Islamic Finance and Transparency: The Dilemma of Blockchain Integration

This article seeks to explore the dilemma Islamic finance faces in incorporating blockchain with regards to transparency. While blockchain does promote transparency in transactions, its adoption will lead to a proliferation of cryptocurrencies that enhances anonymity. This may undermine the benefits Islamic finance will get from embracing blockchain. A tentative solution will be considered. This article takes a comparative philosophical approach. Transparency, as a virtue, is investigated through the Western tradition as well as through the Islamic tradition. The ramifications of the different conceptualisations of transparency will be drawn out and identified with regard to blockchain/cryptocurrencies. This paper finds that contemporary Islamic finance’s support of transparency relies on the Islamic tradition’s stance on transparency. In pursuit of end goals (maqāsid) that provide maximal benefit, a host of virtues must be balanced. This can entail restricting transparency where other considerations are more paramount. This finding emphasises that the Western tradition upholds transparency as an ideal, which is unlike the more nuanced view of transparency in the Islamic tradition. The dilemma can be diluted from a Maqasid approach. Most academic discussions of cryptocurrencies within Islamic finance focus on the dangers of decentralisation. The issue of the transparency-anonymity tension has rarely been focused on. Additionally, this paper provides a sustained examination of the virtue of transparency within the Islamic tradition, its manifestation in contemporary Islamic finance, and its importance in evaluating the adoption of future financial innovation.