Shariah in the Age of Blockchain: Rethinking Legal Authority and Smart Contracts in Decentralized Islamic Finance
Published:
2025-12-31Downloads
Abstract
The emergence of blockchain technology and smart contracts is fundamentally transforming the architecture of financial systems, challenging traditional notions of legal authority, contractual enforcement, and institutional governance. Within this context, Islamic finance faces a critical question: how can Shariah-based legal principles be operationalized in decentralized, code-driven environments where authority is embedded in algorithms rather than institutions? This study addresses this challenge by reconceptualizing Shariah within the framework of decentralized finance (DeFi), proposing a novel model termed Algorithmic Shariah Governance (ASG). Employing a qualitative conceptual approach that integrates Islamic legal theory, blockchain architecture, and financial governance, the study demonstrates that smart contracts can function as programmable compliance mechanisms aligned with core Shariah principles such as transparency, fairness, and risk-sharing. However, the findings also reveal a fundamental tension between decentralized automation and the interpretive nature of Islamic jurisprudence. To address this, the study proposes a hybrid governance model that combines algorithmic enforcement with human-centered Shariah oversight. This research advances a theoretical shift from institution-based authority to code-mediated legal governance, positioning Islamic law as adaptable to emerging financial technologies. By bridging Shariah and blockchain, the study contributes a transformative framework for rethinking legal authority in the evolving landscape of decentralized Islamic finance.
Keywords:
Islamic finance blockchain smart contracts Shariah governance decentralized finance legal authorityReferences
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