ADGM Facilitates World’s First Execution Of Sukuk Via Blockchain

Execution of Sukuk via blockchain; Al Hilal Bank is the first to do so

The Muslim world is slowly adopting blockchain. The latest is the world’s first execution of Sukuk, a bond in Muslim finance, via blockchain. Particularly, AL Hilal Bank was the entity behind the resale and settlement of the Islamic Sukuk.

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An Islamic Sukuk is a bond that complies fully with the existing Islamic laws regarding finances. In particular, the laws require that anyone who professes the Islamic doctrine must not take part in speculative activities. Therefore, the Islamic Sukuk takes out the speculative aspect from bonds, or at least purports that it does.

Execution of Sukuk via blockchain

According to reports, blockchain technology helped to transact a secondary market deal in Al Hilal Bank’s $500m Senior Sukuk maturing in September 2023.

Since their inception, Islamic Sukuks have been the fastest growing asset classes in the Islamic world. In 2017, around $97.9 billion worth of Sukuks were available to investors. Interestingly, this represents a 50% positive change compared to the previous year.

The development opens a whole new world of transactions over blockchain in the region largely conservative in terms of finance. Therefore, digitizing Sukuks is an excellent way to introduce the technology in the Islamic world.

Alex Coelho, Al Hilal Bank’s CEO said that the technology will further secure similar financial transactions. Particularly, Coelho referred to the smart contract aspect of blockchain saying, “The advantages of using smart contracts range from safer transactions with robust Shariah compliance, to the unlocking of new opportunities.”

Smart Sukuks

Smart Sukuks are one way of ensuring efficient means of transaction. Particularly, they will reduce the bloated overheads associated with issuing and settling Islamic Sukuks.

Interestingly, the execution of the Sukuks over blockchain received massive support from Abu Dhabi Global Markets’ (ADGM) Fintech platforms.

Commenting on the developments, ADGM CEO Richard Teng said that they are ready to support entities delivering value.

“ADGM is proud to play an instrumental role in fostering an ecosystem for cutting-edge technology providers to collaborate with local financial institutions in delivering value across financial markets,” Teng said.

Another partner in the exercise was Jibrel Network, a UAE-based Fintech. According to Talal Tabbaa , its co-founder, Jibrel will be able to “provide Islamic financiers with necessary tools to facilitate Islamic agreements with the same speed, volume and efficiency experienced in conventional finance.”

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