An Islamic bond valued at $500 million has been processed through blockchain by the Al Hilal Bank, based out of Abu Dhabi.
The government-backed bank released on November 26, 2018, that the bond, which is shariah-compliant, or sukuk, an Islamic financial certificate that shares similarities to a bond, has been transacted on the secondary market will mature in September of 2023. According to the bank, “this was the first time that Blockchain has been used worldwide to execute a Sukuk transaction.”
In order to facilitate the transaction, a United Arab Emirate-based startup, Jibrel Network, who provides currencies, equities, commodities and other financial assets as standard ERC-20 tokens on the Ethereum blockchain, lent support to the bank with the tools and infrastructure to enact the transaction.
In order to pursue a more sukuk capable market, the bank will invest heavily into blockchain technology in order to create “smart” sukuks, at a discount.
According to Al Hilal Bank’s CEO, Alex Coelho:
“We are proud to be the first bank to launch a ‘Smart Blockchain Islamic Sukuk’. The advantages of using smart contracts range from safer transactions with robust Shariah compliance, to the unlocking of new opportunities.”
The bank has released that Islamic sukuks have seen explosive growth, with $97.9 billion worth of the bonds being issued in 2017, a marked rise of 50% from 2016.