Islamic Bonds Are First Sold Via Blockchain In Abu Dhabi
Al Hilal Bank headquartered in Abu Dhabi, the capital of the United Arab Emirates, has conducted the world’s first blockchain transaction with Islamic bonds (sukuk), Reuters reports.
The Islamic bank has applied DLT to sell and place a small part of $500 million five-year bonds, issued in September 2018, on the secondary market.
Al Hilal Bank is trying to change the market of Islamic bonds with the help of innovative digital technologies, in particular, by integrating blockchain into its infrastructure, according to the bank’s report.
The size of the transaction was $1 million, the press secretary of the institution stated. A private investor, whose name is not disclosed, bought out the bonds. The bank believes that blockchain technology will facilitate the issue and trading of financial products as well as improve regulatory oversight.
In the Islamic world, usury is considered as a sin and forbidden under Sharia law. Therefore, unlike traditional bonds assuming interest payments, a sukuk is a financial tool similar to shares, that allows its owners to make a profit depending on the income of a company or a project.
In August 2018, the World Bank applied blockchain technology for the first time when issuing and selling ten-year bonds. The deal was named Bondi, and Australian Commonwealth Bank became its participant.
As previously reported, the Indonesian company Blossom Finance intends to place Islamic bonds on blockchain.