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Beyond Bitcoin: Developing a Hybrid Shariah-Compliant Blockchain Model for Islamic Finance – Empirical Evidence and Simulation Analysis

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  • Syamsul Bachri Soamole

Abstract

Purpose: The rapid growth of cryptocurrencies has revealed a significant disconnect between speculative digital assets and the ethical principles of Islamic finance. Bitcoin’s volatility, three to four times higher than traditional equity indices, along with its energy-intensive mining process, directly contradict Shariah principles emphasizing stability, asset-backing, and minimization of gharar (excessive uncertainty). This study addresses the gap between blockchain technology's potential and the requirements of Islamic financial systems by proposing and empirically testing a Shariah-compliant digital finance model. Design/Methodology/Approach: A mixed-method approach was employed, integrating a PRISMA-guided systematic literature review, panel data analysis of 100 fintech firms from 2018 to 2024, and Monte Carlo simulation. Fixed-effects regression was used to assess the impact of blockchain adoption on financial performance (ROA, ROE) in both Islamic and conventional fintech firms. The simulation evaluated the efficiency of a Hybrid Shariah Blockchain Model for tokenized waqf (Islamic endowment) operations. Findings: Results indicate that blockchain adoption significantly improves financial performance in Islamic fintech (ROA: β = 0.023, t = 3.41; ROE: β = 0.067, t = 2.79). Simulation results demonstrate a reduction in transaction latency from 3.2 days to 12.4 seconds (95% CI: 10.1–14.7), complete auditability, and transaction costs below $1.00 per operation. Practical Implications: Policy recommendations include regulatory sandboxing and institutional integration strategies to mainstream Shariah-compliant blockchain applications. Originality/Value: This study presents the first simulation-based validation of waqf blockchain governance grounded in Islamic jurisprudence, offering a scalable framework for ethical, decentralized financial services benefiting 1.8 billion Muslims worldwide.

Suggested Citation

  • Syamsul Bachri Soamole, 2025. "Beyond Bitcoin: Developing a Hybrid Shariah-Compliant Blockchain Model for Islamic Finance – Empirical Evidence and Simulation Analysis," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 113-134.
    • Handle: RePEc:ers:ijebaa:v:xiii:y:2025:i:3:p:113-134
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    References listed on IDEAS

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • Z12 - Other Special Topics - - Cultural Economics - - - Religion
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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