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Digital Financial Assets

In: ISLAMIC CAPITAL MARKETS A Comparative Approach

Author

Listed:
  • Obiyathulla Ismath Bacha
  • Ali Zhang Hengchao
  • Mirzet Šeho

Abstract

This chapter examines the evolution and dynamics of digital financial assets (DFAs) in Islamic capital markets (ICMs). Following an introduction of the concept of DFAs and their relevance to ICMs, it discusses the evolution of DFAs and the technologies underlying them. The various types of DFAs, including cryptocurrencies, stablecoins, security tokens, and central bank digital currencies (CBDCs), as well as the development trajectories of DFAs, are examined. Through an in-depth case study of Bitcoin, insights into its operational mechanics and role in modern finance are explored. The chapter also addresses the structure and risks associated with the DFAs and the primary valuation methods for DFAs. Following a discussion of the roles and risks of DFAs in the ICMs, the chapter concludes with a review of the latest developments in the DFAs’ space, including Bitcoin’s recognition as a legal tender, the debut of cryptocurrency exchange tradable funds (ETFs), and the growing interest in CBDCs. On completing this chapter, readers should have an appreciation of the risks and opportunities presented by DFAs within the Islamic finance space and the sustainable development of ICMs in this crypto-economy era.

Suggested Citation

  • Obiyathulla Ismath Bacha & Ali Zhang Hengchao & Mirzet Šeho, 2025. "Digital Financial Assets," World Scientific Book Chapters, in: ISLAMIC CAPITAL MARKETS A Comparative Approach, chapter 14, pages 403-430, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789819815975_0014
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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • F3 - International Economics - - International Finance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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