DeFi can be halal but not DOGE? Decentralizing Islamic finance – Cointelegraph Magazine


While Islamic scholars have long wrestled with the question of whether cryptocurrency is halal, what if it’s really fiat that isn’t permissible?

Islam has strict rules around finance, and it historically defines currency as commodities with intrinsic value — gold, silver, or salt, among others. Waseem Mamlouk, from the DeFi platform Nimbus, argues that government-issued fiat currencies do not have any intrinsic value and may be incompatible with a careful interpretation of Sharia law. This would pose a problem for the burgeoning Islamic finance industry, which aims to produce financial returns in compliance with religious law.

“Mined cryptocurrencies have intrinsic value because it costs a certain amount to produce them — but fiat currencies that are printed digitally onto a balance sheet have no intrinsic value whatsoever.”

Mamlouk sees cryptocurrencies as a viable alternative. As the vice president of Capital Markets for Nimbus, Mamlouk is working to have portions of the business certified as Sharia-compliant in order to dip into the growing pool of investors who want their investments to fit with their religious beliefs. While this would certainly bring profits, Mamlouk also sees Islamic finance as a way to promote responsible long-term investing.

Mamlouk’s contention that fiat money has no intrinsic value is certainly a controversial one and would carry huge ramifications for the Islamic finance industry if his evaluation took on a wider acceptance. In effect, he is saying that fiat is not halal. He is not the first person to question fiat’s potential incompatibility with Islamic finance, as there has long been an academic discussion regarding a desire to return to a gold standard — like in the times of classical Byzantium.

“So, immediately, if we’re going to talk about someone doing dollar-denominated Sharia-compliant funds, it doesn’t really make sense from the get-go. However, with mined crypto’s, it actually does make sense.”



Islamic Finance

Mamlouk believes that cryptocurrencies hold the key to a better implementation of Islamic banking. In short, this refers to financial and banking practices in line with Islamic religious teachings. Of these religious teachings, the central one is a prohibition on riba, generally equated to usury — or charging interest.

With interest being a major part of the current DeFi landscape, Islamic DeFi, which must not involve interest, will require custom solutions. In the Islamic banking industry, Mamlouk explains that bank fees sometimes replace earnings that would otherwise come from interest, but he is not a fan.

“Banks like to play on people with different words and terms. ‘We’re going to charge you fees but we’re not going to charge you interest’ — we know what that is.”

Islamic economics includes a broad idea that money must be earned through fair and legitimate work instead of unfair exploitation, often compared to the labor theory of value. For that same reason, the money received for work must have real and intrinsic value.

Though there are no exact numbers, The Economist has estimated that Islamic Finance accounts for $2 trillion a year and is poised to “reach $3.69 trillion in 2024” according to Gulf Business. Considering that the global population of Muslims is “expected to increase by 70% – from 1.8 billion in 2015 to nearly 3 billion in 2060” according to Pew Research Center, financial services geared towards Islamic sensibilities are certain to continue attracting capital.

Though Islamic finance has been around much longer, it is an unlikely brother of the cryptocurrency industry. They are both fast-growing financial industries — each controlling roughly 1% of global assets — and hopes for a much larger share in the years to come.

What are the rules?

Much of the rules of Islamic banking center around the concept of riba, generally understood to mean usury. This makes paying or earning interest haraam, meaning forbidden. “You’re not getting interest on a certain amount of money that you’re depositing,” Mamlouk says.

There is a prohibition on selling what you do not own, according to him, meaning that short selling, derivatives, and potentially even day-trading of stocks are off the table, as stocks do not normally get settled until the end of each business day, and one may end up re-selling shares before they have even “received” them. At least as far as the issue of custody goes, the immediate settlement of swaps on the cryptocurrency market may well be an answer.

While many crypto traders would be horrified at the prospect of limiting themselves to multi-day spot trades instead of high-margin day trading, Mamlouk does not feel that he is missing out. “I’ve never done any of them personally, and you know, here I am, still alive and well — it’s not that difficult to follow the rules,” he says with a friendly laugh.



Gambling, known as maisir, is also prohibited. This is in part because it implies gaining money by chance instead of through legitimate effort. A comparable concept, bay’ al-gharar, includes any trade that involves excessive, unreasonable risk — that, too, is haraam.

