First Islamic Crypto Exchange (FICE) Set To Launch, Aims To Serve 1.8 Billion Muslims

  • ADAB Solutions, a UAE-registered financial firm, will reportedly launch the world's First Islamic Crypto Exchange (FICE).
  • FICE will be Shariah-compliant, which means its crypto exchange services will be in accordance with the teachings of the Quran (the central religious text followed by over 1.8 billion Muslims).

ADAB Solutions, a financial services firm registered in the United Arab Emirates (UAE), recently announced its plans to launch the world’s first Shariah-compliant cryptocurrency exchange. Shariah law, or Islamic law, is derived from the religious teachings of the Holy Quran, which is the central religious text followed by over 1.8 billion Muslims worldwide.

The new digital asset exchange will reportedly be called the First Islamic Crypto Exchange (FICE) and be based on the “norms of Shariah.” According to the ADAB Solutions’ official website, the projected volume of daily cryptocurrency trading on the FICE platform is $146 million.

The Islamic exchange also expects a “monthly turnover of $4.4 billion” during the first 18 months of its operations. Moreover, FICE will reportedly operate globally and its primary goal is to increase the involvement of the world’s Muslim community in the evolving cryptocurrency market.

Islamic Finance For Crypto

Notably, traditional Islamic banking is an established financial industry in most Muslim-majority countries throughout the world. ADAB Solutions’ management team now aims to introduce cryptocurrency exchange services that are also compliant with the rules of Islamic finance.

The UAE-based company’s website notes that there are currently at least 250 large digital currency exchanges worldwide, however, there are no Islamic crypto exchanges. With the launch of FICE, ADAB Solutions is hoping to attract more Muslim crypto traders and investors.

According to the firm’s website, 

“Many cryptocurrencies, due to their characteristics, are haram (forbidden in Islam). Today, no one can guarantee that the coins and projects listed on conventional cryptocurrency exchanges comply with the norms of Islam.”

ADAB Solutions

"Immoral Services", Usury, Gambling, Alcohol Not Allowed

In order to offer crypto-related services that are “halal”, or permissible in Islam, ADAB Solutions has clearly identified that it will not be involved in digital currency projects related to usury, which is the practice of issuing loans at very high interest rates.

The Islamic financial firm will also not offer “immoral services”, however, it has not specified what exactly would be considered immoral. It’s possible that the company will not support crypto projects or services that offer futures contracts or prediction market services, which allow users to bet on the future prices of cryptocurrencies or events. That’s because betting, or gambling, is strictly prohibited in Islam.

Moreover, ADAB Solutions’ crypto services will not include any businesses that deal in the “Production of alcoholic beverages and tobacco products” as this is also not allowed in Islam, even though smoking and tobacco products have become socially acceptable in most Muslim countries.

The UAE-based firm’s website further states that,

“At FICE there will be no speculative deals, margin trading or operations not corresponding to the norms of Shariah. An additional listing requirement is the approval by the Shariah Advisory Board. These restrictions are not enforced only for religious reasons, they also exclude the appearance of low-quality assets on the exchange.”

ADAB Solutions

ADAB Token

ADAB Solutions will be introducing its own cryptocurrency called ADAB token and its initial coin offering (ICO) is expected to launch in September, 2018. The ADAB token will also be “the only cryptocurrency, which can be used to pay for commission and services within the project.”

As reported by CryptoGlobe in March, an Islamic scholar named Mufti Muhammad Abu Bakr had concluded that bitcoin is not Haram, meaning that it is Sharia-compliant. According to Bakr, bitcoin “qualifies as Islamic customary money” because it had been recognized as legal tender in Germany and was widely being used as a medium of exchange in the United States and many other countries.

How Bakkt Can Bring the Crypto Space an Institutional Investor Influx

Cryptocurrency enthusiasts have for years been waiting for institutional investors to enter the space. While the introduction of bitcoin futures contracts on regulated exchanges in late 2017 didn’t gain a lot of traction, but Bakkt may.

Bakkt is a long-awaited bitcoin futures exchange and on-boarding platform from the Intercontinental Exchange (ICE) - the parent company of the New York Stock Exchange – and it’s set to launch this year. Bakkt itself has remained tight-lipped over the precise launch date after delaying its launch last year, with ICE CEO Jeff Sprecher in February simply saying “later this year.”

It’s possible that this quarter may see the launch or at least more news about when the exchange is finally coming. At the end of March, Bakkt CEO Kelly Loeffler explained:

While we’re not yet able to provide a launch date, we’re making solid progress in bringing the first physical delivery price discovery contracts for bitcoin to the U.S.

Bakkt’s launch could be a major milestone for the cryptoasset industry. A venture backed by Microsoft and Starbucks, its institutional pedigree alone will switch many cautious investors on. Specifically, the firm is set to help consumers pay for goods and services with cryptocurrencies, with Starbucks being the flagship retailer in its arsenal.

Bakkt’s Bitcoin futures contracts will be the first physically-settled derivatives on a regulated trading platform. This means investors will receive the contract’s underlying asset, bitcoin, when it expires.

Currently the Chicago Mercantile Exchange (CME) offers cash-settled bitcoin futures contracts, meaning investors get the equivalent of BTC’s value in fiat when the contracts expire. This is seen by some as a major development in the cryptocurrency space, as it shows traditional finance is willing to interact with the nascent cryptoasset industry.

It’s worth noting that earlier this year the ICE’s CEO called Bakkt a “bit of a moonshot bet,”  as it was organized in a way “very different than the way ICE typically does business.” The firm has its own offices and management team, and could undergo more rounds of financing in the future.

Bakkt And a Potential Bitcoin ETF

What’s significant about Bakkt’s launch beyond this, is that it may bolster the chances of a Bitcoin Exchange-Traded fund (ETF) being approved. Such a product would make it easier for institutional investors to gain exposure to cryptocurrencies.

In August, the US Securities and Exchange Commission (SEC) rejected nine other ETF applications, in particular highlighting how those applying hadn’t provided evidence that “bitcoin futures markets are of significant size’” for an ETF to be launched.

Once Bakkt is launched its trading volumes may very well help quell the SEC’s concerns over the bitcoin futures markets’ small size as institutions and other investors may feel comfortable entering it. Larger futures contracts trading volume, increased liquidity and a well-established company involved may prove enough to convince the SEC that the time is right for a Bitcoin ETF.

Bakkt therefore represents a very significant milestone for a maturing cryptoasset industry and may well herald the “institutional influx” that many have been anticipating since 2017. Despite the markets remaining relatively flat throughout 2019 these looming decisions in the U.S. have the power to move the entire industry forward, for better or worse.