Implications of Islamic Laws on Cryptocurrency and Blockchain


United Arab Emirates (UAE) over the recent years has been making a significant growth in the field of cryptocurrency. However, cryptocurrency and the technologies that have advanced through the products of financial engineering are not compliant with the rules emerging from Sharia Law i.e., firstly, one cannot charge any interest and secondly, one cannot finance or invest in anything that causes any other individual harm such as alcohol, gambling, and tobacco which have been prohibited in the Qur’an. It is however easy to prohibit the usage of cryptocurrency in the latter, but it would be impossible to charge interest satisfying the Islamic Sharia Law. The Islamic laws include legislations regarding mortgages which are at a potentially less risky alternative and it is managed without the loan and interest-based system.

Basic Principles of Islamic Laws:

Islamic laws have two basic principles:

  1. Interest cannot be charged; and 
  2. Investment cannot be made into anything that causes others harm, or is explicitly prohibited by the Qur’an.

Nonetheless, banks and financial institutions manage without the loan and interest-based system in the rest of the world. For example, a person wants to buy a house, the bank will buy it for him and rent it out to the individual at a pre-set term which includes an estimated margin of profit for the banks, a concept referred to as Ijara in Sharia Law of which there are several types numbering not less than three. 

Gambling, trading and volatility:

Cryptocurrency in other words is very much similar to online gambling such as the case in a casino. Seeing the volatility of the market in cryptocurrency, even an investment in these assets would be considered gambling which is against the Sharia Law. There has been a huge debate on the issue of the cryptocurrency market in the UAE amongst eminent Islamic scholars yet this market is seen to gradually make its place in the Islamic market and is growing at a great pace. 

There have been several projects which are lately being evolved ensuring the compliance of Sharia Laws. Decentralised Finance (DeFi), has been lately becoming popular within the UAE market and its rules have been formulated compiling the Sharia Laws. These projects before they enter the Islamic market are rigorously scrutinized making sure that they are in compliance with the Sharia Law.

Evolution of Blockchain technology: 

Blockchain is a distributed ledger technology (DLT) in which a growing list of records, or blocks, are time-stamped and linked using cryptography. This is popularly known as the underlying technology for bitcoin and the application for the technology goes beyond cryptocurrency. The blockchain technology is a growing hub in the crypto industry and it includes the legal, economic, business and cultural environments. The blockchain technology is a legal approach to crypto and has helped in making the UAE market progressive and open-minded. This is also a faster bureaucratic process making it the perfect choice for experimentation and application. 

Emirates Blockchain Strategy 2021

This was launched by the UAE Government in April 2021 and the strategy aims to capitalise on the blockchain technology to transform 50 per cent of government transactions into the blockchain platform by 2021. The technology helps in the saving of time, effort and resource. It also helps to facilitate people to process their transaction at the time and place which suits their lifestyle and work. After adopting this technology, the Government hopes to save: 

  • AED 11 billion in transactions and documents processed routinely
  • 398 million printed documents annually 
  • 77 million work hours annually

UAE uses the technology of blockchain for digital transactions aspiring to give each of the customers a unique identification number that shall point their information on the secure chain. It ensures digital security of national documents and transactions which will reduce operational cost and accelerate the process of decision making; this technology thus assures that information and data on the blockchain cannot be hacked. 

Block-chain project based in the UAE: 

The Dubai Blockchain Strategy is developed to aim in helping Dubai to be established as the first city which is fully powered by Blockchain. The Strategy will be based on three pillars which are namely: (i) Government efficiency; (ii) industry creation; and (iii) international leadership. Some of the leading examples are: 

  • OneGram is a UAE-based company which ensures that Muslims who wish to invest in cryptocurrency comply with the rules of their faith through gold-backed technology. This start up provides solutions backed by physical assets and certified as verified according to Islamic advisors. Each cryptocurrency unit by OneGram is backed by a physical gram of gold stored in a vault. This start up aims to prove that the rules and regulations of Sharia can be compatible with blockchain technology under the right circumstances.
  • ArabianChain is one of the largest crypto firms in the Middle East, and it has a vision to create a decentralized, block-chain based platform that any individual can run applications on top. The vision of the firm is in line with the commercial vision and it has partnered with the Government of Dubai to achieve its stated goal of securing all Government documents using blockchain technology. 
  • The Al Kasir Group, which is a Dubai based company, offers publicly traded crypto assets backed by IGI certified diamonds. The project is in compliance with the Islamic laws and is a joint venture between the UAE Government and a local jewellery trading portal. The assets purchased through the company’s proprietary exchange is backed by diamonds. It can also be used to purchase other luxury goods on the platform of Al Kasir which ranges from precious stones to lifestyle products. 

Shift in the culture and a step forward: 

The influence of crypto technology in the UAE market has evolved the culture in the region and has also helped in the growing involvement of women working in the cryptocurrency and DLT space. 

One of the leading companies Agora Group, its co-founder and managing director, Rim El Aridi, helped lead this change in the blockchain market in the UAE. She has shared her commendable experience in the evolution of blockchain in the region and how women participation can evolve in this field. This would be a great progress for women to be hired and it would eventually be seen as a progress in the government level. There are many challenges that women face on a daily basis in their work environment and Rim El Aridi has overcome this situation and aspires to help other women to encourage themselves.


Investment being the key to both the further development of the space in the UAE complying with Sharia laws, encouragement of women to enter this space will help in the evolutionary growth of UAE in the crypto market growth and as well as a nation. Despite the price volatility, the blockchain technology is framed in a manner that is aligned with Sharia principles of reducing excessive uncertainty as well as the Sharia prohibition against fractional reserve banking. Blockchain is a mathematical proof of ownership and is in compliance with the spirit of Islamic finance than any of the digital fiat money.


ADV. Shayan Dasgupta
Corporate & Commercial – M&A | FinTech, Blockchain & AI