Journal of Islamic Law on Digital Economy and Business

An Islamic legal review of smart contract regulation in digital economic transactions: A comparative study between Indonesia and China

2025-06-14T14:06:28+00:00

Purpose – This study analyzes and compares regulatory approaches to Islamic legal reviews of smart contracts in digital economic transactions in Indonesia and China.
Methodology – Utilizing a qualitative literature study method and a responsive legal theoretical framework, this research examines how two countries with distinct legal systems–Indonesia’s pluralistic system and China’s centralized system–adapt regulations to the development of blockchain-based digital contract technology.
Findings – The main findings indicate that Indonesia remains at an early stage, characterized by a reactive regulatory approach, lacks specific legal instruments, and faces challenges in integrating Sharia principles. Meanwhile, China has established a systemic and proactive regulatory framework that utilizes smart contracts in its judicial system and national digital economy. Differences in legal ideologies and institutional structures influence responses to technological innovation and demonstrate that regulatory harmonization must be contextual and inclusive of local values.
Implications – This research underscores the importance of collaboration across sectors and countries in developing smart contract regulations that are adaptive, fair, and ethical.
Originality – The originality of this research lies in its contribution to filling the literature gap through a comparative approach and the integration of Islamic law values in the legal discourse of the global digital economy.

Controversies of cryptocurrency: Fatwa analysis and implications from Muhammadiyah and NU perspectives in Indonesia

2025-07-17T08:39:32+00:00

Purpose – This study aims to analyze the controversy surrounding cryptocurrency from the perspectives of Muhammadiyah and Nahdlatul Ulama (NU), focusing on their respective fatwas, the underlying juridical argumentation, and the social and economic implications of these religious rulings in Indonesia.
Methodology – Employing a qualitative normative legal approach, the research conducts a comprehensive document analysis of official fatwas issued by Muhammadiyah and NU, complemented by secondary sources such as academic articles, news reports, and government regulations related to cryptocurrency in Indonesia.
Findings – Both Muhammadiyah and NU consistently declare crypto-currencies haram (forbidden) primarily because of Islamic legal principles prohibiting gharar (excessive uncertainty), maisir (gambling), and the lack of state sanctions and consumer protection. While sharing this conclusion, the two organizations differ in their juridical methodologies, with NU exhibiting more contextual flexibility through internal debates and regional councils.
Implications – The fatwas serves as authoritative guidance shaping Muslim consumer choices and government regulations, reinforcing Islamic ethical standards in financial transactions. However, they also create tension between technological innovation and religious compliance, posing challenges to fintech adoption and inclusive economic growth. The findings suggest the need for ongoing dialogue between scholars, regulators, and industry stakeholders to reconcile Sharia compliance with digital financial innovation.
Originality – This study provides an original contribution by offering a comparative, in-depth analysis of the legal reasoning within the Muhammadiyah and NU fatwas on cryptocurrency, linking doctrinal argumentation to broader socioeconomic outcomes. It fills a gap in the existing literature that mostly catalogs fatwa content without examining their interpretive nuances and practical impacts in Indonesia’s unique socio-religious context.

Analysis of the Sharia-based crypto-asset regulatory framework in the United Arab Emirates (UAE) and Bahrain

2025-07-20T08:08:31+00:00

Purpose – This study analyzes the regulatory frameworks governing Shariah-compliant cryptocurrencies in the United Arab Emirates (UAE) and Bahrain, examining how these jurisdictions integrate Islamic principles into their crypto-asset regulations to foster legal digital financial markets.
Methodology – Employing a qualitative approach, the research reviews secondary data sources, including official legal documents, the Shariah fatwas, government policies, and prior academic literature related to cryptocurrency regulation in the UAE and Bahrain. The comparative analysis highlights divergences and convergences in their legal and Shariah-conforming fintech ecosystems.
Findings – The UAE and Bahrain have adopted progressive regulatory frameworks that permit cryptocurrency trading under explicit Shariah compliance conditions. The UAE's Dubai Blockchain Strategy promotes blockchain adoption with robust oversight mechanisms, emphasizing transparency, consumer protection, and synergy with Islamic finance principles. Bahrain, among the first Arab nations to establish comprehensive crypto-asset regulations, mandates licensing, security standards, and Shariah audits by authorized bodies.
Implications – Progressive and Shariah-aligned regulations in the UAE and Bahrain create fertile grounds for developing global standards for Islamic digital assets. Their frameworks enhance investor confidence, promote financial inclusion, and encourage the emergence of halal fintech products, such as digital sukuk and stablecoins. The findings suggest that other Muslim-majority countries can benefit from adopting similar adaptive, transparent, and Shariah-compliant regulatory schemes to integrate digital currencies into Islamic finance effectively.
Originality – This study contributes original insights by focusing on the comparative analysis of two pioneering Arab states' crypto-asset regulations through a Shariah lens, illuminating practical pathways toward a harmonized global Shariah standard for digital financial instruments.

