In time for Ramadan: Crypto zakat picks up speed with new service in Malaysia
KUALA LUMPUR - When Adam Mashrique set out to pay part of his zakat contribution in bitcoin for the first time last Ramadan, few options were open to him.
A growing number of charities had opened up cryptocurrency accounts, the Kuala Lumpur-based blockchain architect noted, but few donation services could handle transactions beyond credit card and PayPal.
Sensing an opportunity, this year he set out to help equip Malaysian peer-to-peer fundraisers to bring bitcoin contributions online. This led to the launch last week of the first cryptocurrency service by Islamic social finance platform GlobalSadaqah, on which he consulted.
“A lot of people want to pay their zakat in bitcoin, but many others don’t realise they should do, if they’ve had their holding for over a year,” Adam told Salaam Gateway.
“Anyone who bought bitcoin four years ago will now be in profit, whatever their holding. Zakat on that should be paid in bitcoin.”
Very little is known about how much bitcoin and other cryptocurrencies Muslims hold, but the number is thought to be substantial and could potentially net charities hundreds of millions of dollars in sadaqah or zakat contributions.
GlobalSadaqah’s very conservative estimate of assets held in bitcoin that should be eligible for zakat this year is around $200 million. It bases its assumption on the value of bitcoin globally of about $160.4 billion, with just 5% of this owned by Muslims.
But a number of factors suggest that cryptocurrency-owners have been holding back in donating 2.5% of their holdings as zakat. Among these is the shortage of regulated global exchanges and effort it takes for individuals to convert bitcoin into fiat currency
“Adam told us he knew of donors who would like to pay their zakat in bitcoin but they weren’t able to because they weren’t in Malaysia,” Mohammed Alim, co-founder and chief product officer of GlobalSadaqah, told Salaam Gateway.
Before bitcoin can be distributed to charities, it must be converted into fiat currency.
GlobalSadaqah does this through the Sinegy cryptocurrency exchange in Malaysia, which is regulated by the country’s Securities Commission.
“It is easy for us as a platform to accept bitcoin and then convert it to ringgit and give it out to the beneficiaries. In countries without regulated exchanges it’s more difficult for them to donate using bitcoin,” Mohammed Alim added.
Last year, Adam paid his zakat using the first service of its kind, which was launched in 2018 by Blossom Finance. Best known for its blockchain sukuk, the Indonesia-based start-up had started accepting payments in cryptocurrencies for zakat-eligible cryptocurrency assets in response to demand from its customers.
NEED FOR EDUCATION
Blossom’s founder, Matthew J Martin, says the fintech firm now simply channels donors to zakatable charities that can accept cryptocurrency payments directly, as more of these go online.
Speaking to Salaam Gateway, Martin said the amount of zakat donated in cryptocurrency is dependent on the growth in channels that allow it. Charities, too, need to work harder to learn about accepting bitcoin and let their donor-base know about it.
“The challenge we face is one of education. There are plenty great zakat-eligible charities out there, but the issue is the best ones are very focused on providing the service they do, distributing zakat,” said Martin. Because of this, they are prone to taking their eye off new donation channels.
One non-profit Blossom works with is fully cryptocurrency-equipped and has received some $20,000 in zakat donations in this way through the start-up. However, it is yet to put its crypto address on its market material.
“They already have an account at the cryptocurrency exchange, but publicising this is yet to happen. Fintech companies can offer as much cryptocurrency as they want but ultimately it is down to the recipient to receive it and publicise having this facility,” said Martin.
This mindset will change as older executives make way for younger ones that are more familiar with alternative payment systems, he added.
MORE TO COME
Adam Mashrique, who has been researching blockchain since 2014 and is chief innovation officer at LuxTag, a non-fintech start-up that uses blockchain to track the provenance of luxury goods, suspects the coming year will see more investors turning to cryptocurrency.
“The situation we are in now is quite uncertain, and it could drive people towards uncorrelated non-traditional assets as more people learn about bitcoin and cryptos,” he said.
"We are realising that certain attributes of these asset classes are more suited towards wealth preservation than the current assets they hold, even though the market is still volatile to a degree.”
Still, people who view cryptocurrency as a risky investment should instead “zoom out” to see broader trends.
The peaks and troughs that bitcoin once experienced have been tempered in recent years, according to Adam.
“The volatility measure of bitcoin has been going down, and more and more people are starting to gain that perspective, making them eligible to pay zakat in this way,” he added.
(Reporting by Richard Whitehead; Editing by Emmy Abdul Alim firstname.lastname@example.org)
© SalaamGateway.com 2020 All Rights Reserved