Can Gold Be the Key to Stability in Shariah-Compliant Cryptocurrency?
DOI:
https://doi.org/10.21274/an.v12i2.11041Keywords:
cryptocurrency, volatility, GARCH, gold-backed token, Shariah complianceAbstract
This study investigates volatility differences between gold-backed and non-asset-backed cryptocurrencies to assess their potential alignment with Shariah principles. From an Islamic finance perspective, excessive uncertainty (gharar), speculative behavior (maysir), and non-compliance with ribawi exchange rules are key concerns in evaluating digital assets. This study uses ARCH and GARCH(1,1) models to analyze the volatility of cryptocurrencies. The selected cryptocurrencies include three asset-backed (KAU, XAUT, PAXG) and three non-asset-backed (BTC, ETH, XRP). The findings indicate that gold-backed cryptocurrencies exhibit lower volatility persistence, meaning that price shocks dissipate more rapidly compared to non-asset-backed tokens. This relative stability suggests a reduced tendency toward speculative fluctuations, thereby mitigating volatility-related gharar. However, Shariah compliance extends beyond price stability and also depends on contractual structure, ownership transfer (taqabud), and adherence to sarf requirements in gold-based exchanges.By integrating econometric volatility analysis with Islamic jurisprudential considerations, this study contributes to the discourse on Shariah governance of digital assets and offers insights for regulators and Shariah authorities in evaluating the permissibility and institutional oversight of asset-backed cryptocurrencies.
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