Cryptocurrencies are wooing Islamic investors.
The cryptocurrency craze has not caught on with devout Muslims. The Islamic faith stipulates any economic action must have a real and physical assets base. Speculation is strictly forbidden. Devout Muslims are loath to invest in any variety of banking product which provides returns through interest payments. It is natural that many people do not consider any cryptocurrency, including Ethereum and Bitcoin, in accordance with Sharia laws.
The scenario is now changing fast. Many cryptocurrency startups have already done so or are in the process to launch instruments which are backed by physical assets. This factor makes these electronic currencies valid in the eyes of Islamic advisors. One excellent example of such an initiative is the cryptocurrency unit named OneGram. Every coin in OneGram is completely backed by physical gold weighing one gram.
The United Arab Emirates and Saudi Arabia have not officially banned cryptocurrencies as of now. However, both governments have issued strict warnings regarding the procurement of bitcoin. Muslim markets are thus much slower to accept digital currencies as part of a trade. For cryptocurrency traders, Islamic finance is an insanely profitable market. About nine percent of the world's GDP is contributed by Muslim nations.
Companies dealing with cryptocurrency like OneGram understands this and comprehend implications. Since OneGram's unit of value has a gold backing, both speculation and volatility are kept under tight control. This factor has made the cryptocurrency acceptable as per Islamic principles. The same has been certified by al-Maali Consulting, a Dubai based company specializing in Islamic finance and jurisprudence. Ibrahim Mohammed, the co-founder of OneGram, said that his company is trying to prove that sharia rules and associated regulations are compatible with modern digital blockchain technology.
There is a cold hard logic to choose gold as a cryptocurrency base. The metal is comparatively stable, with a narrow fluctuation band from $1,200 to $1,350 in 2017. In comparison, the price of bitcoin is a roller coaster. From a high of almost $20,000 in 2017 it has dropped this year to $7,000.
OneGram has already issued millions of dollars value of cryptocurrency. About 40 percent of the total allocation has sold. The company hopes to sell all prior the exchange listing around the end of May.