SMART CONTRACTS IN ISLAMIC FINANCE: RECONSTRUCTING SHARĪ'AH COMPLIANCE WITHIN BLOCKCHAIN-BASED TRANSACTIONS
DOI:
https://doi.org/10.59623/w70qza04Keywords:
Smart Contracts, Islamic Finance, Blockchain-Based TransactionsAbstract
The convergence of blockchain technology and Islamic finance has introduced a transformative modality for the execution of Sharī'ah-compliant contracts through algorithmically automated, self-executing code commonly termed smart contracts. This article undertakes a systematic and doctrinal examination of how smart contracts can be architected to satisfy the classical requirements of Islamic contractual jurisprudence (fiqh al-mu'amalat) while leveraging the transparency, immutability, and disintermediation afforded by distributed ledger technology. Drawing upon a corpus of 40 recent scholarly publications (2022–2026) identified through a structured literature review methodology, this study conducts thematic synthesis across five major dimensions: the legitimacy of smart contracts under Islamic contract theory, akad-specific implementation frameworks, governance and regulatory architectures, Maqasid al-Sharī'ah alignment, and the remaining doctrinal tensions unresolved by current technological capabilities. The paper develops an original Sharī'ah Compliance Reconstruction Framework (SCRF) that maps traditional contract conditions including the prohibition of ribā, gharar, and maysir, as well as the requirements of valid ijab-qabul, ahliyyah, and halal mahal al-'aqd onto corresponding smart contract design parameters. Our findings demonstrate that while smart contracts show considerable promise for automating akad-based transactions such as murabahah, ijarah, sukuk, and waqf, significant doctrinal challenges persist concerning contract immutability versus the Islamic right of rescission (khiyar), oracle-introduced uncertainty, and the institutional legitimacy of decentralized governance vis-à-vis the Sharī'ah Supervisory Board (SSB) function. We propose a Hybrid Sharī'ah-Tech Governance Model (HSTGM) as a forward-looking institutional architecture for Islamic financial authorities seeking regulatory clarity. This study contributes to the global Islamic fintech research agenda for 2025 and beyond, offering actionable implications for policymakers, Sharī'ah scholars, and blockchain developers operating at the frontier of decentralized Islamic finance.
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