Traditional finance plays a pivotal role in shaping global trade and economic growth, affecting the lives of billions worldwide. However, unethical and unsustainable practices have created an unequal world order, with 1.4 billion adults still unbanked and 10% of the world’s richest holding 3/4th of the world’s wealth. Half of the world’s population holds no wealth at all!
On one hand, frauds, hacks, and scams defraud people of their hard-earned money. On the other hand, interest—and debt-based financial products deter religious people from being banked or financially included. Incessant debt financing also negatively impacts countries at the macro level. People all over the world question the ethicality of traditional finance and look for alternative solutions.
Data shows that global debt has increased to $97 trillion, and the average interest rate on consumer loans in many countries exceeds 20%. While banks continue to profit from trillions of dollars earned as interest, compliant financial solutions remain inaccessible for $2 billion Muslims, as interest is strictly prohibited in Islam.
However, alternative ethical crypto solutions like Caiz present a big opportunity financially, including millions of Muslims and other unbanked people via Jaiz means. Jaiz here simply means acts that are permissible in one’s religion.
Certain qualities make a financial product ethical or Jaiz. This article discusses what constitutes ethical finance and whether Jaiz cryptocurrencies like Caiz present a good use case in ethical finance.
What is Ethical Finance?
Ethical finance presents an alternative to the debt and interest-laden financial services market. The idea of ethical finance began taking shape in the 1950s and 1960s when workers started investing their pensions in affordable housing. After that, the UN came up with 17 sustainable development goals (SDGs) to eradicate poverty, preserve the environment, spur economic growth, improve health and education, and reduce income inequality.
In 2017, the EU published an action plan on sustainable finance and introduced several ESG-related regulatory measures. All these shaped the crux of ethical finance. Ethical finance, therefore, includes financial practices that positively impact social, environmental, and governance factors while ensuring financial gains. At the personal level, ethical finance is based on the principles of honesty, integrity, fairness, and social responsibility. That’s where Islamic finance finds similarities with ethical finance.
Islamic finance is a much older concept than ethical finance. Islamic finance began with the birth of Islam in 610 AD. It finds its lineages in the holy Quran and is based on the principles and practices governed by the Islamic or Sharia law. Islamic finance is based on the concept that our actions in this world will shape how we will be treated in the hereafter. It governs how Muslims acquire, invest, generate, and spend their wealth.
Islamic law prohibits all practices involving interest, speculation, debt, and fraud. It upholds the values of honesty, integrity, transparency, equity, and justice via profit-sharing and risk-averse financial products. Usury is prohibited, and so is trade in certain kinds of items. It encourages charity for the poor and needy.
Lately, cryptocurrencies have grown as an alternative class with inherent characteristics of profit sharing, zero-interest credit, transparent and immutable records, community governance, and decentralized control.
What is Jaiz Crypto? Are All Cryptos Ethical?
In Islamic finance, a financial product is either Jaiz or naJaiz/ permissible or not-permissible. There is no middle way. The same holds true for cryptocurrencies.
Bitcoin came into existence in 2009 as an alternative to traditional finance, challenging the system with its decentralized nature. It was an answer to the systemic risk posed by the banks and monetary policy decisions at that time. Thousands of cryptocurrencies emerged after Bitcoin.
2008 is known as the year of the financial crisis and global depression. Bitcoin laid the foundation for trustless, transparent, and decentralized financial networks, placing the control in the hands of the user and not any third party or century entity like a bank. We know these networks as blockchains today, and the coins fueling the on-chain economy are cryptocurrencies. While some native qualities make cryptocurrencies a true contender for Jaiz crypto, not all cryptocurrencies are Jaiz.
Crypto scams are the biggest challenge the sector faces today. The recent Bybit hack cost $1.4 billion in lost funds. Memecoins are mostly rugpulls with no substantial use case backing them. In fact, scams rose by 31.6% in 2024 when compared to 2023. So many crypto projects fail to uphold the values of ethical finance, let alone comply with Islamic standards of finance and investments.
Caiz, a Sharia-compliant blockchain ecosystem, addresses both crypto scams and unethical financial practices with a transparent and compliant approach. Caiz has an Fiqh-compliant blockchain, Caiz Chain, on which its DeCe (decentralized centralised) financial ecosystem resides. The decentralized layer ensures transparency, immutability, and security of transactions. The centralized layer takes care of compliance, regulations and whether the funding sources comply with Islamic principles.
Caiz also has other products like Caiz App, Caiz API, Caiz Wallet, Caiz Stable, and Caiz Coin, all of which are based on ethical finance and Islamic principles. Users can benefit from interest free loans, risk-free investments, and stablecoin transactions on the fast, low cost Caiz Chain. Caiz can be the missing link in the financial inclusion of the unbanked, including the 2 billion Muslims.
The Financial and Crypto Ecosystems Need An Ethical Overhaul
While the crypto world is still grappling with its definition of what’s ethical and in the user’s interest, projects like Caiz present an ideal for what and how an ethical finance solution can be built. Islamic finance or Jaiz crypto is a much stricter implementation of ethical finance.
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