Unreasonable risk sounds a lot like cryptocurrency, especially in the early days. Dogecoin, a cryptocurrency based on speculation and memes, seems to fit the description of gambling or excessive risk. Is Dogecoin haraam? Mamlouk figures it would be, cautiously reasoning that it has “no project,” and “that’s pure speculation.” That’s a no on Doge from Mamlouk (but the jury’s still out).

Another important aspect of Islamic finance, according to Mamlouk, is ensuring that Sharia-compliant funds do not mix with non-compliant funds. He goes on to say that this is a very difficult ask for the modern financial system, as banks contain money from many different sources.

“That could be blood money — that could be an arms dealer’s money sitting in some foreign bank,” with the banking officials having no way to know where their clients’ money truly came from, and thus no ability to tell other clients that the money held in the bank comes from legitimate and permissible sources.

Cryptocurrencies hold the key to fix many of these problems, Mamlouk believes. Chief among these is the inherent traceability of many cryptocurrencies, and that one can mine or acquire newly mined or minted coins with a verifiable pedigree — and thus a moral purity — that can absolutely be ascertained.

The strict approach of Islamic finance might just offer the counterweight that opens the doors for a billion Muslims around the world to participate in the blockchain revolution.

Early passions

Mamlouk was born in DC, USA but grew up in the Kingdom of Saudi Arabia, where his father worked for the government-owned Saudi Aramco oil company. He describes the environment he grew up in — and still lives in today — as a highly “intellectual, international community.” When he was young, he remembers being taken to see a supercomputer, one of only three in the world at that time. The experience stuck with him and led to his interest in technology, crypto and financial solutions.

He returned to his native DC to study commercial law at American University, where he graduated in 1994 and embarked on a career in finance IT advisery (early fintech) and IT security — staying out of the courtroom in favor of lending his advice to financial, tech and telecom corporations in the Middle East and globally.

Back in the day, he says, investment banking did not really exist in the Middle East. Mamlouk took part in founding Atlas Investment Group in Amman, Jordan, later selling to Arab Bank, which he calls the “largest bank in the Middle East.” As he advanced in his career, he saw the growing dominance of computers and the internet, which inspired him to return to the US to study IT at the University of Virginia and graduated in 1999, the year leading up to the infamous Y2K bug.


Mamlouk’s next goal is to get some of Nimbus’ solutions certified as Sharia-compliant in order to reach a wider pool of users. Currently based in Malta, Nimbus is a DAO-governed platform giving users access to a number of DApps that opens the door to various potential revenue streams, including things like crypto staking, trading and lending, among others.

So how does a financial venture get certified as Sharia-compliant?

Neither the process nor requirements are standardized, as Islam is not a centralized religion in the way of Catholicism, for example. Instead, each country — Pakistan, Iran, Malaysia and the member states of the Gulf Cooperation Council, for example — will have their own systems and procedures in place.

These systems can differ, as evidenced by Malaysia’s Shariah Advisory Council praising crypto’s “great potential.” Whereas others, including the Grand Mufti of Egypt and Fatwa Center of Palestine, previously declared cryptocurrencies haraam.

Mamlouk has his sights on either Saudi Arabia or Bahrain, which he says have largely interchangeable regulations. Bahrain, whose central bank recently licensed Sharia-compliant crypto exchange, appears somewhat more nimble when it comes to innovation. The plan is to submit a proposal to a local Sharia council.

“That council has to look at various aspects — basically an audit,” Mamlouk explains. Then, they may make a decision or “give you certain pointers” about what to change in order to be approved. After a successful audit by a Sharia council that examines the proposed practices, a project can be declared Sharia-compliant.

“We are looking forward to having it blessed but we’re not looking forward to having a Sharia council because it’s a burden… for us, it’s more about social responsibility.”

From Mamlouk’s perspective, the guidelines around Islamic finance can be thought of as more than the rules of a specific religion. This is because he sees them as generally promoting responsible practices that discourage undue risk while emphasizing transparency and honesty.

“It’s a responsible investment, and it’s realistic,” he says about the method.

Future views

The idea of Sharia Councils giving approvals to business practices and investment vehicles is fascinating and could encourage a captivating co-creation between fintech innovators and religious scholars.

