Initial Coin Offerings are an innovative way to raise funds by issuing tokens through blockchain technology. The issued tokens can vary widely in their design and function. Some of the common types of tokens include: work tokens, utility tokens, asset-backed tokens, revenue tokens, equity tokens, buy-back tokens. In theory, a token holder can gain a share in equity, have rights to access as service or utility, have a claim on an asset or have entitlement to profits or payments. It is concluded that the flexible nature of ICOs and tokens allows them to be structured in a Shariah compliant manner. Furthermore, screening criteria are proposed for ICOs to ensure Shariah compliance of the project and company.
As a Shariah advisor and research at Shariyah Review Bureau, Bahrain, I have authored this paper.
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