Islam is centered on making peace and being in a mutually peaceful environment, and Shariah compliance ensures our business conduct aligns with responsibility, sustainability, respect for others, and respect for the world we live in.”

Chynge is fortunate in having Dato’ Mahdi provide informal advice on Shariah compliance and financial inclusion based on UN goals and objectives.

Similarly, CEO and Founder Robin Lee of HelloGold — a financial services platform offering services and products for the underserved and unbanked — shared:

We believe we have to be Shariah compliant to truly be financial inclusive, otherwise, we’d be slicing off a large portion of the world economy. Our Shariah certification opens doors with financial institutions, partners and investors and gives us immediate and unquestioned credibility in Muslim countries.

The inheritance of Shariah properties across content, applications, and platform

The Stellar platform is Shariah-compliant but that does not constitute the applications and the content that ride on the Stellar platform to be automatically Shariah-compliant. Activities that are haram will immediately invalidate the Shariah compliance of the Stellar platform.

Stellar offers a foundation that is Shariah compliant. The application layer then needs to be Shariah compliant. For instance, if a gambling or alcohol delivery dApp uses the Stellar blockchain, it does not make these apps Shariah compliant because gambling and alcohol are haram in Islam.

The business activities of a licensed and regulated exchange house such as Chynge may receive Shariah certification if the customers that use its services are in businesses that are not haram. If the customer of an exchange house that is Shariah compliant conducts money transfers that are resultant from drugs, prostitution, gambling or other haram activities, these haram activities do not automatically become halal for running in a Shariah-compliant service on a Shariah-compliant platform.

The Stellar platform makes an excellent use case for payments but with its shiny, new Shariah certification, Stellar may expand its reach into other Islamic financial products including Mudarabah (sale-purchase), Wadiah (current account), Sukuk (bonds), Taqaful (insurance), and Ijarah (leasing). The foresight of the insurgent Stellar management team to work with Muslim countries has leapfrogged the technology ahead of the incumbents and Chynge is proud to be aligned with Stellar as a strategic partner to offer relevant financial services and products to the Middle-East, North Africa, and of course, our backyard here in South-East Asia.