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As to conclude this topic, there are many possiblities and opportunitiies in Decentralized Finance industries (DeFi) for Islamic Banking to take advantage of, however, the technology and concept of DeFi as a whole is still new and yet to be stable and control, as we can see many unethical activities, like scams and rug pull Web 3.0 projects,  money laundering using cryptocurrency coccurs in DeFi and none of the regulation parties could take action of it. It takes time for Defi as a whole to proof it true possibilities and capabilities that truly benefit us as users, and to the point where Islamic Banking could bring ethic and faith in decentralized finance.

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This article is written by Khalid Howladar in 2022, with title of " Islamic Defi : An opportunity to bring ethics and faith into cryptoverse. In this topic, it focuses at the idea of crypto verse as a whole , its impact and potential in the near future. It discusses about how Islamic Banking and Finance could potentially adapt the future decentralized finance industry, and opportunity to establish Islamic Decentralized Finance that promote ethic and faith. We have summarized Khalid Howladar article into 5 main points and form them into a mind map, in which "Crypto assets are key to the future of finance" , "Cryptocurrencies are critical
" , " DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies " , " The Islamic crypto economy has barely begun" , and " Can DeFi drive greater financial empowerment for everyone " .

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Intermediaries, such as commercial and investment banks, stockbrokers, and pooled investment funds, have historically played an important part in the financial system. Schoar noted that "this new financial infrastructure seeks to get rid of intermediaries and institutions and replace them with a network of decentralised participants on the blockchain, particularly in DeFi." Cryptocurrency supporters hail decentralised finance as a means to democratise money. Advocates believe that by replacing traditional financial institutions and banking fees with public blockchains and open-source software, anybody with an Internet connection may participate for free.

Schoar and co-author Igor Makarov of the London School of Economics examine these and other assertions in a new working paper, "Cryptocurrencies and Decentralized Finance." The authors claim that DeFi has the potential to change the financial system, but that several issues, including as transparency and regulation, must be solved first. Because DeFi is generally unregulated, it attracts fraud and money laundering and lacks consumer safeguards seen in traditional finance. According to Elliptic, a blockchain analytics business, more than $10 billion lost to DeFi scams in 2021.

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DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies (B)

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DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies (B)

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Smart contracts may include the whole finance structure, contract, underwriting risk, and compliance procedures into the ledger of second-generation blockchain technology. Many nominal contracts used in Islamic finance, such as Ijarah, Mudarabah, Salam, and Murabahah, may also be automated utilising smart-contract logic and tokenized assets.

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The Islamic crypto economy has barely begun (B)

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The Islamic crypto economy has barely begun (B)

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It also has a Shariah governance board that is involved in product development, not just certification. MRHB may employ a decentralised governance model in the future to provide token holders with direct authority over the ecosystem's direction and behaviour, allowing for more autonomous decision-making.

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Can DeFi drive greater financial empowerment for everyone? (B)

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Can DeFi drive greater financial empowerment for everyone? (B)

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DeFi, in its ultimate form, would allow communities to construct multiple self-sustaining ecosystems that would let individuals to better handle their own finance, money, and assets without the impediment of centralised institutions delaying the process and extracting fees. More specifically, it allows the more socially conscious to construct a more accessible, fairer, and ethical or Halal crypto platform that is managed in accordance with their community's standards. DeFi ecosystems, as opposed to one-size-fits-all macropolicies, can better suit the needs of local communities, allowing economic and entrepreneurial wealth production to really descend to the lowest levels of society. Decentralisation is an important strategy of reducing racial and religious bias in financial access.

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Can DeFi drive greater financial empowerment for everyone? (C)

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Can DeFi drive greater financial empowerment for everyone? (C)

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Clearly, ethical and Halal DeFi is still in its early phases, and there are a number of difficulties with such a nascent technology. With over $3 trillion in assets in the Islamic financial industry, however, there is room for multiple Halal crypto platforms to focus on this group and ensure they do not lag behind. The emphasis on Halal principles has aroused the interest of many who have remained out of the cryptoverse due to [justifiable] fear and scepticism, and if done right, Islamic DeFi may successfully pull the general audience into the cryptoverse.

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DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies (C)

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DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies (C)

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Regulations and practises like as know-your-customer, anti-money laundering, and consumer protection may be codified using smart contracts. As a result, having a commercially operating Islamic 'decentralised bank' in the metaverse that is financed, owned, and cooperatively controlled by local communities, allowing individuals to communicate with no intermediaries and without prejudice, is quite feasible in the future.

While cryptocurrency exchanges record daily transaction volumes in the tens of billions of dollars, millions of Halal-sensitive Muslims remain excluded from this ecosystem due to the widespread belief that cryptocurrency is prohibited or 'Haram,' given the wide diversity of expert opinion.

