The Dai stablecoin, MakerDAO and Islamic finance

I would like to take up the subject of blockchains, cryptocurrencies and Islamic finance, especially the upcoming stablecoin Dai and the surrounding economic ecosystem. I will give my opinion of whether the different parts of the system is compatible with Islamic banking principles or not. I would be grateful for any response.

Holding Dai: just holding Dai does not earn interest (Riba) so the most obvious obstacle to use is not present. Additionally, as the Dai value over time can move from the SDR peg, which can be considered an Islamic gift (Hibah). This is clearly the case as the movement of Dai value is subject to the MakerDAO governance (out of control of a single individual) and is not time bound (MakerDAO governance decides). Additionally there is not in any shape or form a guarantee involved in the movement of Dai valuation. Holding the Dai stablecoin can therefore be said to fully conform with the principles of Islamic banking.

Borrowing Dai: creating Dai by moving collateral into a collateral debt position (CDP) and getting Dai stablecoins in return is also not in breach of Islamic banking principles, although retrieving the collateral would involve paying the stability fee which would be in direct breach of Sharia banking principles. To get around this the borrower could liquidize the whole CDP position instead of paying the stability fee. Alternatively the whole CDP could be sold to a non-islamic entity.

Holding MKR: according to Sharia banking principles, holding the MakerDAO coin MKR is not directly wrong, but certainly highly suspicious. There is no guarantee of payment, no ensured interest, but the highly speculative nature of the MKR coin could easily make holding it a breach of the Sharia principles of speculations (Gharar) and the ban on relying on uncertain future events (Maysir). Devout followers of Sharia banking may want additional religious guidance before deciding to hold MKR.

I challenge all Islamic scholars to read up on MakerDAOs whitepaper and confirm or discuss the assumptions above.

Sources:
https://en.wikipedia.org/wiki/Islamic_banking_and_finance
https://makerdao.github.io/docs/

Page not found.

How do you have any control over the governance of this currency?

I mean how much do you trust the group of people who control this stuff?

What is to stop them making more of these "stable" coin things when they fancy a new car?

Gold has risen over 367% in US dollar terms and by more in currencies used in Islamic countries

How does commodities speculation differ from stock market speculation?

Do you expect that the world's production of gold will remain the same with the price being 4 times what it was and do you think that increased supply of gold will make the price drop?

How do you actually have control over your gold through this currency at all? If they anounce that the money has been stolen and somebody has run away with the gold what do you do?


Edited by Tim the plumber - 27 April 2017 at 2:59am