Islamic finance is the basis for the prospective crypto-future

Nobel Prize winner in economics Paul Robin Krugman, widely known as the most unsuccessful forecaster in history, none of whose forecasts have ever come true, seems to have made his first correct forecast. He compared the current state of crypto market to the housing bubble and the subprime mortgage crisis.

He noted that the cryptocurrency is devoid of any real value.

«This is a house built not even on sand, but on nothing at all», - said Krugman.

In his assessment, professor referred to the famous movie «The Big Short», which tells the story of investors who bet on the assumption that the huge increase in housing prices in the years before the global financial crisis of 2008 was a bubble, and that many of the seemingly complex financial the tools that helped inflate the housing market will eventually turn out to be useless garbage.

«It seemed incredible at the time that the housing market and the generally accepted view that everything was fine with the markets could be so wrong. But in the end, they've just burst»

Discussing the current state of cryptocurrencies, he quoted the Federal Trade Commission (FTC) stating that cryptocurrency is becoming the preferred means of payment for fraudsters. He also mentioned the collapse of the algorithmic stablecoin terrausd (UST), stating that this stablecoin was «neither stable nor a coin».

It’s all good with Krugman's. But there is a substitution of concepts. When bitcoin appeared on January 3, 2009, it became the first cryptocurrency. Then Litecoin appeared, it is also a cryptocurrency. Then, after a while, Ethereum came, which also seemed to be a cryptocurrency, only with smart contracts. That's exactly what Paul Krugman is right about. All these modest jokes will burst, just as the subprime bonds burst in 2007. And we will continue to pretend that we have 9,000 cryptocurrencies, and not 9,000 fake cryptocurrencies that distract investors' attention and money from Bitcoin and other real cryptocurrencies.

Financial systems must rely on some solid basis and rules which can help them to remain steadfast despite any ups and downs. Islamic law, or Shariah law, is a religious law forming part of the Islamic tradition. It guides and dictates many aspects in the lives of Muslims throughout the world, including financial interactions.

One of the core principles of Islamic financial law is the prohibition of paying or charging interest, which is currently not followed by a large part of financial institutions constituting the modern financial system.

The Islamic financial system has been virtually untouched by the recent financial crisis due to its prohibitions on speculative transactions and uncertainty, as well as the attention it pays to fairness and risk-sharing. Islamic finance is a rare example, where the system featuring certain limitations and restrictions is more sustainable and powerful, compared to the system where such limitations are not present. Digital currencies designed in accordance to Islamic finance can be a powerful impact. They can provide economic and social benefits, support innovation and ensure sustainable. This is exactly the financial instrument that modern Muslim society needs to accept the challenge and ensure our common well-being.