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Cryptocurrencies are essential to the operation of any DeFi ecosystem because they enable financial settlement to take place directly within a set of financial'smart' contracts, providing enormous efficiency, cost, transparency, audit, and compliance benefits. In terms of Shariah, some scholars have noted that the technology of cryptocurrencies/coins/tokens and their associated blockchains is inherently Shariah-neutral, but the source of a coin's value must be fully assessed to ensure a token is Halal or Haram given the prevalence of interest-based lending in the crypto verse.

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The Islamic crypto economy has barely begun (C)

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The Islamic crypto economy has barely begun (C)

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Shariah administration is challenging in this fast developing business, with only a few crypto professionals. Perhaps in the future, Shariah compliance should be devolved to a decentralised body of experts that can ensure the platform's Halal integrity through the usage of particular Shariah governance tokens. This may be suitable for a faith with many Shariah law schools and no centralised institutional power to coerce obedience, and so is partially decentralised (with the strengths and weaknesses this entails).

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In 2021, crypto finally became institutional, with inflows totaling $9.2 billion, bringing the total value of crypto assets under administration to $62.5 billion. Indeed, the CEO of DBS Bank, Singapore's US$700 billion centralized finance (CeFi) behemoth, recently stated that "Bitcoin will continue to expand as a substantial store of wealth in a similar vein to gold." It is vital to note that cryptocurrencies are equally valuable in both CeFi and DeFi, which is why many of the world's major banks have spent a total of US$3 billion in crypto and blockchain technology.

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"The DeFi market is worth $77 billion. But, given its anonymity and absence of consumer protection, is it safe? According to researchers, regulation is long overdue." Betsy Verecky, an author of "Decentralized finance: 4 challenges to consider" stated. What would life be like without banks? That is the foundation of decentralised finance, a $77 billion business billed as a more efficient alternative to traditional banks.

In a DeFi future, cryptocurrency-backed transactions are automatically processed, and blockchain-based smart contracts enable people to trade directly with one another without the control of giant banks — or any institutions. "The distributed ledger technology at the heart of cryptocurrency and DeFi is a core innovation that has the potential to change the architecture of our existing financial infrastructure," said Antoinette Schoar, an MIT Sloan finance professor and co-director of the National Bureau of Economic Research's Corporate Finance programme.

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Crypto has moved from the fringe of fintech to become one of the fastest-growing sectors in finance. Venture capital funds invested over US$30 billion into crypto investments in 2021. The total value of global crypto-related mergers and acquisitions increased from about US$1.1 billion in 2020 to some US$55 billion in 2021 although the total crypto market cap remains smaller than the US$3 trillion-plus Islamic finance sector at around US$1.85 trillion[1]. Within crypto, the decentralized finance (DeFi) sector is still comparatively small at around US$200 billion of 'total value locked' in smart-contract-based protocols worldwide, leaving vast potential growth ahead.

How much of this venture funding was explicitly for Islamic or Halal crypto projects? Stats are hard to find but I estimate it is less than US$10 million, despite the US$3 trillion-plus evidence of Shariah-sensitive finance demand. As an active angel investor and start-up advisor, I have been on both sides of the fundraising table and there are still many challenges when it comes to funding for the Halal tech sector and on top of these, crypto investing is even more risky with a much higher incidence of poor governance, scams or failed projects, making it a minefield for investors especially on projects where sometimes founders and scholars bizarrely remain anonymous.

After 25 years in finance and markets, I genuinely believe that - for the first time in the centuries since interest-based, centralized banking was introduced - blockchain and the associated cryptocurrency technology offers humankind a real prospect of taking finance closer to the communities it is meant to serve with a new decentralized approach, but what exactly is DeFi?
DeFi 101: Cryptocurrencies are critical
It is ironic that central banking - core to almost every capitalist economy in the world - is actually a key pillar of Marxism/communism. Simplistically, it is a state-run monopoly in the business of money that persists even though the decentralized private sector tends to be much better at delivering innovation, efficiency, quality and economic value/wealth creation. Bitcoin is the first and still most decentralized (and hence neutral) cryptocurrency whose value is completely immune to monetary abuse, devaluation and political weaponization. Currently, institutional bitcoin trading volumes account for 99% of transactions over US$100,000 and it remains the cryptoverse equivalent of gold or a 'reserve asset' that will continue to appreciate over the long term while the fiat money inevitably devalues.

Cryptocurrencies are critical to the functioning of any DeFi ecosystem as it allows financial settlement to occur directly within a set of financial 'smart' contracts with immense efficiency, cost, transparency, audit and compliance benefits. With respect to Shariah, some scholars have noted that technology of cryptocurrencies/coins/tokens and their associated blockchains are intrinsically Shariah-neutral but the source of a coin's value needs to be fully assessed to ensure a token is Halal or Haram given the prevalence of interest-based lending in the cryptoverse. This is a view I personally support - one Fatwa does not fit all.

