Stellar, the creator of the lumens (XLM) and an open-source protocol, designed for people to quickly make cross-boundary transactions in different fiat currencies, became the first distributed ledger technology to obtain Sharia compliance certification. Shariyah Review Bureau (SRB) of Bahrein “conducted its review on the Network’s guides, concepts, and related material and did not find any provisions that are non-congruent to the principles of Sharia.”
Based initially on Ripple, the second-largest cryptocurrency protocoling in the world at present, Stellar was released 2014 by Jed McCaleb — a co-founder of Ripple and a founder of Mt. Gox. Although the newest network is not a direct competitor of its successful forerunner, the split was announced to address pain points of Ripple’s. Nowadays Ripple is still being criticised for a number of disadvantages, including the lack of anonymity, the centralised structure and the amount of the platform’s native coins (XRPs) owned by the company.
Representing Stellar as a better version of Ripple’s, the Stellar team have officially complied with requirements of a non-profit organisation: no stock, no profits can be given to individuals, no private inurement. The fact that they don’t have access to profits was mentioned by the SRB in the Sharia compliance certification given.
“The technology is open source, distributed, and community owned. Stellar.org is the non-profit organisation that contributes to the development of tools and social good initiatives around the Stellar network and financial inclusion. Employees contribute code to the Stellar network, but the technology is independent of the organisation.” One of the financial Islamic principal states, “it is important to avoid any agreement that has a significant part of excessive uncertainty or speculation (gharar and maysir) since it will be considered non-compliant with Sharia perspective.” Preventable ambiguities and faults in terms of the contract are also banned.
On their website, the SRB agreed on the mission to “help businesses worldwide bring their ideas to the expanding markets of Islamic Finance.” The statement reads, “our journey since then has led us to work with companies in international business contexts beyond the banking and insurance sectors and towards a wide range of industries such as energy, agriculture, pharmaceuticals, real-estate, retail, and transportation — and with many more to come.”
Stellar is the first distributed ledger the SRB have certified. Nevertheless, the World Sharia Advisory Committee issued the similar document to the cryptocurrency NOORCOIN earlier in March.
For Stellar, obtaining such a document means that 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 the distributed ledger technology in their Sharia-compliant product and service offerings.
It should be mentioned that after the announcement, the price of the lumen (XLM) increased by 20 %.
Earlier in June, Fortune reported that Stellar was engaged in talks to acquire blockchain startup Chain for $500mln. Citing anonymous sources familiar with the discussions, the media reported that Stellar would pay $500mln worth of XLM to obtain Chain, which had previously raised more than $43mln from a variety of financial institutions including Capital One, Citigroup, Nasdaq, and Visa, as well as tech-focused funds such as Khosla Ventures, Blockchain Capital, and Pantera Capital.