This could point to a future where Sharia Councils audit all types of cryptocurrency projects, tokens and smart contracts before issuing opinions on their appropriateness for Muslim investors. Mamlouk agrees, saying that there is a huge opportunity for all types of rating and ranking services because “we don’t have any of that.”

As for the DeFi industry as a whole, Mamlouk is mega-bullish. He sees adoption skyrocketing around the world in the years to come.

“There’s no way that DeFi grows less than 100%, on average, for the next five years — very year — and it’s going to compound. People are going to look at it after those five years and they’re gonna say ‘wow, how did I not see this coming’.”




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How El Salvador’s Bitcoin Law may change global finance – Cointelegraph Magazine



“Clearly, the thing that’s transforming is not the technology — the technology is transforming you.” Jeanne Ross, formerly of the MIT Sloan Center for Information Systems Research

If El Salvador’s “Bitcoin Law” was “the shot heard round the world” for Bitcoin, then when the International Monetary Fund (IMF) and the World Bank questioned the legislation, it was the incumbent empire striking back. 

However, if El Salvador can implement its Bitcoin Law despite numerous technical and legal hurdles, it may force changes upon the organizations that oppose it and hasten reforms in how United States tax and commercial laws treat cryptocurrencies. 

The surprise shot heard round the world

After winning approval by a supermajority of its congress, El Salvador enacted its Bitcoin Law and became the first country in the world to adopt Bitcoin as legal tender. The Bitcoin Law passed mere days after El Salvador’s president, Nayib Bukele, first announced his plans to introduce it. The short time between Bukele’s surprise announcement and the passage of the Bitcoin Law prevented opponents from blocking it.

However, in a prescient series of tweets, Avanti Financial Group CEO and Bitcoin advocate Caitlin Long predicted “a big fight” over the Bitcoin Law and warned that “the world is about to pressure it [El Salvador] given what’s at stake.” 



The IMF’s leverage and lending Pools

Indeed, the day after El Salvador passed the Bitcoin Law, the IMF claimed that the legislation raised “a number of macroeconomic, financial and legal issues that require careful analysis.” The World Bank, which frequently cooperates with the IMF, joined the fray and proclaimed that it had rejected El Salvador’s request for help with implementing its Bitcoin Law because of “environmental and transparency shortcomings.” While these proclamations from powerful Washington, DC-based multinational organizations embody the fight that Long predicted in her tweets, the Bitcoin Law’s forward momentum may hasten reform in how these organizations and laws in the United States address cryptocurrency.

Based on its governing documents, the IMF is more likely to resist the Bitcoin Law by exerting economic pressure than by legally challenging the legislation of a sovereign nation. IMF member nations, including El Salvador, are bound by a code of conduct memorialized in the IMF Articles of Agreement. 

These articles require members to allow their currency to be exchanged for foreign currencies freely and without restriction, keep the IMF informed of changes in financial and monetary policies that will affect fellow members’ economies, and modify their policies to accommodate the needs of the entire membership. The IMF administers a pool of money from which its members can borrow “to help nations abide by the code of conduct” in its Articles of Agreement. In other words, the IMF enforces its articles through access to its lending pool.





Since El Salvador is seeking a $1.3 billion loan from the IMF to revitalize its economy, the IMF could attempt to restrict or withhold this important funding based on the Articles of Agreement. For example, the IMF could argue that it was not adequately informed in advance of the Bitcoin Law. It could also demand that El Salvador limit or modify the Bitcoin Law to accommodate “the needs of the entire membership.” 

However, it appears that concerns over punitive action by the IMF based on the “issues” it raised with the Bitcoin Law may have been overblown. After the IMF voiced its concerns, El Salvador’s finance minister, Alejandro Zelaya, assured the IMF that the country was not abandoning the U.S. dollar as a currency. Zelaya also stated that talks with the IMF were progressing well and claimed that the IMF did not have a problem with the Bitcoin Law. The IMF did not respond to Zelaya’s remarks, and so the jury is still out on what, if any, action the IMF may take in response to the Bitcoin Law.

Assuming El Salvador stands by its Bitcoin Law, it will still need help implementing it. As drafted, the Bitcoin Law only allows 90 days for implementing measures to make Bitcoin legal tender in the country. While El Salvador already has a partnership with the private digital wallet company Strike to build the requisite infrastructure for the Bitcoin Law, the World Bank flatly rejected the country’s request for assistance.

