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.
A Sharia sandbox would incubate and shield innovative products and emerging technologies from any premature Fatwa or view. Similar to regulatory sandboxes, a Sharia sandbox could house all new tech and innovative start-ups which do not explicitly and clearly involve any prohibited element yet are unclear in their nature.
This would allow firms to get Sharia advisory services and test their products in a live environment with the oversight and guidance of Sharia advisors before any Fatwa, view or official Shariah certification. A Sharia sandbox could incubate and shield any tech or start-up and give it room to grow and develop into a certified Sharia-compliant offering.
Ultimately, the Sharia has been revealed to add value to people’s live and make people prosperous eternally. That eternal objective is supported by a stable economy with people receiving their needs in this transitory existence. Whatever adds value to people in being meaningful contributors to the world, and assists in achieving the eternal goal, will be welcomed by the Sharia. Whatever hinders that route, will be unwelcome.
Mufti Faraz Adam