2021 was the year the crypto finally became institutional as inflows hit US$9.2 billion to push the crypto assets under management to US$62.5 billion. Indeed, the CEO of DBS Bank, a US$700 billion Singaporean centralised finance (CeFi) titan, recently shared his belief that: "Bitcoin will continue to grow as a meaningful store of value in a similar vein to gold." It is important to note that cryptocurrencies are equally useful in both CeFi and DeFi which explain why many of the world's largest banks have collectively invested US$3 billion into crypto and blockchain technologies. Emerging market leader Standard Chartered leads the pack with US$380 million invested and is joined by CeFi powerhouses JPMorgan, Goldman Sachs, Santander and Citibank among others, all investing hundreds of millions each. Where are the Islamic Banks?
DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies
Blockchain technology is specifically suited for Islamic finance which is ideally asset-backed, although in substance current practices tend to fall short of the ideal given customer demand. Islamic business principles around transparency, fairness and the binding contractual agreement between parties fit perfectly with this new technology. In addition, DeFi crucially relies on smart-contract technology to enable peer-to-peer trustless financial activity and can economically liberate individuals to become entrepreneurs, investors or even collectively their own 'bank'.

Smart contracts can incorporate the entire financing structure, contract, underwriting risk and compliance processes into the ledger of second-generation blockchain solutions. The various nominal contracts used in Islamic finance (for example Ijarah, Mudarabah, Salam and Murabahah) can also be automated through smart-contract logic together with the relevant tokenized assets.

Regulations and processes involving know-your-customer, anti-money laundering and consumer protection can be codified into smart contracts. As such, it is entirely feasible in the future to have an Islamic 'decentralized bank' operating profitably in the metaverse that is funded, owned and collectively run by their communities allowing people to transact with no intermediaries and no discrimination.

However, while crypto exchanges report growing transaction volumes of tens of billions of dollars every day, millions of Halal-sensitive Muslims remain shut out of this ecosystem because of the fear and confusion of cryptocurrency being prohibited or 'Haram' given the wide diversity of opinion among scholars.
The Islamic crypto economy has barely begun
Currently, it is observed that no Islamic bank is yet offering crypto assets to retail customers - which may make sense given the high-risk aversion and current profitability of their existing business. Nonetheless, various crypto and DeFi platforms are emerging to attract the younger stakeholders of billion-plus of Halal-sensitive consumers as well as those looking for a more ethical approach. Halal crypto will ensure that the community will be a part of this new high-growth economy that will create many new jobs and businesses globally. As such, it is important to remove the confusion and friction around the 'Haram' perception of crypto in some quarters so that Muslims can enter this space with a clear conscience.

While still very immature, DeFi platforms hold huge promise. The most prominent Islamic platform is currently MRHB DeFi[2] ('Marhaba') which raised over US$5 million[3] from the community in December 2021 to build an entire, eight-product Halal cryptoverse that includes non-interested based lending, non-fungible token market and crypto income products. The telegram community has over 45,000 of mostly millennials and Gen Z members across five languages and has a Shariah governance board that has a key role in the design of the products and not just certification. MRHB may potentially (in future) apply a decentralized governance model to give token holders direct power to determine the direction and conduct of the ecosystem and enable more autonomous decision-making. (Disclosure: Acreditus Partners, founded by the author, is a strategic shareholder of MRHB.)

Shariah governance is challenging in this fast-growing space with only a handful of scholars currently fluent in crypto. Perhaps to reduce this bottleneck, maybe it is best in the future if Shariah compliance can be devolved to a decentralized body of scholars who through the use of specialized Shariah governance tokens can ensure the Halal integrity of the platform. This perhaps befits a faith that has multiple schools of Shariah jurisprudence and no centralized institutional authority to dictate compliance and hence is itself somewhat decentralized (with the strengths and weaknesses this entails).
Can DeFi drive greater financial empowerment for everyone?
The benefits of DeFi extend far beyond Islamic finance. Following the 2008 global crisis and then the COVID-19 pandemic, there is a widespread perception that the centralized financial system is failing the needs of the '99%'. Financing of the economy seems far more lucrative than the real economy and money printing is driving yet more inequality. Economic growth is still greatly dependent on Riba/interest-based, debt-fueled consumption rather than productive investment and 'stagflation' (low growth and high inflation) is a distinct possibility. Given this sorry state of affairs, one can argue that our centralized finance is already failing younger and lower income populations worldwide and many Muslim communities in particular are particularly vulnerable to exclusion.

