Stellar is the first cryptocurrency to get the Shari’a seal of approval.
According to the Stellar Development Foundation, the technology network has been designated as Shari’a compliant by the Shariyah Review Bureau (SRB).
In real terms, this means Muslims can use stellar for cryptocurrency transfers and exchanging real-world cash into the digital currency.
The certification also allows Islamic financial institutions to access the stellar network.
“In partnership with SRB, this certification will help grow the stellar ecosystem in regions where financial services require compliance with Islamic financing principles. For example, Islamic financial institutions in the Gulf, Indonesia and Malaysia can integrate stellar technology in their Sharia-compliant product and service offerings,” said an announcement from the foundation.
Stellar had to pass several strict tests to gain the compliance certificate.
“Based on provided information, SRB conducted its review on the network’s guides, concepts and related material and did not find any provisions that are non-congruent to the principles of Shari’a. However, the users of the network seeking to attain Shari’a compliance should take note that merely following the attached guidelines does not automatically ensure compliance to Shari’a,” said the announcement.
Over the past 12 months, the foundation has explored partnerships with financial firms in the Gulf region and seeking Shari’a compliance certification helped the talks, said Lisa Nestor, director of partnership at Stellar.
“We have been looking to work with companies that facilitate remittances, including in the United Arab Emirates, Saudi Arabia and Bahrain. It’s a huge market,” she said.
“Stellar is the first distributed ledger protocol to receive Shari’a compliance certification in the money transfer and asset tokenization space. Additionally, the Shari’a compliance certification extends to applications and usages of lumens.”
Islamic clerics and bankers have discussed if cryptocurrency volatility is the same as lending money at unreasonable interest rates, which is forbidden under Shari’a law.
“For the blockchain technology there was no issue, the main thing we needed to consider was the use of the underlying cryptocurrency,” said Mansoor Ahmed, SRB’s assistant general manager.
The certification covers the stellar blockchain and native currency Lumens – the seventh largest cryptocurrency by market capitalisation. Stellar has a market cap of $5.56 billion and is trading at $0.29.
Stellar was created in 2014 by Jed McCabe, former chief of technology at rival cryptocurrency Ripple.