Cryptocurrency can spur growth, but must be syariah-compliant
INDUSTRY 4.0 is declared by global economic leaders as the new face of global economy. Malaysia’s position on business innovation was asserted at The Economist Events’ Innovation Summit 2017, which discussed Asian innovation “in a drawbridge-up world”.
Technology renders every industry either relevant or irrelevant. This is the outcome of disruptive innovation.
But, it is positive in vision and transformation, especially in the internationalisation of innovation for trade and business.
One of this outcome is cryptocurrency, such as Bitcoin and Ethereum.
Innovations, such as drones, and Uber and Grab e-hailing services, have changed urban transportation and businesses for the interest of the people, despite compliance hiccups.
Chainblock technology has transformed conventional banking, and financial system and norms.
Cryptocurrency seeks to overcome the restrictions of conventional banking and financial practices. The world cannot stop innovations such as cryptocurrency.
To ensure investors’ confidence, the concept of cryptocurrency must comply with the goals and visions of the law, that is, regulation of new business innovation.
Hence, a balance must be achieved, given the advantages of cryptocurrency.
It also has an impact on Islamic banking and financial sector. Efforts are underway by syariah advisory councils and national financial organisations to determine the nature, scope and legality of cryptocurrency for trade, business and Islamic banking, and financial activities.
This writer is a strong supporter of innovation economy. But, innovations must be either regulated in a transparent manner by self-regulation, or by government legislative framework, for conventional and Islamic banking and financial transactions.
Islamic banking and finance is no longer the new kid on the block. The International Monetary Fund recently held its first discussion on the subject, Fintech innovation and blockchain technology and how they impacted global trade and economies of scale.
Some argued that cryptocurrency was more secure and effective than “conventional banks, which operate using the principle of fractional reserve, which is prohibited by syariah”.
Cryptocurrency can be moderated and legally accepted to spur economic internationalisation agenda for developed and developing regions.
Cryptocurrency must comply with syariah requirements:
THERE must not be elements of interest (riba) involved;
NO elements of excessive risk (gharar);
NO elements of speculation or gambling (maisir); and,
CRYPTOCURRENCY must be regulated by a central digital authority to provide a guarantee net of safety and transparency to buyers and investors.
As world trade gears up for Industry 4.5 using economic tools to generate global peace, world leaders must make a just and balanced decision to maximise the potential of new innovation in the form of cryptocurrency.
As Prime Minister Datuk Seri Najib Razak said at the Invest Malaysia 2017: “We need to put innovation and creativity at the heart of the economy of the future.”