Abstract
Purpose This paper aims to explore issues arising from ṣukūk (Islamic bonds) on blockchain, including Sharīʾah (Islamic law) and legal matters. Design/methodology/approach A qualitative methodology is used in conducting this research where relevant literature on ṣukūk was reviewed. Through a doctrinal approach, the paper presents analyses on the practice of ṣukūk and ṣukūk on blockchain by discussing its legal, Sharīʾah and regulatory issues. This culminates in a conceptual analysis of blockchain ṣukūk and its peculiar challenges. Findings This paper reveals that digitizing ṣukūk issuance through blockchain remedies certain inefficiencies associated with ṣukūk transactions. Indeed, structuring ṣukūk on a blockchain platform can increase transparency of underlying ṣukūk assets and cash flows in addition to reducing costs and the number of intermediaries in ṣukūk transactions. The paper likewise brings to light legal, regulatory, Sharīʾah and cyber risks associated with ṣukūk on blockchain that confront investors, practitioners and regulators. This calls for deeper collaboration in research among Sharīʾah scholars, lawyers, regulators and information technology experts. Research limitations/implications As a pioneering subject, the paper notes the prospects of blockchain ṣukūk and the current dearth of literature on it. The paper would assist relevant Islamic capital market entities and authorities to determine the potential and impact of blockchain ṣukūk in their respective businesses and the financial system. Practical implications Blockchain ṣukūk will assist in addressing issues inherent in classical ṣukūk and in paving the way to innovative solutions that will facilitate and enhance the quality of ṣukūk transactions. For that, ṣukūk would require appropriate regulatory technology to address its governance and regulation peculiarities. Originality/value Integrating ṣukūk with blockchain technology will add value to it. The paper advances the idea that blockchain ṣukūk revolutionises ṣukūk and enhances its practice against known inadequacies.
Highlights
WSÁ uhkicūhk,foroftmenarfiefnearrnecde to as Islamic bonds, perspective, refers to iascleinrtgifiucisattiecaolrlydothceumpleunrtatlhoafttehveidAenracbesicawtroarndsa“sÁcatikokn”, specifying the right, obligations and conditions of contracting parties thereto (ISRA, 2017).According to the Securities Commission Malaysia, sÁukūk are defined as “certificates of equal value evidencing undivided ownership or investment in asset(s) using Sharīah principles and concepts endorsed by the Sharīah Advisory Council” (Securities Commission Malaysia, 2014, p. 5)
This paper reveals that digitizing sÁukūk issuance through blockchain remedies certain inefficiencies associated with sÁukūk transactions
The foregoing discussions in this paper highlight how sÁukūk may benefit from blockchain technology
Summary
WSÁ uhkicūhk,,foroftmenarfiefnearrnecde to as Islamic bonds, perspective, refers to iascleinrtgifiucisattiecaolrlydothceumpleunrtatlhoafttehveidAenracbesicawtroarndsa“sÁcatikokn”, specifying the right, obligations and conditions of contracting parties thereto (ISRA, 2017).According to the Securities Commission Malaysia, sÁukūk are defined as “certificates of equal value evidencing undivided ownership or investment in asset(s) using Sharīah principles and concepts endorsed by the Sharīah Advisory Council” (Securities Commission Malaysia, 2014, p. 5). .] certificates of equal value representing undivided shares in the ownership of tangible assets, usufructs and services or (in the ownership of) the assets of particular projects or special investment activity The relationship between a bondholder and bond issuer in a conventional bond is generally based on a loan contract with interest, which is considered riba from a Sharīah perspective. Another principle is that the underlying sÁukūk assets must be Sharīah-compliant which means that a sÁukūk transaction cannot deal with Sharīah-prohibited activities such as gambling and the selling of alcohol.
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