Asset Tokenization in Islamic Finance Historical Perspectives, Sukuk Innovations, and the Shariah Compliant Blockchain

Abstract

This research article explores the evolving landscape of asset tokenization within the framework of Islamic finance, emphasizing its historical background, key concepts, and implications for the financial ecosystem. It begins with an analysis of financial disintermediation and transaction costs, tracing the emergence of Shariah-compliant blockchain technologies in the global Islamic fintech sector. The study then delves into the intricacies of Sukuk, focusing on traditional Islamic finance principles such as Al-Shuftaza (exchange), Al-Hawalah (transfer), and Al-Kafalah (custodianship), while also examining innovative structures like smart Sukuk and their issuance processes on blockchain platforms.

Further, the article categorizes the nature and classification of tokens, discussing their benefits and the Shariah guidelines that govern smart contracts and token compliance. It also addresses the social challenges and potential impacts of asset tokenization on stock markets, particularly in relation to Islamic finance. The research culminates in a series of recommendations aimed at enhancing the integration of asset tokenization within Shariah-compliant frameworks, fostering financial inclusion, and ensuring ethical investment practices. This comprehensive analysis serves as a foundation for understanding the transformative potential of asset tokenization in promoting sustainable and equitable economic growth in the Islamic financial sector.