The Malaysian government believes that blockchain technology will not only help boost its economy but that it will also help to streamline the Islamic finance sector.
Mastura Ishak, program director at the Malaysian Industry-Government Group for High Technology, studied the impact that blockchain technology would have on the country’s key industries, recently stating:
“Blockchain is interesting because it allows small players to have a say about what’s going on.”
Creating a More Sustainable Future
Tenaga Nasional Berhad (TNB), Malaysia’s sole utility provider, is also exploring how it can use blockchain technology. The company is currently interested in the technology’s use in the renewable energy sector–with energy sellers having to declare how electricity is sourced, giving consumers the option of where to buy energy.
While TNB is the only energy provider in Malaysia, the hope is that blockchain technology will drive it to produce more sustainable energy.
The palm oil industry is another area where the government believes blockchain will have a significant impact. By placing certificates for palm oil on blockchain, it will allow users to track their palm oil source.
Additionally, the government will be able to see which palm oils are sustainable and which areas need to be regulated.
Blockchain Technology Is Helping to Shape the Islamic Finance Industry
Sharia law forbids interest collection and dictates that debt creation must be backed by material goods like gold. This is a very different approach compared to Western banks, which use intangible assets like futures, meaning the Islamic banking system is a more complex, with higher legal and administrative costs.
Each loan agreement, for example, requires at least three contracts with multiple parties to be valid. Blockchain will help to automate the contractual process, allowing banks to cut costs and pass savings on to the end customer.
There has been a lot of debate surrounding whether or not cryptocurrencies are Halal. However, Malaysia and Dubai are exploring pegging cryptocurrencies to gold as a possible solution.
Looking at the possible solution, Ibrahim Mohammed, co-founder of Onegram, said:
“Gold was among the first forms of money in Islamic societies, so this is appropriate. We are trying to prove rules and regulations from sharia are fully compatible with digital blockchain technology.”
Cover Photo by Izuddin Helmi Adnan on Unsplash
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