Article (Scientific journals)
Tokenization of Sukuk: Ethereum Case Study
Khan, Nida; Kchouri, Bilal; Yatoo, Nissar Ahmad et al.
2020In Global Finance Journal
Peer reviewed
 

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Keywords :
Sukuk; Blockchain; Ethereum; Tokenization; Smart contract; Cost-benefit analysis
Abstract :
[en] Sukuk is a financial instrument that provides returns similar to conventional bonds. It has served to cater to the capital requirements of big corporations and governments, while circumventing interest to adhere to the Shariah law. Sukuk can be touted as Shariah-compliant bonds that rank amongst the most successful and the fastest growing financial instrument in the Islamic economy. The sukuk research area is marked by a dearth of quantitative literature, compared to qualitative academic work. This paper seeks to fill this existing gap, and introduces a novel, exploratory analysis of sukuk tokenization based on a case study. The funding needs of small and medium enterprises remains largely unmet through sukuk on account of the high costs involved, among other reasons. As we show in this paper, blockchains can aid to lower the cost incurred through the tokenization of sukuk. We highlight some of the key challenges involved in the issuance of sukuk and discuss their resolution using blockchain. We also provide a taxonomy of blockchain applications in finance, with a particular focus on Islamic finance. Our paper reviews different blockchain architectures to assess their viability for tokenization. We conduct a novel case study on sukuk tokenization by implementing a basic smart contract for Sukuk al-Murabaha on Ethereum. The paper concludes by a conceptual analysis of feasibility concerns, based on a comparison of the conducted cost-benefit analysis of conventional sukuk issuance with tokenization.
Disciplines :
Computer science
Author, co-author :
Khan, Nida ;  University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT)
Kchouri, Bilal ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF)
Yatoo, Nissar Ahmad;  International Online University
Kräussl, Zsofia ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF)
Patel, Anass;  570easi
State, Radu  ;  University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT)
External co-authors :
yes
Language :
English
Title :
Tokenization of Sukuk: Ethereum Case Study
Publication date :
June 2020
Journal title :
Global Finance Journal
ISSN :
1044-0283
Publisher :
Elsevier, Netherlands
Peer reviewed :
Peer reviewed
Focus Area :
Finance
FnR Project :
FNR11617092 - Data Analytics And Smart Contracts For Traceability In Finance, 2017 (01/03/2017-31/01/2021) - Nida Khan
Available on ORBilu :
since 15 May 2020

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