Can Blockchain Harm Islamic Societies?

Written By Mufti Billal

Introduction


In recent years, blockchain has emerged as a revolutionary force promising transparency, decentralization, and new economic models. From financial services to supply chains and charitable giving, this technology has caught the attention of reformers and investors across the Muslim world. But behind the innovation lies a less explored question: Can blockchain also become dangerous for Islamic societies?

This article offers a balanced look—acknowledging the opportunities while shedding light on the ethical, legal, and spiritual risks that must not be ignored.

The Promise: Trust Without Central Authority

Blockchain’s appeal is strong in many Muslim countries. Where corruption or weak institutions have undermined trust, blockchain offers the dream of immutable records, transparent donations, and even decentralized Islamic finance free from interest and manipulation.

Islamic endowments (waqf), zakat distribution, halal supply chains, and identity systems are all being reimagined through blockchain-based models. If governed well, this can lead to greater efficiency and trust.

But it is precisely this decentralization of trust that introduces new vulnerabilities.

Risk 1: Financial Crime and Terror Financing

One of the most pressing concerns with blockchain—particularly cryptocurrencies—is their ability to bypass state financial controls. Privacy coins along with mixing services, enable untraceable transactions, making them attractive tools for illicit activities.

Without rigorous Shariah governance, even tokens marketed as “Islamic” may inadvertently finance impermissible or harmful causes.

While discussions around crypto-related terrorist financing often focus on jihadist groups, the misuse of blockchain is not limited to Islamic actors. In fact, far-right and white supremacist extremists in the West have been among the most active adopters of cryptocurrency.

According to the Southern Poverty Law Center (SPLC), a U.S.-based advocacy group, over 600 cryptocurrency addresses have been linked to prominent far-right figures, including:

  • Andrew Anglin, publisher of the neo-Nazi website The Daily Stormer

  • Andrew Auernheimer, a white-supremacist hacker

  • Don Black, founder of the white-power forum Stormfront

These individuals often promote their crypto wallets openly on websites and social media, encouraging supporters to donate. The SPLC’s December report noted that it was difficult to find any major U.S. far-right figure without a cryptocurrency presence.

Tim Squirrell, of the Institute for Strategic Dialogue, explains this trend as a response to deplatforming by mainstream platforms:

“One of the dreams of the far right is not just a blockchain cryptocurrency, but a decentralised future where they don’t have to rely on mainstream structures… They want blockchain blogging websites, blockchain streaming websites.”

This growing use of crypto by far-right extremists highlights a broader, more complex reality: blockchain tools can empower any ideology, including those hostile to Islamic values and communities.

For Islamic societies committed to moral integrity and national security, this evolving threat landscape presents a serious and urgent challenge.

Risk 2: Loss of Ethical Oversight in Decentralized Systems

Blockchains often run on code-based governance—smart contracts that execute automatically, without human intervention. While this offers efficiency, it also removes moral discretion. In contrast, Islamic law is rooted in intention (niyyah), ethics, and human accountability—which machines and algorithms cannot replicate.

In decentralized ecosystems, DAOs (Decentralized Autonomous Organizations) are increasingly used to make critical decisions about funding, dispute resolution, and community policy—usually through token-based voting. But this introduces a series of serious ethical and spiritual risks:

  • Who ensures the system upholds maqasid al-shariah (the objectives of Islamic law)?

  • What happens when majority voting leads to immoral or unjust decisions, simply because wealthier actors hold more tokens?

As the OECD warns, governance tokens—often distributed freely and traded on decentralized exchanges—can be manipulated:

“A group of bad actors can purchase enough governance tokens to manipulate the outcome of a vote… Flash loans can even be used to borrow tokens temporarily for voting. Over time, governance power tends to concentrate in the hands of a few actors.” — OECD Blockchain Policy Centre, 2022

This risk becomes especially dangerous in Islamic contexts involving trust-based assets like waqf, zakat, or mudarabah-based investments. Without a Shariah-compliant governance ring-fence, a DAO could:

  • Approve haram partnerships or investments with no oversight

  • Allow powerful actors to seize communal assets if no ethical block is built into the smart contract

  • Lead to splits and forks over contentious decisions, harming those without the technical knowledge to manage the consequences

These problems are rooted in the underlying philosophy of many blockchain systems. As noted by Primavera De Filippi and colleagues, the technology was heavily shaped by cypherpunk ideology—a movement of libertarian and anarchist thinkers who sought to escape centralized governance altogether:

“The cypherpunks… regarded centralized institutions as the source of all worldly corruption… focused on letting go of governmental institutions or any other corruptible intermediary authority.”

This legacy affects DAO design: authority is rejected, and human moral oversight is intentionally removed. But as De Filippi et al. caution:

“What computer code provides in terms of accuracy and precision, it loses in terms of flexibility and granularity… it cannot adequately capture the nuances of human values, ethical principles, and morality.”

Even when code appears neutral, governance in many blockchain applications remains highly centralized in practice:

“The governance of many existing blockchain applications is often highly centralized… governance tokens are concentrated in the hands of a few individuals.”

Although DAOs are praised for decentralization, in practice they can replace tyranny of rulers with tyranny of code—or tyranny of capital. For Islamic projects, this highlights the urgent need to integrate:

  • Shariah supervisory boards with decision-making authority

  • Built-in protections for minority rights, ethical integrity, and communal trust

  • Dispute resolution mechanisms grounded in Islamic legal principles, not algorithmic consensus alone

In short, decentralization without spiritual and ethical oversight risks not just inefficiency—but injustice.

