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Cryptocurrency Framework Diagnostics from Islamic Finance Perspective: A New Insight of Bitcoin System Transaction

Author

Listed:
  • Nashirah Abu Bakar

    (Islamic Business School, College of Business, Universiti Utara Malaysia, Malaysia)

  • Sofian Rosbi

    (School of Mechatronic Engineering, Universiti Malaysia Perlis, Malaysia)

  • Kiyotaka Uzaki

    (Department of Business Studies, Oita University, Japan)

Abstract

This paper analyses the operation of cryptocurrency system in perspective of Islamic finance. The purpose of this study is to evaluate the cryptocurrency framework whether it is meet the Islamic Finance rule. In addition, this study performed in providing the Islamic minded investor a proper information regarding investment in Bitcoin. Cryptocurrency is a digital currency in which encryption techniques that implement to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. A transaction is a transfer of Bitcoin value that is broadcast to the network and collected into blocks. A transaction typically references previous transaction outputs as new transaction inputs and dedicates all input Bitcoin values to new outputs. This cryptocurrency has no physical form and exists only in the network. Bitcoin also has no intrinsic value in that it is not redeemable for another commodity, namely gold. Then, this study evaluates the framework according to Islamic Finance rule. The bitcoin account holder is anonymous. Therefore, it is difficult to track the real account holder if any suspicious activity occurs. In addition, the value of Bitcoin is unstable because of high volatility. Bitcoin also suffers variance in perceptions of Bitcoins store of value and method of value. All of these three conditions contribute to uncertainty in transaction framework of Bitcoin. As a conclusion, Bitcoin transaction is classified as a transaction with high uncertainty (gharar).

Suggested Citation

  • Nashirah Abu Bakar & Sofian Rosbi & Kiyotaka Uzaki, 2017. "Cryptocurrency Framework Diagnostics from Islamic Finance Perspective: A New Insight of Bitcoin System Transaction," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 4(1), pages 19-28, November.
    • Handle: RePEc:mgs:ijmsba:v:4:y:2017:i:1:p:19-28
    DOI: 10.18775/ijmsba.1849-5664-5419.2014.41.1003
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    Citations

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    Cited by:

    1. Mustafa Raza Rabbani & Shahnawaz Khan & Eleftherios I. Thalassinos, 2020. "FinTech, Blockchain and Islamic Finance: An Extensive Literature Review," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 65-86.
    2. Chen, Xia & Miraz, Mahadi Hasan & Gazi, Md. Abu Issa & Rahaman, Md. Atikur & Habib, Md. Mamun & Hossain, Abu Ishaque, 2022. "Factors affecting cryptocurrency adoption in digital business transactions: The mediating role of customer satisfaction," Technology in Society, Elsevier, vol. 70(C).
    3. Walaa J. Alharthi, 2021. "Using Blockchain in WAQF, Wills and Inheritance Solutions in the Islamic System," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 101-116.
    4. Hina Binte Haq & Syed Taha Ali, 2018. "Navigating the Cryptocurrency Landscape: An Islamic Perspective," Papers 1811.05935, arXiv.org.
    5. Soonduck Yoo, 2021. "How to Design Cryptocurrency Value and How to Secure Its Sustainability in the Market," JRFM, MDPI, vol. 14(5), pages 1-12, May.
    6. Nashirah Abu Bakar & Sofian Rosbi & Kiyotaka Uzaki, 2022. "GARCH Model for Evaluating Volatility Based on the Share Price of Airlines Company During the COVID-19 Outbreak," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 9(1), pages 42-52, November.
    7. Mohammad Sahabuddin & Junaina Muhammad & Mohamed Hisham Yahya & Sabarina Mohammed Shah & Md. Kausar Alam, 2019. "Digitalization, Innovation and Sustainable Development: An Evidence of Islamic Finance Perspective," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 9(12), pages 651-656, December.
    8. Juhro, Solikin M. & Syarifuddin, Ferry & Sakti, Ali, 2022. "Inclusive Welfare: On The Role of Islamic Public-Social Finance and Monetary Economics," MPRA Paper 113788, University Library of Munich, Germany.
    9. Marwan Mohamed Abdeldayem & Saeed Hameed Al Dulaimi, 2021. "A qualitative approach to evaluate the reconciliation of GOLDX and OneGram in Islamic Finance," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 39(1), pages 113-134.
    10. Maryam Jamilah Asha’ari & Salina Daud & Norazah Mohd Suki, 2023. "Linking Sustainable Design and Social Sustainability Performance of Chemical Manufacturing Firms: Moderating Role of Islamic Work Ethics," Sustainability, MDPI, vol. 15(7), pages 1-21, March.
    11. Nashirah Abu Bakar & Sofian Rosbi & Kiyotaka Uzaki, 2020. "E-Wallet Transactional Framework for Digital Economy: A Perspective from Islamic Financial Engineering," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 6(3), pages 50-57, March.

    More about this item

    Keywords

    Cryptocurrency; Bitcoin; Transaction framework; Islamic finance; Uncertainty;
    All these keywords.

    JEL classification:

    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

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