The backstory on the Gaza-based startup that’s issued Islamic finance verdicts on more than 2,500 cryptocurrencies

Mohammad Abo Jazar learned about currency crises early in life. Perhaps too early.

Born in Iraq, he witnessed his country’s invasion of neighboring Kuwait in the early 1990s when the resulting war and harsh economic sanctions brought the economy to its knees. The Iraqi Dinar fell from 3 dollars to less than a few pennies. After losing all their savings, Abo Jazar’s family left Al Anbar, in western Iraq, for his father’s hometown of Gaza in the Palestinian Territories.

“Out of the frying pan and into the fire,” he said with a laugh.

Today, the 43-years-old university professor is the founder of “Crypto Halal,” a Gaza-based company specializing in Islamic Sharia-compliant cryptocurrencies. The Iraqi Dinar isn’t the only currency in the Middle East to take a nosedive. In 2019, The Lebanese Lira lost 90 percent of its value. In the past three months, Egypt devalued its currency by 14 percent.

On the other side of the equation, the dominance of the U.S. dollar in global markets is having an adverse effect as well, Abo Jazar said.

“The domination of the dollar on the world economy and manipulation through federal interest rates are pushing the world to the edge,” he said. He believed crypto was the solution.

But it wasn’t always that clear for him. When he first heard of crypto in 2017 when he was invited to a conference on the application of blockchain to Islamic finance he thought there’d been a mistake.

“I thought the word blockchain was a typo; I never heard of it before,” he said. After a quick Google search, he was hooked.

Crypto Halal

For two decades, Abo Jazar has taught and practiced Islamic finance, a field that guides Muslims to permissible trading and investment practices. With blockchain and cryptocurrencies, however, he knew there was a wide open new field where he could apply his expertise.

He spent eight months in isolation, immersed in reading, researching, studying, and writing on crypto. By last October, Abo Jazar was ready to launch Crypto Halal with a team of computer programmers, Islamic scholars, and translators. They started analyzing cryptocurrencies listed on Coinmarketcap and have issued religious verdicts on more than 2,500 currencies.

Through his work, Abo Jazar also sees an opportunity to bring along other Islamic finance scholars who are skeptical of digital currencies. Scholars who prohibit crypto either do not understand the technology or are politically motivated and resentful of the idea of a currency not controlled by a government, he said.

Satoshi

Abo Jazar believes the open-source code of Bitcoin and the immutability of the blockchain ensure the currency’s integrity without the need for a government.

“Even if Satoshi himself wanted to tamper with it, he can't... This is the beauty of the technology,” he said.

While a growing number of scholars have prohibited crypto, Abo Jazar is confident the Middle East's economic environment will lead to mass adoption.

“I don’t believe Bitcoin and crypto will replace national currencies,” he said, “I believe it is an assistive store of value and method of payment in times of crisis.” For example, if a local currency loses its value or central banks freeze withdrawals, people can use crypto and blockchain to continue with their lives and mitigate the economic shock.

Halal Trading

Islamic finance is vast and complex. It requires rigorous knowledge of religious doctrine as well as fintech. The religion prohibits investing money in forbidden activities such as casinos or alcohol manufacturers.

The religion also prohibits usury, known as Riba. In the Islamic context, the word is an umbrella term covering many financial practices, ranging from predatory lending to unjustified interest rates. In this domain, scholars may have different opinions which can lead to controversy and confusion.  

The majority of Islamic scholars prohibit trading futures and view it as a form of gambling on price differences rather than a real investment. Others prohibit margin trading and fixed passive interest rates. When it comes to judging a specific token or cryptocurrency, the religious ruling requires delving into the intricate details of the project.

Long before its crash, Crypto Halal prohibited Luna and UST, among other algorithmic stablecoins. The rationale is that such tokens do not have an intrinsic value or fair market prices. They depend on artificial price-fixing through manipulating mining and changing interest rates to affect supply and demand.

The firm also prohibited Binance’s BNB. It criticized the currency’s role in spreading Ribaa practices. It also cited an unfair advantage of the founding team, who own a large reserve of pre-mined coins.

The company’s scholars did not reach a definitive verdict yet on pay-to-earn game tokens, fan tokens, and most metaverse projects. It regularly publishes its verdicts to more than 120,000 followers on Telegram and offers detailed rationales on its website for a fee.

Future Plans

“We started in an empty space, and now the demand is nonstop,” said Abo Jazar.

He said several Muslim investors are consulting with Crypto Halal while building their projects to ensure its compliance from the very beginning. The company currently offers consultancy services to an Islamic investment fund, a token for an Islamic entertainment streaming service and other projects.

While he regularly moves between Iraq and Gaza, he is considering moving to Dubai, the Gulf city that has attracted a growing crypto community. Abo Jazar envisions a future where every company and project have tokens, and people are free to choose between paying with fiat money or cryptocurrencies.

If such a future materializes, Abo Jazar will be ready, with plans in the works to build a crypto launchpad and then a blockchain.

“Step by step, we will build the first-ever Sharia-compliant ecosystem,” he said. “We will be guiding Muslims through this new economy and show them what halal is.”