OBC-UTM Shariah-Compliant Digital Coin Research Findings
Medini City, Iskandar Puteri, Johor, 20 January 2020: Japanese digital media giant OKWAVE Inc’s (3803:JP) blockchain arm, OKBLOCKCHAIN CENTRE Sdn Bhd. (OBC), has concluded its collaborative research on shariah-compliant digital coins with Universiti Teknologi Malaysia (UTM). The study, which began on 30th December 2018, investigated the viability, importance and requirements of shariah-compliant cryptocurrency.
With a global cryptocurrency user base that exceeds 30 million people, the adoption of cryptocurrencies in commerce is a growing trend among global markets. However, statistics show that cryptocurrency usage in Muslim countries are amongst the lowest worldwide, which is attributed to their reluctance in legitimizing cryptocurrencies for fear that they are not compliant with Islamic law.
OBC-UTM’s research cites two “fatwas” (Islamic legal pronouncements) on cryptocurrencies, one of fatwa (Fatawa Islam, No. 219328) states that cryptocurrencies are currencies in the digital world (virtual networks) and are considered shariah-compliant despite their non-physical nature because from the standpoint of insured value, their status is the same. Whilst another fatwa ( Fatawa Syabakah Islamiyah, No 191641) states that while cryptocurrencies, unlike general legal tender, fiat notes and metal coins, are not physical in nature, trading between cryptocurrency and physical legal currency is considered to have the same mechanism as sharf transactions (currency transactions) and therefore acceptable. The study concludes that according to Islamic jurisprudence, the basic shariah status of cryptocurrency and blockchain technologies are allowed (or mubah in Islamic jurisprudence) on the condition that the cryptocurrency and business activities related to it do not involve any of these five elements; uncertainty ( gharar ), speculation ( maisir ), injustice ( zulm ), usury ( riba ) and/or fraud. In other words, the legality of cryptocurrencies under Islamic law is to be determined on a case-by-case basis.
Professor Ts. Dr. Kamalrulnizam ABU BAKAR, Head of Research Project on “ Study of Shariah Compliant Digital Coin” in UTM commented, “Not to be left behind in a global economy where cryptocurrencies are becoming commonplace, OBC-UTM’s research findings propose the development of a shariah-compliant cryptocurrency ecosystem built on six essential shariah regulated components, shariah shield, blockchain platform, applications, exchangers & marketplaces, finance regulation and research & development.”
With regards to the technical aspects of blockchain technology, OBC-UTM’s paper proposes that the shariah-compliant blockchain ecosystem be built in two stages, Ethereum’s blockchain platform, as it is closest to shariah compliant and has large transaction options; and followed by a new blockchain platform built with shariah-compliance in mind. Each blockchain platform will have two types of cryptocurrencies, the main coin (virtual currency) and the application coin (utility tokens for specific apps). In prior, two papers from this research were presented at the 4th International Halal Conference (INHAC) that was held in Osaka, Japan on 22nd – 23rd April 2019.
The ecosystem comprises four shariah based features; permissioned ledger on public network for registered users, stable coin that is backed up by gold with window price mechanism, forensic transaction system, and KYC/AML compliant protocol. The features are aimed to tackle the issues of gharar (uncertainty), maisir (speculation), riba (usury) and zulm (injustice). Moreover the novel approach of forensic transaction system will significantly augment the existing KYC/AML as well as combat fraud & deception.
Recently, a member of OKWave Group, LastRoots Co., Ltd., has successfully acquired a registered cryptocurrency exchanger license from the Kanto Finance Bureau (Virtual currency exchange registration: Kanto Local Finance Bureau No.00018). Following their first successful licensed coin called “c0ban” (recently adapted into “c0ban project community”) , OKWave Group plans to create a digital coin to fulfill demands for shariah-compliant cryptocurrencies in the Muslim world, an idea welcomed by Malaysian Prime Minister, Tun Dr Mahathir Mohamad & Muslim leaders at the Kuala Lumpur Summit 2019.
“These shariah-compliant digital coins will have certain competitive advantages in saturated cryptocurrency pools of the future. The stability of the coins will make users feel more secure with their cryptocurrency investment and governments will be more comfortable with the widespread use of the currency, thanks to the coin’s novel approach in supporting anti-money laundering and consumer laws,” added Matsuda Gen, the Chief Executive Officer of OBC and Board of Directors of OKWave Inc.
About OK BLOCKCHAIN CENTRE Sdn Bhd (OBC)
OBC is a blockchain technology-based IT development center, responsible for the strategic advancement of the OKW Inc group (Japan). OBC is located at a Medini 9, Central Business District of Iskandar Puteri, Medini City. OBC is actively collaborating with Malaysia government agencies, local universities and prominent technology companies in making Johor as the renowned blockchain development hub. For more information, visit us at: https://www.okwave.global/
About OKWAVE Inc
OKWave Co., Ltd. was established in July 1999 as Japan’s first and largest Q & A site, aiming to “realize both physical and emotional well-being through the creation of a place to help each other and contribute to the development of the world”. OKWAVE (https://okwave.jp) has been in operation since January 2000. OKWAVE became a public company in June 2006 and is listed on Nagoya Centrex Market (3808: Nagoya). At present, OKWAVE is providing services for rewarding the members of society in the expansion of “Thanks Economy”(https://thanks-economy.com/) platform using combined technologies of AI, Blockchain and Information security.
OKWave has occupied the top share of the Japan domestic market for many years, providing domestic and international companies with consultation and solutions using Q&A, such as OKBIZ brand chatbot (https://www.okwave.co.jp/business/service/okbiz-ai-chatbot/) and AI agent services such as OKBIZ for FAQ, an FAQ system used by government agencies and Fortune 500 companies (https://www.okwave.co.jp/business/service/biz-faq-helpdesk/). For Community Support, a customer participation-based support community is also connected with OKWAVE (https://www.okwave.co.jp/business/service/okbiz-cs/).
OKWave also dynamically expanding businesses into areas such as Inbound Traveler Solutions and Fintech. https://www.okwave.co.jp/about/en/business/
About Universiti Teknologi Malaysia, UTM
About Universiti Teknologi Malaysia (UTM): Established in 1972, UTM earned the status of a Research University on 10th of June 2010. Comprising 1,407 academic staffs with Doctor of Philosophy degree, UTM currently has 26,316 students with 3,974 are international. To date, UTM has achieved world recognition by the QS World University Rankings which are #217 in the world and #46 in Asia.
With its vision to be a premier global academic and research institution, excelling in science, technology and engineering, UTM is moving forward to reach greater heights in terms of capacity building and professional development to achieve UTM Desired State by 2020. More details at www.utm.my.
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