Sharia considerations for Web3, DeFi and NFTs

Mufti Faraz Adam is the CEO & Head Shariah Advisor at Amanah Advisors.

Web3, DeFi and NFTs are debated among Sharia scholars across the world, but are we asking the wrong question and approaching the problem from the wrong angle? Instead of asking whether x or y is Sharia compliant and attempting to reach a conclusion from the get-go, it may make more sense to approach all emerging technologies with sandbox-like thinking, where it is more of an exploration and experiment without a premature conclusion. A ‘Sharia sandbox’ of some sort would facilitate this, where there is a live and controlled testing environment for various technologies to assist stakeholders in developing Sharia acceptable digital infrastructure for a decentralised digital economy. There is sufficient basis in Sharia to begin with a permissive footing, a positive stance and with an intention to continuously iterate for Sharia alignment. The foundational maxim in Islam which is cited by several classical authorities and legal schools, states: “Transactions are permissible by default, unless evidence is established to the contrary.”

This should be the starting point for all experiments with Web3, NFTs and DeFi. Any problematic areas or experiences should be individually stripped out of the use cases of these technologies. Experimentation allows growth and the best ideas to rise to the top in an unmanipulated market with low barriers to entry. Experimentation facilitates better Sharia understanding and Sharia research.