Mohemed AlKaff AlHashmi, a prominent Islamic finance expert, recently discussed the impact of value-accrual mechanisms on the compliance of digital assets with Islamic Sharia Law. In his view, the way a token’s value is accrued can determine whether it is considered halal (permissible) or haram (prohibited) under Islamic principles.

According to AlHashmi, the key factor in determining the compliance of a digital asset with Sharia Law is its value-accrual mechanism. This refers to the way in which the value of a token is generated and distributed to its holders. In traditional finance, this would be equivalent to the interest earned on a loan or the dividends received from a stock.

In the world of digital assets, value-accrual mechanisms can take various forms, such as staking rewards, transaction fees, or even a fixed supply that creates scarcity and drives up the token’s value. However, not all of these mechanisms are considered halal under Islamic principles.

For example, staking rewards, where users earn a return for holding their tokens in a specific wallet, may be seen as a form of riba (usury) and therefore prohibited. Similarly, transaction fees that are charged for the use of a digital asset may also be considered haram, as they can be seen as a form of gharar (uncertainty) and maysir (gambling).

On the other hand, a fixed supply mechanism, where the total number of tokens is limited and cannot be increased, may be deemed halal as it creates scarcity and does not involve any form of interest or uncertainty.

AlHashmi emphasized the importance of understanding the value-accrual mechanisms of digital assets before investing in them, especially for Muslim investors who must ensure their investments are in line with their religious beliefs. He also highlighted the need for more education and guidance in this area to help Muslim investors navigate the world of digital assets.

In conclusion, the compliance of a digital asset with Islamic Sharia Law depends on its value-accrual mechanisms, and investors must carefully consider these mechanisms before investing to ensure their investments are halal. With the growing popularity of digital assets, it is crucial for the Islamic finance industry to provide more guidance and clarity on this topic to cater to the needs of Muslim investors.