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Stellar Lumens is Sharia Compliant
In an announcement on July 17th, Stellar (XLM), a blockchain payments platform, declared that their system had been judged as Sharia-compliant by the Shariyah Review Bureau (SRB). The SRB is a leading international Islamic body for deciding if practices are in line with Islamic law. Stellar is the first blockchain platform to be recognized as complying with Sharia law. Islamic teaching and codes of ethics forbid many kinds of financial transactions, specifically “usury” which is in many cases interpreted to mean charging interest on loans.
The SRB confirmed that the permission also extends to use of the Stellar XLM Lumen token as well as the underlying Stellar blockchain technology.
What does this mean for Stellar?
In the announcement, Stellar outlined how they believe the endorsement will aid the development of their global strategy for adoption. Saying that “this certification will help grow the Stellar ecosystem in regions where financial services require compliance with Islamic financing principles. For example, Islamic financial institutions in the Gulf Cooperation Council (i.e., Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) and parts of Southeast Asia (e.g., Indonesia and Malaysia) will now be able to integrate Stellar technology in their Sharia-compliant product and service offerings.”
Crucially, given Stellar’s commitment to becoming a key payment method for the developing world, they point out “that these regions are endpoints of popular foreign worker remittance corridors.”
As for the next steps, they described how they intend to capitalize on the endorsement of the SRB: “In the next few months, members of the Stellar Development Foundation will meet with global financial institutions and engage them on how to best utilize Stellar in their Sharia-compliant financial services and products. We’re excited to add even greater diversity and inclusion into the Stellar ecosystem.”
In light of their focus on payments in the developing world such as the remittance market, Islamic compatibility is a crucial target. Out of the predicted potential market of 600 million Islamic banking customers worldwide, currently, only 100 million are engaged by a service provider (according to an EY report on the industry).
Developing world focus
Stellar has outlined their strategy for an open-source and global payment system which allows for fast and secure payments. It has an average confirmation time of just 2-4 second, significantly quicker than the likes of Bitcoin and even Ethereum. However, it also maintains a decentralized ledger system unlike other superfast quasi-decentralized crypto platforms like Ripple (XRP).