At its ideal, DeFi will allow communities to build multiple self-sustaining ecosystems that allow individuals to better manage their own financing, wealth and assets without centralized institutions sitting in the middle, slowing the process and extracting fees. More specifically, it allows the more socially conscious to build a more accessible, fairer and ethical or Halal crypto platform that is governed according to their community values. DeFi ecosystems can better support the needs of local communities versus the one-size-fits-all macro policies to really devolve economic and entrepreneurial wealth creation to the lowest levels of society. Crucially, decentralization is also one way to prevent racial and religious discrimination in financial access.

Clearly, this is just the beginning of ethical and Halal DeFi and there are still many risks in such an infant technology. However, with over three trillion dollars of assets in the Islamic finance sector, there is room for many Halal crypto platforms focused on this community and ensure they are not left behind. The focus on Halal ethics has generated significant interest from those who remain excluded due to [justifiable] fear and cynicism and - if done right - Islamic DeFi can bring the mainstream population safely into the cryptoverse.
Khalid Howladar is the chairman of MRHB DeFi, partner and founder of Acreditus Partners and head of credit/Sukuk at RJ Fleming & Co.
MRHB DeFi currently has a community numbering 50,000 over various channels of which 1,000+ invested in the various funding rounds typically reserved for VCs and HNWIs. The token launch was on 22 December 2021 more information here https://www.globenewswire.com/news-release/2021/12/31/2359462/0/en/MRHB-DeFi-Closes-Successful-USD5-5M-Fundraise-with-IDO-and-Announces-5-Million-Pool-of-MRHB-Token-Rewards-for-Liquidity-Providers.html CoinMarketCap and is listed on and PancakeSwap

[1] https://coinmarketcap.com/ 20/03/2022

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Islamic DeFi: An opportunity to bring ethics and faith into the cryptoverse

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Crypto has moved from the fringe of fintech to become one of the fastest-growing sectors in finance. Venture capital funds invested over US$30 billion into crypto investments in 2021.

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Can DeFi drive greater financial empowerment for everyone? (A)

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Can DeFi drive greater financial empowerment for everyone? (A)

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The benefits of DeFi extend well beyond Islamic funding. Following the 2008 global financial crisis and the COVID-19 outbreak, many people believe that the centralised financial system is failing the "99%." The economy's finance looks to be substantially more profitable than the actual sector, and money creation is exacerbating inequality. Economic growth continues to be primarily reliant on Riba/interest-based, debt-fueled consumption rather than productive investment, and'stagflation' (low growth and high inflation) is a genuine possibility. Given this sorry state of affairs, one could argue that our centralised finance is already failing younger and lower-income populations worldwide, and many Muslim communities, in particular, are particularly vulnerable to exclusion.

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The Islamic crypto economy has barely begun (A)

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The Islamic crypto economy has barely begun (A)

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No Islamic bank is presently offering crypto assets to retail customers, which makes sense given their high risk aversion and current profitability. Halal cryptocurrency will ensure that the community is a part of this new high-growth economy, which will result in the creation of many new jobs and businesses throughout the world.

While still in their infancy, DeFi systems offer immense promise. MRHB DeFi ('Marhaba,' which raised over $5 million from the community in December 2021 to construct a comprehensive, eight-product Halal crypto ecosystem that includes non-interested based loan, non-fungible token market, and crypto income products, is the most noteworthy Islamic platform at the present. Telegram has over 45,000 subscribers, mostly millennials and Gen Z, and is available in five languages.

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DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies (A)

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DeFi is a true use-case of blockchain, smart contracts and cryptocurrency technologies (A)

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Blockchain technology is highly suited for asset-backed Islamic finance, yet current practises fall short of the ideal given client desire. This innovative technology is completely consistent with Islamic business ideals such as transparency, fairness, and binding contractual commitments between partners. Furthermore, DeFi is highly reliant on smart-contract technology to enable peer-to-peer trustless financial activity, which can economically liberate individuals to become entrepreneurs, investors, or even their own 'bank.'

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Bitcoin was the first and remains the most decentralised (and hence neutral) cryptocurrency, with a value impervious to monetary abuse, devaluation, and political weaponization.  It remains the crypto verse equivalent of gold or a "reserve asset" that will continue to rise over time while fiat money devalues.

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Crypto assets are key to the future of finance

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Crypto assets are key to the future of finance

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Cryptocurrency has risen from the outskirts of fintech to become one of the fastest-growing financial industries. Global crypto-related mergers and acquisitions surged in value from around US$1.1 billion in 2020 to over US$55 billion in 2021. The decentralised finance (DeFi) industry within crypto is currently very modest, with roughly US$200 billion in 'total value locked.'

With 25 years of experience in finance and markets, Khalid Howladar sincerely believes that, for the first time in centuries since interest-based, centralised banking was introduced, blockchain and the associated cryptocurrency technology offers humanity a genuine prospect of bringing finance closer to the communities it is meant to serve through a new decentralised approach.