Risk 3: Exploitation, Scams, and False Islamic Branding

In the expanding world of crypto, scammers have increasingly turned to Islamic branding to gain trust and credibility among Muslim investors. Arabic names, crescent symbols, Qur’anic phrases, and vague promises of “Shariah compliance” are often used to attract faith-driven communities—without genuine oversight or transparency.

This tactic is a textbook case of what the U.S. Securities and Exchange Commission (SEC) defines as affinity fraud:

“Fraudsters who carry out affinity scams frequently are (or pretend to be) members of the group they are trying to defraud… They target any group they think they can convince to trust them with the group members' hard-earned savings… Affinity fraud almost always involves either a fake investment or an investment where the fraudster lies about important details.”

One of the most notorious examples of this was the OneCoin scandal. Marketed globally as a revolutionary digital currency—and falsely promoted as “Shariah-compliant” in the Muslim community—OneCoin lured thousands of investors through religious messaging and community influence. It turned out to be a multi-billion dollar Ponzi scheme, with no real blockchain behind it.

This case highlights the spiritual and financial dangers of using Islam as a marketing tool in unregulated crypto projects. Without proper Shariah boards, transparent fatwa disclosure, and ethical accountability, Islamic branding becomes not a protection—but a weapon for exploitation.

Risk 4: Digital Colonialism and Surveillance

Most blockchain infrastructures are designed and governed by companies or communities outside the Muslim world, largely based in the United States or Europe. Even seemingly neutral public chains like Ethereum encode Silicon Valley values of disruption, radical decentralization, and privatized governance. These are not merely technical preferences—they are ideological positions. As such, blockchain introduces not only new systems of data exchange but also new forms of ideological influence and economic dependency.

In the humanitarian and development sectors, blockchain is increasingly deployed through public-private partnerships (PPP). These projects are presented as innovative solutions for financial inclusion, digital identity, or aid delivery. But as critical scholars argue, blockchain humanitarianism is not neutral aid—it is deeply ideological. It aligns with the PR interests of the crypto-economy, not the long-term empowerment of local populations.

Across the Global South—including many Muslim-majority contexts—NGOs are used as on-the-ground facilitators for foreign blockchain systems. Aid becomes a Trojan horse for platform colonization: digital systems are introduced not to serve communities, but to experiment on them and extend market-based governance models.

The Pacific Islands offer a stark case. In Vanuatu, Oxfam’s Unblocked Cash pilot introduced Ethereum-based disaster relief without community ownership or understanding of how the blockchain works. In Fiji, a blockchain-based tuna traceability system built by ConsenSys and WWF positioned foreign software firms as gatekeepers of the nation’s export infrastructure, while most local actors lacked the tools or training to access or influence the data.

Such initiatives, while wrapped in humanitarian language, frequently obscure who actually benefits. The real power lies elsewhere—in proprietary codebases, developer communities in the West, and foreign investors who stand to profit. Meanwhile, Muslim or indigenous communities are left technologically dependent, unable to audit or shape the systems they are told to trust.

Some projects even romanticize local cultures to justify their experimentation. The rhetoric of “techno-indigeneity” casts indigenous or non-Western societies as naturally suited for decentralized systems—ignoring political histories and material power imbalances.

This isn’t simply a symbolic issue. In Papua New Guinea, a blockchain special economic zone (SEZ) backed by U.S. investors was granted legal and migration control powers—a clear bypassing of state sovereignty. And in Fiji, blockchain-based land registries backed by multilateral banks are digitizing indigenous lands, making them easier to lease, monetize, and transfer—without any guarantee of local control.

As Al Jazeera notes, this dynamic reflects a broader digital colonialism:

“Today, digital infrastructure takes on the same role [as railways and trade routes]: Big Tech corporations use proprietary software… to spy on users, process their data, and spit back manufactured services to subjects of their data fiefdoms.”

For Muslim societies concerned with autonomy, justice, and the preservation of ethical and legal values, these risks are existential. If Islamic economies depend on foreign digital systems they cannot govern or interrogate, they risk losing not only economic independence but also the ability to protect their own ethical frameworks.

Moving Forward: The Need for Islamic Tech Governance

The Islamic world must not reject blockchain outright—but neither should it adopt it blindly.

What’s needed is:

  • Robust Shariah screening of blockchain use cases and tokens

  • Education for scholars and youth to understand both the code and the consequences

  • Investment in indigenous Islamic blockchain solutions—designed with maqasid al-shariah in mind

  • A new generation of Muslim technologists and jurists who can think ethically and technically

Conclusion

Blockchain is neither angelic nor satanic. It is a tool—one that can empower or enslave, depending on who controls it and how it is used.

For Islamic societies, the question is no longer whether to adopt blockchain—but how to shape it with integrity. If we wait too long, the architecture of the future will be built without us, governed by values that may contradict our own.

We need more than participation—we need presence, purpose, and principle.
That means designing systems anchored in Shariah, led by trustworthy scholars and technologists, and accountable to the communities they aim to serve.

The future will not wait.
Neither should our response.

Consulted Resources

Mufti Billal
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