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Cryptocurrency Zakat and Waqf in the Islamic World

The more Islam followers begin to show interest in cryptocurrencies, the more arise new questions whether it is possible to use this new asset class to carry out traditional financial transactions, including those that are mandatory for every Muslim, the most important of which are:

Waqf, waqf, habus — property transferred for religious or charitable purposes;

Zakat is one of the five pillars of Islam, a mandatory annual tax in Islamic law, paid from various types of income and property.

In this article, we will try to figure out how charity and cryptocurrencies are combined.

Despite the divergence of views regarding the use of digital assets, the result of the research of many theorists and practitioners of Islamic finance is the recognition that cryptocurrencies in Islam can be considered as an analogue of traditional money, therefore all possible laws that apply to state currencies can be applied to them. Regardless of the form (precious metals, paper or digital coins), money in Islam is considered as property, which means it can be an object of zakat.

An important factor in the permissibility of using cryptocurrencies as a means of using them when paying zakat or waqf is that transactions with cryptocurrencies are considered as commercial activities, and such activities offer the concept of paying 2.5% of income in the form of zakat in accordance with applicable Shariah laws. If cryptocurrencies are used in accordance with Shariah law, it is recommended to set aside part of the income based on the principle of charity for humanitarian purposes and ensuring economic justice.

It can be said that cryptocurrencies perform most of the functions of property (maal) in Islam, all the rules and requirements for material types of wealth can be applied to them.

Moreover, cryptocurrencies have properties similar to the characteristics of gold in Islam, namely:
1. Cryptocurrency has a limited supply;
2. It is impossible to determine exactly who is its creator;
3. Each unit of cryptocurrency is unique;
4. It can be used for worldwide payment;
5. Cryptocurrency can be sold/exchanged for other forms of ownership.

Based on the above, cryptocurrencies can significantly expand the possibilities of charitable activities, which are an important part of Islamic law and Islamic finance.

Blockchain can also increase the efficiency of zakat collection and distribution, as this technology provides unprecedented opportunities for conducting transparent transactions. Blockchain technology can be used to reduce risks in financial institutions. Risk reduction is a serious problem faced by banks in developing countries, as it can affect recipients of remittances and humanitarian organizations.

The concept of Waqf is that the wealth that a person owns should be used for good deeds and benefit society.

The use of blockchain in Waqf can maintain the accuracy of the records being held. The cryptocurrency waqf offers a secure and transparent network, thus avoiding a closed and opaque charity model. It is aimed at obtaining sustainable benefits, ensuring greater returns and achieving a global effect with a high level of transparency and accountability.

IslamicCoin can become an ideal tool for the implementation of the most important aspect of charitable financial activities based on the norms of Islam and Sharia.

IslamicCoin cannot be arbitrarily “printed” and thus devalued.

Islamic Coin can be minted (issued) only by those who contribute to the work and investments – validators and network stake holders at a pre-announced rate.

Every time a new coin is minted, 10% of the issued amount is deposited into a special Evergreen DAO account for further investment in Islamic Internet projects or transferred to Islamic charities.

The mission of the project is to provide the international community of followers of Islam with a reliable and promising financial instrument that allows for independent financial cooperation to support innovation and philanthropy.

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