IOTA Achieves Shari'a Compliance: Paving the Way for Islamic Finance Integration

IOTA recently achieved Shari’a certification from the Cambridge Institute of Islamic Finance, confirming its adherence to Islamic principles and legal requirements. According to the announcement from the IOTA Foundation, this certification integrates a Shari’a Governance Framework and ensures annual compliance reviews, enhancing trust and supporting the project’s growth in the Middle East and globally.

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Islamic finance refers to a system of banking and financial practices that complies with Islamic law, known as Shari’a. This system prohibits the collection and payment of interest (riba), promotes risk-sharing, and emphasizes ethical investments. Financial transactions under Islamic finance must be backed by tangible assets or services, fostering a more stable and equitable economic environment.

To strengthen its commitment, the IOTA Ecosystem DLT Foundation has been established in Abu Dhabi, United Arab Emirates.

Shari'a compliance means following Islamic business principles, continuously overseeing adherence to Shari'a rules, and maintaining ethical operations. The IOTA Token uses a Shari'a Governance Framework, checked yearly by the Cambridge Institute of Islamic Finance, which serves as an independent advisor, to ensure it meets these standards.

According to Dominik Schiener, Co-Founder and Chair of the IOTA Foundation:

Shari’a compliance significantly benefits the IOTA Ecosystem DLT Foundation by enhancing its credibility and ethical standards, which are essential for promoting IOTA technology and the IOTA token within Muslim communities.

The initiative should help IOTA expand its business in the Middle East while adhering to the region’s compliance principles.

With the growing economies of the Islamic world and the Middle East, the importance of Islamic finance is expanding globally. Unsurprisingly, this trend is also extending to the world of cryptocurrencies.

Interestingly, the Islamic world remains quite divided on the topic of cryptocurrencies. While some authorities label most large cryptocurrencies as Halal (permissible), others adopt a more conservative stance, deeming them Haram (forbidden).

For example, in Indonesia, the largest Islamic country, the National Ulema Council has banned cryptocurrency, citing issues of uncertainty and potential harm. Conversely, many investors from Islamic countries argue that investing in cryptocurrencies is permissible as long as the associated projects comply with Halal principles.

This dilemma mirrors the broader non-Islamic world, where opinions are similarly split. Some regulators ban cryptocurrencies due to concerns about speculation and potential harm, while others embrace them for their technological advancements and inherent value.

As global regulatory perspectives on cryptocurrencies mature, acceptance within the Islamic world is likely to increase, aligning more closely with trends in traditional financial markets.