Coin offerings are a new way to finance technological activities. But do they comply with Sharia law?
Certain investors are bound by Shariah principles for their project financing activity. Blockchain and its operating principles could offer them new opportunities.
Blockchain protocols can offer new possibilities to support the development of economic activities. Used as a mean to finance innovative projects and to develop them on the international stage, decentralised transaction systems are of high interest to companies looking to work with an international community of investors and clients likely to understand their offer.
For some investors, tokens’ issuance thanks to the blockchain technology could represent a new opportunity to support the development of a project while respecting Shariah principles.
In short, where investment is concerned, the five cardinal principles of Shariah must be respected. The concepts of interests, speculation, profit- and loss-sharing, and lawfulness of the underlying sectors and the use of tangible goods as underlying assets must be examined.
Respecting these principles necessarily requires a case-by-case analysis. It is of course imperative to take into account the nature of the token, the prerogatives that it offers and the structure of the blockchain on which the operation is carried out.
An activity backed by a blockchain could for instance enable its participants (issuing company and economic partners) to swap service offer and demand without a speculative objective or unbalanced relationship as regards profitability.
If these principles are respected, blockchain could offer a new outlook to those actors adhering to Shariah principles.