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Having received the Sharia certification, the Stellar Foundation will be working on developing Sharia-compliant applications using the Stellar technology for Islamic financial institutions.
Stellar, the seventh biggest blockchain platform is now the first distributed ledger technology (DLT) to have received a formal Sharia certification. In the official press release on Tuesday, Stellar notes that it is the first cryptocurrency project that is compliant with the Islamic regulatory requirements.
The Shariyah Review Bureau (SRB), a leading international Sharia advisory agency and a Central Bank of Bahrain licensee has reviewed the applications and properties of Stellar and has provided guidelines for making Sharia-compliant applications using the Stellar technology for Islamic financial institutions.
This is one of Stellar’s key strategies to enter the remittance market in the Gulf region. While talking to Reuters, Lisa Nestor, director of partnership at Stellar said:
“We have been looking to work with companies that facilitate remittances, including in the United Arab Emirates, Saudi Arabia and Bahrain. Its a huge market.”
Nestor also said that in addition to the cross-border payments, Stellar’s technology could be used in other areas like “asset digitization, and the firm has an ongoing partnership with IBM to develop such blockchain applications”. The official announcement from Stellar read:
“In partnership with SRB, this certification will help grow the Stellar ecosystem in regions where financial services require compliance with Islamic financing principles. For example, Islamic financial institutions in the Gulf Collaboration Council (i.e. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) and parts of Southeast Asia (e.g. Indonesia and Malaysia) will now be able to integrate Stellar technology in their Sharia-compliant product and service offerings.”
While talking to Reuters, Mansoor Ahmed, the Islamic advisory firm’s assistant general manager, talked about their decision to extend the certification to Stellar. He said:
“For the blockchain technology there was no issue, the main thing we needed to consider was the use of the underlying cryptocurrency.”
Moreover, in an additional 16-page document, the Shariyah Review Bureau (SRB) put forward its justification for giving Stellar the certification by reviewing the cryptocurrency and its applications against the standards published by the non-profit Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI). The SRB concluded:
“Based on provided information, SRB conducted its review on the Network’s guides, concepts and related material and did not find any provisions that are non-congruent to the principles of Shari’a. However, the users of the Network seeking to attain Shari’a compliance should take note that merely following the attached guidelines does not automatically ensure compliance to Shari’a.”
Several Islamic scholars have been debating on cryptocurrencies for long, especially regarding the price volatility of the asset class and whether it is legal to be used under the Sharia law or not.
While concluding the announcement and charting the further path, Stellar wrote:
“In the next few months, members of the Stellar Development Foundation will meet with global financial institutions and engage them on how to best utilize Stellar in their Sharia-compliant financial services and products. We’re excited to add even greater diversity and inclusion into the Stellar ecosystem.”