Swiss Firm Obtains Sharia Compliance Certificate for Ethereum-based Stablecoin

News and Analysis

X8 AG, a Swiss fintech company has received Islamic finance certification for its stablecoin built on the Ethereum blockchain protocol.

As reported by Reuters, the firm was certified by the Shariyah Review Bureau (SRB), an Islamic advisory firm licensed by Bahrain’s central bank. According to a company’s representative, having obtained the certification for its digital currency, X8 is now planning to expand its business in the Middle East.

Several fintech firms are integrating their technology into the field of Sharia-compliant finance, with regulators and financial exchanges in the Middle East region keen to attract new business and encourage innovation in the sector.

This has prompted Islamic scholars to assess the religious validity of digital currencies, with some of them being wary of price volatility and the types of assets behind digital tokens.

X8 hopes its Ethereum-based cryptocurrency, which is fully backed by a basket of eight fiat currencies and gold, can address such concerns.

“The Gulf region is a really good place for financial technology companies, because they all want to become hubs for fintech,” said X8 director and co-founder Francesca Greco.

Regulators in the Gulf region have built a welcoming environment for fintech but they are also being cautious about cryptocurrencies, giving an opportunity for so-called “stablecoins” which are designed to reduce price volatility, Greco added.

The company also plans to open a regional office in the Middle East later this month and to launch a crypto-exchange that would include a Sharia-compliant component. According to Greco, discussions with local exchanges in Abu Dhabi, Dubai and Bahrain have already been held.

The Middle East has previously been a difficult region for cryptocurrencies after crypto trading was banned in some countries. However, the region is changing its stance and wants to position itself as a blockchain powerhouse.

Stellar received its Sharia compliance certificate in the money transfer and asset tokenization field in July 2017 and claimed to be the first blockchain protocol to do so. Other companies claiming “firsts” in the sector include crypto utility token NOORCOIN, which was certified with a Sharia Certificate from the World Sharia Advisory Committee in March.

In October 2017, the Jeddah-based Islamic Research and Training Institute, a research arm of the Islamic Development Bank, revealed its plans to use blockchain technology to develop sharia-compliant products, aiming to support financial inclusion efforts across its member countries. The organization also signed an agreement with local firm Ateon and Belgium-based SettleMint, with the first stage to focus on a technical feasibility study.

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