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... On the other hand, several studies disputed goldbacked cryptocurrencies' safe haven performance and stated that they are vulnerable to volatility originating from gold markets (Aloui et al., 2021;Díaz et al., 2022;Jalan et al., 2021;Kołodziejczyk, 2023;Nugroho, 2021;Widjaja et al., 2023). In this regard, Adzimatinur et al. (2021) assess the risk and volatility inherent in goldbacked cryptocurrencies in comparison to conventional cryptocurrencies and financial assets. They indicate a heightened degree of volatility exhibited by these digital gold assets in contrast to traditional cryptocurrencies and the S&P500 stock index. ...
The recent global crises have heightened financial market instability, surging the need for diversification, hedging, and safe haven assets to mitigate stock market risks. This study employs a Quantile Vector Autor-egression (Q-VAR) approach to analyze the interconnectedness between gold-backed cryptocurrencies and G7 stock market indices during crises spanning from December 1, 2020, to July 5, 2023. Our findings indicate a robust association between digital gold and financial assets, with a total connectedness index (TCI) of 58.64%. Remarkably, G7 stock indices emerge as significant contributors to market fluctuations compared to digital assets, exerting influence ranging from 24% to 37%, thereby underscoring the potential of gold-backed cryptocurrencies for effective diversification strategies. Dynamic analysis during crises indicates the pivotal role of DGX as a safe haven, alongside identifying NIKKEI as a significant net receiver. Furthermore, the total net directional connectedness examination corroborates the status of gold-backed cryptocurrencies as net receivers , reaffirming their safe-haven abilities. Intriguingly, an in-depth examination across quantiles validates symmetrical dynamic connectedness, with G7 indices predominantly functioning as net transmitters of spillover. Our empirical findings underscore the compelling safe-haven potential in gold-backed crypto-currencies, offering valuable insights for investors, policymakers, and portfolio optimization during turbulent market conditions.
... In the first category, scholars advocate against Bitcoin's use in Muslim communities due to its speculative nature. They asserted that many users engage with it as a form of speculative investment, akin to gambling, citing concerns about Bitcoin's volatility and the absence of regulatory oversight leading to uncertainty (Adam, 2017;Adzimatinur et al., 2021;Aliyu et al., 2020;Bakar et al., 2017;Fatarib & Sali, 2020). ...
This paper aims to investigate the challenges associated with collecting Zakat on Bitcoin, one of the digital assets in Malaysia. The study is qualitative as interviews were conducted with Zakat officers, Chief Executive Officer f MAIPs Perlis, Muftis, Scholars, and experts. The study identifies key challenges. Firstly, limited knowledge among the general population complicates determining whether specific digital assets are Zakatable. Additionally, the study highlights that technological infrastructure deficiencies hinder the efficient management of digital assets for Zakat purposes. The findings also reveal that the challenge of credit risk arises from the unpredictable nature of digital asset prices, leading to uncertainties in when to liquidate digital assets (Bitcoin) after receiving Zakat. Note that regulatory uncertainty due to the absence of clear guidelines impacts the establishment of standardized procedures. The digital assets are unstable since they are not properly regulated by Bank Negara. It was discovered that the challenge is also related to security concerns related to cybersecurity risks, including hacking and unauthorized access, which pose significant threats to Zakat funds collected as digital assets. It is expected that the findings of this research will educate Muslims on Zakat's obligations to digital assets. It will also inform policymakers, regulators, and stakeholders, guiding future initiatives and policies to foster compliance, transparency, and security in collecting Zakat from digital asset holdings.
... In this regard, gold-backed cryptocurrencies are a famous type of stablecoins. Some researchers have focused on such assets from Islamic finance perspective (Alam et al., 2019;Adzimatinur et al., 2020;Aloui et al., 2021;Ncir et al., 2021;Ali et al., 2022). For instance, Díaz et al. (2023) examine the capacity of stablecoins to limit portfolio risk. ...
... In this regard, mixed findings results about the associations between gold-backed cryptocurrencies and other asset classes are reported. Using the ARCH-GARCH approach, Adzimatinur et al. (2020) compare the volatility and risk of gold-backed cryptocurrencies to Bitcoin, Ethereum, S&P500, and gold. They show that these assets are more volatile than Bitcoin, Ethereum, and the S&P500. ...