Potential World Bank implications of the Bitcoin Law

Although the World Bank is refusing to assist with the Bitcoin Law, an informative article by Martin Rivers suggests that the legislation may force the World Bank to accept Bitcoin. Specifically, the World Bank’s International Bank for Reconstruction and Development is governed by its founding document, its Articles of Agreement. Section 12 of Article V states that in lieu of accepting a member’s currency in certain cases, the Bank “shall accept […] notes or similar obligations issued by the Government of the member or the depository designated by such member.” 

Thus, the World Bank’s articles would require it to accept a note issued by El Salvador that is backed by its Bitcoin reserves. Section 9 of Article II further states that when the par value of holdings in a member’s currency appreciates, the World Bank must pay the gains back. If the opposite happens, the member must contribute additional currency to maintain the par value of its holdings. Consequently, if Bitcoin is deemed a local currency of El Salvador, the World Bank could be accumulating Bitcoin or paying El Salvador Bitcoin gains depending on cryptocurrency’s price action.

The Central American Bank for Economic Integration expresses support

Regardless of the World Bank’s position on the Bitcoin Law, other banking organizations focused on Central America are offering to help implement it. For example, Dante Mossi, executive president of the Central American Bank for Economic Integration (CABEI), stated that the bank will give El Salvador technical assistance in implementing the Bitcoin Law.

The CABEI has 15 member countries and seeks to “promote the economic integration and the balanced economic and social development of the Central American region.” In voicing his support for the Bitcoin Law, Mossi noted that it would lower the cost of remittances for relatives of Salvadoran nationals living abroad. While Mossi stated that he is “very optimistic” about El Salvador making Bitcoin legal tender, he is also asking El Salvador’s government to develop regulations to prevent “bad actors” from taking advantage of Bitcoin’s pseudonymous features.

Hastened tax and commercial law reform in the U.S.

The Bitcoin Law could also force needed reform in how U.S. tax and commercial laws treat cryptocurrencies. In March 2014, the Internal Revenue Service issued a notice characterizing cryptocurrencies as property. In issuing this notice, the IRS observed that although a digital currency can operate like a “real” currency, “It does not have legal tender status in any jurisdiction.” 

Now that Bitcoin is legal tender in El Salvador, the IRS may be forced to reexamine the principles it articulated for treating Bitcoin as property for tax purposes. If the IRS were to treat Bitcoin as a traditional currency, this would require any trading or investment gains on the asset to be taxed at ordinary income tax rates instead of more favorable capital gains tax rates. However, decentralized cryptocurrencies like Bitcoin do not fit within the Department of Treasury regulations that define currency as coin or paper issued by a country.





Current tax regulations and currency definitions are a poor fit for Bitcoin because they preceded the advent of blockchain technology. However, U.S. taxpayers with family or business in El Salvador and other countries that adopt Bitcoin as legal tender will need better clarity regarding their tax obligations. 

Instead of forcing an outdated framework onto Bitcoin, lawmakers and regulators should draft new rules that are tailored to cryptocurrencies and do not impose overwhelmingly complicated reporting burdens on a growing number of Bitcoin users. The creation of a tax safe harbor for certain de minimis cryptocurrency transactions, such as the one proposed in The Virtual Currency Tax Fairness Act of 2020 introduced in the House by Rep. Suzan DelBene, could be a good start.

In fact, tax law already provides a safe harbor for small transactions in foreign currencies. Specifically, 26 U.S.C. § 988(e) states that gains from “personal” transactions under $200 involving foreign currencies are exempt from taxation. With El Salvador’s adoption of Bitcoin as legal tender, some U.S. citizens might argue that Bitcoin is a foreign currency and that gains from Bitcoin transactions under $200 are not taxable. 





However, this exemption only applies to “personal” transactions and not those undertaken for trading and investment purposes. Thus, absent tax reform, it appears that all transactions in Bitcoin will continue to be taxable events. This reality will impose complicated reporting burdens on U.S. taxpayers who send regular Bitcoin micropayments to their families in El Salvador.

