Rezkinomik | What is Halal Economy? Can it Reform a New Global Currency?

The concept of Halal Economy

Halal is an Arabic term that refers to things that are permissible or acceptable under Islamic law. In the context of economics, a halal economy is one that operates in accordance with Islamic principles and values, including the prohibition of interest-based financial transactions and the prohibition of investing in certain types of businesses, such as those that produce or sell alcohol, pork, gambling, or tobacco. 

A halal economy may also prioritize ethical and socially responsible business practices and seek to reduce harm to the environment. 

The goal of a halal economy is to create an economic system that is fair, transparent, and sustainable, and that aligns with Islamic principles and values.

How the halal economy related to current global financial system? 

The halal economy is a distinct economic system that operates according to Islamic principles and values. It is separate from the traditional global financial system, which is based on interest-based financial transactions and includes a range of financial instruments and practices that may not be permissible in a halal economy.

However, the halal economy is not completely isolated from the traditional global financial system. Many Islamic financial institutions, for example, operate within the traditional global financial system and offer halal financial products and services that are compliant with Islamic law. These products and services may include Islamic banks, investment funds, and insurance products that are structured in a way that avoids interest-based transactions and other activities that are prohibited under Islamic law.

In addition, the halal economy is growing and becoming more integrated with the traditional global financial system. There is increasing interest in halal finance and investment from both Muslim and non-Muslim investors, and there are now a range of halal financial products and services available that cater to this demand. As a result, the halal economy is becoming more integrated with the traditional global financial system, although it remains distinct and operates according to its own principles and values.

Can Halal Economy reform a new global currency?

It is possible for the halal economy to create new currencies or financial instruments that are based on halal principles and values. These could potentially be used as a form of global currency or as a way to facilitate trade and financial transactions within the halal economy.

One example of this is the use of Islamic finance instruments such as sukuk, which are a type of asset-backed financial instrument that is structured in a way that is compliant with Islamic law. Sukuk have been used as a way to raise capital and finance projects in the halal economy, and they have gained popularity in recent years as a way to fund infrastructure and development projects in Muslim-majority countries.

Another example is the use of digital currencies that are based on blockchain technology and designed to be compliant with Islamic law. These types of digital currencies could potentially be used as a way to facilitate trade and financial transactions within the halal economy and potentially beyond.

It is important to note that the development and adoption of new currencies or financial instruments in the halal economy would depend on a variety of factors, including regulatory considerations, market demand, and the willingness of individuals and institutions to adopt these new forms of currency.

Is there any project is going on now for Islamic digital currency using Blockchain?

There are a number of projects and initiatives underway that are exploring the use of blockchain technology and digital currencies in the halal economy. These projects aim to create digital currencies or financial instruments that are compliant with Islamic law and can be used to facilitate trade and financial transactions within the halal economy.

One example of this is the development of Islamic stablecoins, which are digital currencies that are pegged to a specific asset or currency, such as the US dollar, and are designed to be compliant with Islamic law. These stablecoins could potentially be used as a way to facilitate trade and financial transactions within the halal economy, as they would be backed by a stable asset and would not involve interest-based financial transactions, which are prohibited under Islamic law.

Another example is the development of blockchain-based platforms for Islamic finance, which could potentially be used to facilitate the issuance and trading of Islamic financial instruments, such as sukuk. These platforms could also be used to automate the process of compliance with Islamic law, which is an important consideration for financial transactions in the halal economy.

It is worth noting that these types of projects and initiatives are still in the early stages of development and it is not yet clear how widely they will be adopted in the halal economy. However, they represent an interesting and potentially significant development in the use of blockchain technology and digital currencies in the halal economy.

How can stablecoin be categorized as sharia compliant when it is pegged to the US dollar? 

There is no definitive answer to this question because the concept of stablecoins is relatively new and there is no established Islamic financial framework for evaluating them. Some people may argue that stablecoins are compliant with Islamic principles because they are pegged to a physical asset (e.g., the US dollar) and do not involve interest or speculation. Others may argue that stablecoins are not compliant because they are not backed by a tangible asset such as gold or silver, and because they rely on complex financial systems and technologies that may not be fully understood or transparent. 

Ultimately, it would be up to Islamic scholars and financial experts to determine whether stablecoins are compliant with Sharia principles.

A stablecoin is a type of digital currency that is pegged to a specific asset or currency, such as the US dollar. The value of a stablecoin is typically tied to the value of the asset or currency it is pegged to, which means that it is designed to maintain a stable value and avoid the volatility that is often associated with other types of cryptocurrencies.

One way that a stablecoin can be pegged to the US dollar is through a process called collateralization. In this process, the issuer of the stablecoin holds a reserve of US dollars, which is used to back the value of the stablecoin. If the value of the stablecoin falls below the value of the US dollar reserve, the issuer can use the reserve to buy back the stablecoin and maintain its value.

There are also other ways that stablecoins can be pegged to the US dollar or other assets, such as through the use of algorithms or smart contracts that are designed to maintain the value of the stablecoin.

It is possible for stablecoins to be pegged to other assets, such as gold, instead of the US dollar. In this case, the issuer of the stablecoin would hold a reserve of gold, which would be used to back the value of the stablecoin. The value of the stablecoin would be tied to the value of the gold reserve, and the issuer would use the reserve to buy back the stablecoin and maintain its value if necessary.

There are pros and cons to using different types of assets to back stablecoins. The US dollar is often used as a backing asset because it is a widely accepted and stable currency, but using gold or other assets as a backing asset can also have benefits, such as providing a hedge against inflation or currency depreciation. Ultimately, the decision to use a particular asset as a backing asset for a stablecoin will depend on the specific goals and needs of the issuer and the users of the stablecoin.

"In conclusion, the halal economy and sharia-compliant currency are still in the wishful thinking stage, and there is no specific strategy from any Islamic financial activist to implement or reveal a total absence of usury (riba)".

Compiled by: Haji Rozman Abas

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