Digital financial transformation: An Islamic economic analysis of online lending in the era of industrial revolution 4.0

2025-05-18T14:43:16+00:00

Purpose – This study critically examines online lending practices by evaluating their compliance with Sharia principles. The research also highlights the interplay between regulations, public digital-financial literacy, and Sharia-based fintech innovation, and proposes a digital business model that is fair, transparent, and sustainable.
Methodology – This research uses a descriptive qualitative literature review by systematically analyzing primary and secondary sources. This analysis followed systematic review guidelines through the stages of selection, data reduction, thematic analysis, and contextual interpretation, ensuring validity, timeliness, and relevance in synthesizing theory and empirical findings.
Findings – This research shows that although digital transformation in the financial sector, particularly online lending, brings efficiency and wider access, it also raises serious issues regarding Sharia compliance. By integrating regulatory perspectives, digital-financial literacy, and Sharia financial technology, this study research reveals a gap between Islamic principles, such as the prohibition of usury, uncertainty, and exploitation, and the reality of online lending practices.
Implications – This study highlights the urgent need for stricter regulations to protect consumers and ensure Sharia compliance in online lending. The Islamic fintech sector emphasizes the importance of developing business models based on justice and sustainability, utilizing alternative contracts, such as mudharabah and musyarakah.
Originality – This research contributes to originality by integrating multidimensional perspectives—regulation, literacy, and Sharia-driven fintech innovation—offering a more holistic view than prior studies. It also reinforces the relevance of maqāṣid al-sharīʿah as both a normative and a practical foundation for ethical and inclusive fintech governance.

Artificial intelligence and Islamic finance: A Scopus-based literature mapping through a PRISMA protocol

2025-06-01T07:02:30+00:00

Purpose – This study examines the development of copus-based literature on the application of Artificial Intelligence (AI) in Islamic finance with a specific focus on its legal-normative implications within the framework of Islamic law (Sharia). It seeks to identify prevailing trends, technological implementations, and multidisciplinary approaches shaping this emerging field while assessing how these developments interact with and potentially influence Sharia compliance standards, fatwas, and governance mechanisms in Islamic finance.
Methodology – A Systematic Literature Review (SLR) based on the PRISMA protocol was applied. Data were retrieved exclusively from Scopus, using strict inclusion criteria to ensure relevance and quality.
Findings – Academic interest in AI integration into Islamic finance has grown markedly since 2020, with conference proceedings dominating the output. AI technologies such as blockchain, cloud computing, and Natural Language Processing (NLP) have been explored in diverse contexts. Research reflects a multidisciplinary lens covering the technical, ethical, legal, and Sharia compliance dimensions. AI is viewed as a strategic enabler for financial inclusion, social fund management automation, and enhancement of maqāṣid al-sharīʿah–oriented services.
Implications – The findings underscore the importance of scholars, regulators, and Sharia governance bodies in ensuring that AI adoption upholds fiqh muʿāmalāt and ethical imperatives. This mapping provides a foundation for future research and policymaking toward innovative Sharia-compliant AI systems.
Originality – This research is among the first systematic reviews that explicitly map copus-based academic discourse on AI applications in Islamic finance using a PRISMA-based SLR approach. This emphasizes the interdisciplinary nature and growing international engagement in developing Sharia-compliant AI solutions.

The fundamental principles of Islamic law in the digital era: An ushul fiqh and maqashid Sharia approach

2025-07-20T07:57:38+00:00

Purpose – This study aims to explore and formulate the fundamental principles of Islamic law in addressing contemporary digital transformation by integrating the methodologies of ushul fiqh and maqashid Sharia. It responds to the need for a dynamic yet normatively grounded Islamic legal framework capable of regulating emerging issues, such as digital contracts, e-money, artificial intelligence, and virtual marriage.
Methodology – This study employed a qualitative normative legal method using doctrinal analysis. The data were drawn from classical jurisprudence, contemporary fatwas, academic journals, and case studies on digital law. Sources were purposively selected for their relevance to Islamic legal responses to digital issues. The analysis used conceptual mapping and thematic interpretation guided by ushul fiqh and maqashid Sharia principles.
Findings – The findings indicate that ushul fiqh tools, such as qiyas, istihsan, and maslahah mursalah, offer structured adaptability for addressing digital innovation within a Sharia-compliant framework. In parallel, maqashid Sharia strengthens the ethical dimension and enhances societal relevance, particularly by preserving values such as justice, intellect, and wealth. The combined application of both approaches enables the reconstruction of legal reasoning that is faithful to tradition and responsive to modern needs.
Implications – This study contributes to the development of contemporary Islamic jurisprudence by proposing an integrative model that bridges classical norms and digital governance. It provides a basis for producing ethical fatwas, Sharia-compliant digital policies, and inclusive legal innovation.
Originality – This research uniquely integrates ushul fiqh and maqashid Sharia to reconstruct Islamic legal reasoning in the digital era, addressing a critical gap between tradition and technological transformation.