While politics may indefinitely delay meaningful tax reform, the legal experts who write private commercial law in the United States are already moving to accommodate cryptocurrencies. The Uniform Commercial Code (UCC) harmonizes the laws of commercial transactions and plays a crucial role in bringing greater certainty to business dealings. Currently, it is debatable whether Bitcoin’s adoption as legal tender by El Salvador makes it “money” under Sections 1-201(a)(24) and 9-312(b)(3) of the UCC.

This uncertainty makes it difficult to incorporate Bitcoin into secured transactions under the UCC. However, the Uniform Law Commission has drafted proposed changes to the UCC that specifically address “intangible money” like Bitcoin. These proposed changes clarify that security interests in “intangible money” can be perfected solely by establishing “control” over the asset.

Bitcoin’s adoption forces change

Bitcoin is now recognized as legal tender by a sovereign nation but is struggling to coexist with powerful financial organizations and laws that were designed for an economy that predated blockchain technology. It appears that El Salvador is moving forward with the implementation of its Bitcoin Law despite skepticism and resistance. If El Salvador implements the Bitcoin Law and other nations follow its example, Bitcoin may change the organizations that are resisting its adoption and hasten needed legal and financial reforms for handling cryptocurrencies.


This article is for general information purposes and is not intended to be and should not be taken as legal advice.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph or of Nelson Mullins Riley & Scarborough.





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Finance expert has dire warning for Giants’ Saquon Barkley after Bitcoin investment: ‘It could go very badly, very quickly’


Saquon Barkley just made the riskiest decision of his career.

Thankfully for Giants fans, it had nothing to do with his ACL injury rehab –– or anything football related for that matter. Barkley’s risk is financial.

“I will be taking my marketing money in Bitcoin,” Barkley told Anthony Pompliano on the “The Best Business Show” in early July.

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That means 100% of Barkley’s endorsement money will be paid in Bitcoin via the payment app Strike. With countless Bitcoin success stories out there, Barkley is convinced he’ll be one, too –– after all, he is investing over $10 million annually, which could currently buy him 250.06 BTC. According to experts though, Barkley should temper his expectations.

“He’s taking a gamble,” Forbes cryptocurrency expert Billy Barmbrough told NJ Advance Media. “A very important rule of investing is that historical past performance should not be used to predict future performance. While it may seem like a tempting idea, it’s a very risky one. It could go very badly, very quickly.”

The reason Barkley’s investment is so risky is because of Bitcoin’s volatility. The value swings constantly and as Forbes put it in a recent analysis: “Anyone considering (investing in cryptocurrency) should be prepared to lose their entire investment.” Bitcoin’s market makes it so unstable.

“The reason it’s volatile is because it’s a relatively immature market,” Bambrough said. “Nobody really knows exactly what it should be valued at, so the price swings quite a lot.

“No one is able to say with any confidence what the price will be in 6 months, a year or 10 years.”

Aside from volatility, another thing Barkley should worry about is future regulations on cryptocurrencies. While it’s mostly deregulated, countries like China and South Korea issued crackdowns on crypto trading, causing massive drops in value. Bambrough said regulations like this could completely empty Barkley’s investment.

“It’s difficult to say what regulations will look like in the future,” Bambrough said. “It’s possible that people who are putting their money –– or sponsorship deals –– into it now might find that in a year’s time, they’re unable to access the crypto assets that they invested in.”

Cryptocurrency instabilities could be devastating to millions of Americans in a few years –– including several NFL players. Along with Barkley, rookie QB Trevor Lawrence and free agent tackle Russell Okung had some of their contracts paid in Bitcoin.

Barkley said his interest in Bitcoin sparked after being sidelined for most of the 2020 season with an ACL injury. This offseason, Barkley had conversations with his agent as well as Bitcoin investors Anthony and Joe Pompliano and Jack Mallers. These talks persuaded him to fully commit to it.

“When you see the KDs, the LeBrons and Bradys of the world and you want to create generational wealth, you can’t do that with the sport that I play and the position that I play and coming off of injuries,” Barkley said.

If Bitcoin remains stable, Barkley could rake in a significant profit. While he knows a potential boom –– or bust –– in his investment won’t happen overnight, he’s fully confident in his choice.

“We’ll see how right I am in a couple of years,” Barkley said.

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