Digital tokens engineered by Singapore’ IBF DigiLabs specifically for impact-based projects have been certified as compliant with Islamic laws, underscoring the growing acceptance of cryptocurrencies in the Muslim world.
The social cryptos are part of IBF DigiLab’s Confluence project, a platform to measure, rate and exchange impact units. IFN’s sister publication, IFN Fintech, previously reported that the Confluence project gained acceptance to the FIKRA Islamic Fintech Accelerator Program, an initiative by the Securities Commission Malaysia and UN Capital Development Fund, forming its first cohort of entities spearheading measures to enhance the nation’s Islamic capital market.
The Shariah approval was issued by Amanah Advisors.
“The social cryptos operate under the Shariah concept of Hiba bil Shart (conditional granting) where social cryptos are credited to a donor’s wallet upon the successful presentation of an impact report by a donor after donating to a third-party charitable project,” explained Mufti Faraz Adam of Amanah Advisors.
IBF DigiLab is part of IBF Net which is working on several Islamic fintech projects. Confluence is one of the few designed in line with the UN Sustainable Development Goals. It converts impact units into social cryptos based on verifiable data.
“This has several strong merits over the conventional way of donating to or investing in impact-creating projects and waiting for the intended outcome. The use of social cryptos ensures that there is zero time-lag between donation/investment and impact, since impact creation precedes the donation/investment act. Furthermore, impact measurement tools are employed by a third party (Platform) with no incentive to overstate/understate while project owners have little control over impact data generation,” explained IBF. “Social cryptos also provide divisibility and granularity to impact assets. Donor/investor can easily change the nature of his/her footprints across various sectors and design his/her preferred portfolio of impact donations or impact investments.”
IBF Net has big ambitions: it is working toward “miniaturizing” the Islamic economy by developing smart contracts and use cases for philanthropy, and non-profit and for-profit sectors. Confluence is part of a bigger project to achieve that.
While controversial within the Shariah finance space, cryptocurrencies are gaining more mainstream momentum within the industry as stakeholders develop a deeper understanding of the asset class and industry practitioners develop solutions to support the Islamic economy.