Given that the interconnections of NFT and DeFi digital assets with other stablecoins still not sufficiently studied, this paper is two-fold. We first examine the dynamic conditional correlation between gold-backed cryptocurrencies and NFTs and DeFi assets during the period 02/11/2021-05/01/2023. We thereafter assess the diversification potential of gold-backed cryptocurrencies against NFTand DeFi. To this end, we use the time-varying Student's copula to investigate the cross-markets linkages among different assets in dynamic fashion. We afterwards compute the optimal hedging ratios and effectiveness index to better explore the effectiveness of portfolio risk management. Our findings clearly show that the degree of dependence between gold-backed cryptocurrencies and NFT and DeFi tokens tends to vary over time. Our results also display that gold-backed cryptocurrencies act as suitable hedging (or diversifying) assets during normal times. Nevertheless, such assets can be considered as robust safe havens during the 2022 bear market for the most of NFT and DeFi assets. More specifically, PAXG and PMGT are found to be the best safe haven instruments for both NFT and DeFi tokens. DGX also serves as safe-haven assets for some NFT and DeFi assets, but with a lower risk-mitigation capacity compared to PAXG and PMGT. In most cases, DGX tends to act as a strong diversifier. Its hedging feature is only recorded for the NFT Protocol (xNFT) and the DeFi token Chainlink (LINK). Our results are of particular interest to investors and portfolio managers who search for safe havens to mitigate the risk of their NFT and DeFi portfolios.
... Shariah compliance aspect of gold is also addressed in Adzimatinur et al. (2021). The authors discuss the potential of goldbacked-cryptocurrency as a Shariah-compliant investment analyses the volatility and risk associated with this asset class. ...
This study explores the challenges of managing Shariah Compliant Portfolios and the importance of addressing Shariah non-compliance (SNC) risk, particularly in the context of social media and reputation risk. The paper proposes using the Black-Litterman portfolio optimization model and incorporating the views of Shariah scholars to construct a Shariah compliant portfolio that generates better returns than the benchmark portfolio while addressing SNC risk. Additionally, the paper discusses the benefits of adding gold to a portfolio of stocks and bonds and provides insights on reallocating gold's weight based on the investor's risk-return preferences. The paper provides a comprehensive review of the literature on portfolio selection models, SNC risk, SNC risk assessment, and portfolio diversification through Shariah-compliant gold investments. The study's methodology and data sources are explained, and the results are presented and analyzed. The paper concludes by summarizing the main findings and discussing their implications for investors, policymakers, and asset managers in the realm of Islamic finance.
In this article, we attempt to analyze and compare the safe-haven features of gold, Bitcoin and gold-backed cryptocurrency against the stock and banking indices of G7 countries during the outbreak of adverse events. To do so, we examine dynamic relationships between different assets and we compute optimal hedge ratios for different couples using the corrected Asymmetric Dynamic Conditional Correlation-Exponential Generalized Autoregressive Conditional Heteroscedasticity and corrected Asymmetric Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroscedasticity models. We clearly show that gold and gold-backed cryptocurrency maintain higher weights in optimal portfolios compared to Bitcoin. We also report that shocks due to unexpected events increasingly affect dynamic correlations, asset weights and hedge ratios. This underscores the need for regular demand for rebalancing the hedge positions and effective risk management. We thereafter show that the relationship between Bitcoin (gold-backed cryptocurrency) and G7 indices is highly affected by the outbreak of COVID-19 pandemic. Such findings highlight the hedging and safe-haven features of different asset classes against stock markets. They could have insightful implications for investors who want to minimize investment risks and policymakers who are worried about the financial consequences of different unexpected events.
Abstract
Blockchain smart contracts is a digital program based on the
blockchain design that accommodates certain data stored in their
internal logic. The decentralized nature of this technology prevents
unauthorized access. This technology require the use of
cryptocurrencies to be effectively utilized as a medium of exchange.
While cryptocurrencies have received wide recognition as an
improvement to modern business transactions. However, in the
Muslim communities, Muslim scholars have divergent views on the
permissibility and prohibition of cryptocurrencies on certain
grounds. Islamic law is characterized by outstanding flexibility that
enables it to keep pace with the development of time and place, and
gives it the validity to interact to address emerging issues that stand
in people's way. This study aims to examine blockhain smart
contracts, how they work, the religious ruling surrounding its
permissibility. As well as the consensus of Muslim Scholars on its
usage by Muslim communities. The study adopts qualitative
doctrinal, library based or normative judicial research to analyze
blockchain smart contracts and their suitability and compatibility
with Islamic law. By examining the law from the perspective of
social reality, the researchers qualitatively analyzed the concept ofSmart contracts within the boundaries of law and its application
under Islamic law. Delving into deductive reasoning and
conclusions based on consensus of scholars. This study found that
blockchain smart contracts falls within the permissibility principle,
The Maliki school sale on credit and negotiations under the ijtihadi
perspective. This research suggests the need for further study to
shed light on this new type of contract to support its acceptability
among Muslim communities.
