REIMAGINING MONEY: THE INTERSECTION OF ISLAMIC FINANCE AND DIGITAL CURRENCY IN A GLOBALIZED ECONOMY

Abstract

The rapid transformation of financial systems, spurred by digital innovations, has led to the emergence of digital currencies that challenge traditional monetary frameworks. In this evolving landscape, Islamic finance presents a unique model grounded in Shariah principles, emphasizing ethical conduct, risk-sharing, and the prohibition of riba (interest). This paper explores the convergence of Islamic finance and digital currencies within the broader context of a globalized economy. It investigates whether digital financial instruments, such as cryptocurrencies and central bank digital currencies (CBDCs), align with the core tenets of Islamic economics. The study critically examines the compatibility of blockchain-based digital money with Islamic jurisprudence, focusing on issues of gharar (excessive uncertainty), speculation, transparency, and decentralization.

The intersection of Islamic finance and digital currency offers potential benefits, including enhanced financial inclusion, cross-border transaction efficiency, and increased accountability through distributed ledger technologies. However, it also presents regulatory, ethical, and jurisprudential challenges, especially regarding the intrinsic value of digital currencies, volatility, and speculative trading. This paper draws from classical Islamic sources and contemporary scholarly perspectives to offer a framework for evaluating digital currencies through the lens of Islamic finance. The research highlights that while some forms of digital currency may be permissible, others require significant restructuring to conform to Islamic principles.

Through a synthesis of interdisciplinary scholarship, this paper aims to contribute to the development of a Shariah-compliant digital financial system capable of meeting the demands of the global economy. The findings suggest the need for ijtihad (independent legal reasoning) among Islamic scholars and collaborative efforts between technologists, economists, and Shariah experts to ensure that innovation in finance upholds ethical and religious values.