Ms Samina Naz, a student of the Department of Economics, University of Peshawar defended her research work on “Issues and Challenges in the Adoptability of Cryptocurrency in a Shariah Compliant Financial System” successfully here on Thursday.
She has carried out research studies under the supervision of Dr.Naila Nazir, Chairperson.
Prof. Eatzaz Ahmad and Dr. Waseem Shahid from Quaid-i-Azam University, Islamabad, attended the seminar as External Examiners and Dr. Mufti Syed Naeem Badshah Bukhari participated as Shariah Expert.
Faculty members and postgraduate students also participated.
Cryptocurrency was introduced into the financial system during 2008 in the form of Bitcoin. Bitcoin is a peer-to-peer cryptocurrency created by an unknown person, or group of persons, named Satoshi Nakamoto.
Virtual currency operates like a currency in some environments and is a medium of exchange, but it does not have all the characteristics of real currency. Cryptocurrency is a subset of virtual currency as defined by the European Central Bank during 2012.
Transactions are verified and records are maintained by a decentralized system using cryptography, rather than by a centralized authority. Over 2,000 “altcoins” have been created so far, but Bitcoin still dominates the market, comprising more than 50% of the market capitalization of all cryptocurrencies. Therefore, the present research has focused on bitcoin.
Transactions are verified and recorded on the blockchain. Blockchain is a public ledger that is used as a record-keeping system that maintains participants’ identities, their respective cryptocurrency balances, and all the genuine transactions in secure and anonymous.
Unlike other conventional financial systems, the Islamic financial system prohibits any activity or transaction that involves one of three features: interest (riba), gambling (maysir), or uncertainty (excessive gharar).Riba is derived from the word raba’wa, which means “to grow, to increase, or to exceed.” Riba, in specific terms, can be translated into English as “interest” (Haqqi, 2009).
Maysir (gambling) refers to the easy acquisition of wealth by chance, whether or not it deprives others of their rights. Contracts involving pure speculation are an example of maysir.The Arabic word gharar implies danger, fraud, or uncertainty that might result in loss or destruction (Uddin, 2015). According to Imam ibn Taymiyyah, gharar occurs when someone does not know what is stored for him at the end of trading activities, which is similar to qimar (gambling).
In exploring the research question, the following objectives were met:i) To review the global cryptocurrency system and the process of using blockchain technology being practiced for cryptocurrencies; ii) To identify the elements of riba, gharar, and maysir in cryptocurrency from a Shari’ah perspective and; To analyze the harms and benefits of cryptocurrency in terms of storability, unit of account, medium of exchange, and speculative investment and; iii) To identify the threats and challenges for the Islamic financial industry to incorporate blockchain technology-based cryptocurrencies.
In order to identify the concerns of the Islamic financial sector over the adoption of cryptocurrencies, data from secondary and primary sources was gathered using a variety of methods. Although the vast majority of nations have not outright banned cryptocurrencies, they do express concern over their inherent risks. Investing in these currencies is thought to be extremely risky and speculative. Additionally, cryptocurrencies encourage criminal activity, are highly volatile, and are vulnerable to cyberattacks.