Cryptocurrencies and Blockchain in Islamic Finance:

Toward a Hybrid Transnational Legal Framework

Zainab Waheed Dahham

 

Abstract: This article examines the intersection between Islamic finance and the digital economy, with particular emphasis on cryptocurrencies and blockchain technology within a transnational legal framework. The rapid emergence of digital assets has created profound challenges for both secular and religious legal systems, raising pressing questions about their legitimacy, regulation, and compatibility with Shari’ah principles. While cryptocurrencies embody innovation in financial transactions, they also entail risks of volatility, speculation, gharar (accessory uncertainty), and potential violations of the prohibition of riba (interest). Conversely, blockchain technology presents opportunities to enhance transparency, accountability, and efficiency in financial practices, Shari’ah-compliant governance, disclosure, and compliance mechanisms. Through a comparative legal and jurisprudential analysis,1 this article reviews contemporary fatwas, the European Union’s Markets in Crypto-Assets Regulation (MiCA), Financial Action Task Force (FATF) guidelines, and initiatives in Muslim-majority jurisdictions such as the United Arab Emirates, Bahrain, and Malaysia. The study argues that a hybrid model integrating Islamic jurisprudence with international financial regulation could provide a sustainable and ethically sound framework for governing digital assets. The findings highlight both challenges and opportunities for Muslim and non-Muslim jurisdictions alike, as well as policy implications for regulatory design and Shari’ah governance of digital assets.