The world of cryptocurrency is abuzz with the upcoming launch of Islamic Coin (ISLM) – the native token of the HAQQ blockchain. Built on an ethics-first philosophy, it brands itself as the only Shariah-compliant digital asset in the world that gives back to its community. 10% of each issuance of ISLM is directed towards the Evergreen DAO, which invests in projects that benefit the Muslim community or donates to Islamic charities.
Not only has this project raised a record-breaking amount of funding from noted investors like ABO Digital and Futurecraft Ventures, it is also backed by prominent members of several Middle Eastern royal families, hence the excitement and anticipation.
While we remain positive on the outlook of ISLM, we did notice several issues that have tempered our expectations slightly. Read on to find out our thoughts on ISLM.
#1 Adoption of Islamic Coin Will Be A Challenge
While ISLM does enjoy some very favorable tailwinds, such as the fact that the MENA (Middle East & North Africa) region currently tops the world in cryptocurrency adoption, it does lead to a pressing question:
What is going to set them apart?
After all, the demand for cryptocurrency in the region precedes the launch of Islamic Coin, so it’s not as if people are sitting around waiting for a Shariah-compliant alternative.
Let’s take a deeper look into the use-cases.
According to Chainalysis research, adoption in the MENA region is driven mostly by people who view cryptocurrency as a form of savings preservation and a way to remit payments internationally. Hardly surprising when you consider for example, that the Turkish lira inflated by 80.5 percent in 2021, or the fact that half of all workers in the prosperous Gulf States are migrant workers.
For all the strengths of Islamic Coin, there just seems to be better alternatives out there for these use cases. For example, a stablecoin pegged to the USD like USDT would be much more appealing for savings preservation compared to Islamic Coin, an unknown entity whose price might fluctuate wildly on a day-to-day basis.
For global remittance payments, XRP has a long track record of being cheap, fast, and secure, as well as incredibly liquid. What would entice someone to switch from XRP for remittance to ISLM, whose performance remains untested? Is the draw of Shariah compliance and an ethics-first philosophy strong enough to overcome the inertia of a well-performing incumbent? That remains to be seen.
#2 The Microscope is On Evergreen DAO
As mentioned earlier, Evergreen DAO is in charge of investing in projects that benefit the Muslim community or donating to Islamic charities from the proceeds of every issuance of ISLM.
While this charitable component is a commendable feature that aligns with the principles of Zakat (charity) in Islam, questions start to arise as you dive deeper.
First of all, in addition to charity, Evergreen DAO may also “fund activities necessary for the HAQQ network evolution.” Additionally, “key decisions are made by a council that consists of HAQQ network validators whose contribution to the network stability and security is the greatest.” In layman’s terms, that means whoever owns the largest amount of ISLM has the final say over how Evergreen DAO should spend their money.
By looking at how the initial supply of ISLM is distributed, we can get a sense of who will sit on this council. Based on this informative breakdown, it seems most likely to be the founders of ISLM together with several other hand-picked members of the public (unless new information comes to light).
While nothing suggests that the founders of ISLM has any plans to misuse these funds via their indirect control of Evergreen DAO, the fact that they have this capacity means that the actions of Evergreen DAO will be closely scrutinized in the near future.
#3 Gold-Backed Stablecoin will Flop
On the HAQQ roadmap, a gold-pegged stablecoin backed by top UAE banks is scheduled to be launched in Q1 2024. Since Muqaddimah of Ibn Khaldun wrote in the Quran that gold and silver specifically should be used as money, a gold-pegged stablecoin definitely makes sense on paper.
Unfortunately, this concept isn't a new one; the idea has been floating around almost as long as cryptocurrencies themselves. In an effort to bring more stability to the volatile crypto market, several gold-backed tokens have made their appearance. Some of these, like DGC and OneGram, even claim to be Shariah-compliant, meeting the stringent Islamic ethical standards for financial transactions.
Add in the fact that gold hasn’t really lived up to its reputation as an inflation hedge and you can see why we believe reception of HAQQ’s gold-pegged stablecoin to be lukewarm at best.
In the grand tapestry of financial evolution, ISLM represents a harmonious stitch between tradition and modernity. As it weaves its narrative, it holds the promise of transforming the cryptocurrency scenario in the Middle East and potentially globally.
Whether or not it becomes the definitive catalyst remains to be seen, but its mere existence has already widened horizons and sparked conversations about a more inclusive financial future.