The purpose of this chapter is to demystify blockchain technology and present potential use cases to ignite the potential blockchain brings. This chapter brings together thought leaders from both academia and industry to ensure a more holistic perspective on blockchain, both pros and cons. Primarily riding on the potential of the smart contract, this chapter expounds on the potential innovation that can be derived from blockchain. Simultaneously, this chapter expands on potential ideas that would bring value to mankind. It discusses how blockchain can be used to do social good and to rebuild trust between citizens, government, and more importantly, politicians. This could be achieved by rebuilding thrust through transparency and efficiency. While it is not without any drawback, suggested areas of future research were also proposed at the end of this chapter. This chapter also proposed a possible digital framework to be considered.
Muslim scholars and experts have given their views on issues related to the permissive and prohibitive use of cryptocurrencies. Scholars and experts’ decisions were of three categories: permitted the use of cryptocurrency; prohibited its use based on Islamic principles; and tawaqquf, yet to make their final decision on the acceptance or otherwise. The main objective of this study was to systematically examine and organize the various studies and research that explored known common ideas among Muslim scholars and experts on issues related to the use of cryptocurrency in Muslim communities. This study adopted the PRISMA guideline of reporting a systematic literature review, where it identified and explored available literature in Scopus, Emerald Insight, and Google Scholar, related to Muslim scholars' and experts’ decisions on the use of cryptocurrency. With the increasing use of cryptocurrency globally, the topic has also rapidly grown among Muslim scholars and experts, which has created a need for a real conclusion and justification for the people to hold on to. The systematic literature review revealed that the Muslim scholars and experts’ views on cryptocurrencies can be sub-categorized further: permitted its use (requirements compliant, regulations, justified reasons, wide acceptance, and gold-backed), prohibited its use (speculative nature, restrictions by authorities, fewer benefits, and religious beliefs), and tawaqquf (potentials for improvement, PMBC, Islamic cryptocurrencies, and backed Dinar and Dirham crypto). The conceptual contribution of this study was that views expressed by Muslim scholars and experts on cryptocurrencies be categorized for public consumption and guide in understanding issues. Abstrak: Sarjana dan pakar Muslim telah memberikan pandangan mereka tentang isu berkaitan permisif dan larangan penggunaan mata wang kripto. Keputusan ulama dan pakar terdiri daripada tiga kategori: membenarkan penggunaan mata wang kripto; melarang penggunaannya berdasarkan prinsip Islam; dan tawaqquf, belum membuat keputusan muktamad mengenai penerimaan atau sebaliknya. Objektif utama kajian ini adalah untuk mengkaji dan menyusun secara sistematik pelbagai kajian dan penyelidikan yang meneroka idea-idea umum yang diketahui di kalangan sarjana dan pakar Islam mengenai isu-isu yang berkaitan dengan penggunaan mata wang kripto dalam masyarakat Islam. Kajian ini menerima pakai garis panduan PRISMA untuk melaporkan tinjauan literatur yang sistematik, di mana ia mengenal pasti dan meneroka literatur yang terdapat dalam Scopus, Emerald Insight dan Google Scholar, yang berkaitan dengan keputusan pakar dan sarjana Muslim tentang penggunaan mata wang kripto. Dengan penggunaan mata wang kripto yang semakin meningkat secara global, topik ini juga telah berkembang pesat dalam kalangan sarjana dan pakar Muslim, yang telah mewujudkan keperluan untuk kesimpulan dan justifikasi sebenar untuk dipegang oleh orang ramai. Kajian literatur sistematik mendedahkan bahawa pandangan ulama dan pakar Muslim tentang mata wang kripto boleh dikategorikan kepada: dibenarkan penggunaannya (mematuhi keperluan, peraturan, alasan yang wajar, penerimaan meluas, dan disokong emas), melarang penggunaannya (sifat spekulatif, sekatan oleh pihak berkuasa, faedah yang lebih sedikit, dan kepercayaan agama), dan tawaqquf (potensi penambahbaikan, PMBC, mata wang kripto Islam dan kripto Dinar dan Dirham yang disokong). Sumbangan konsep kajian ini ialah pandangan yang diutarakan oleh para sarjana dan pakar Islam mengenai mata wang kripto yang dikategorikan untuk kegunaan awam dan panduan dalam memahami isu ini.
