Legality of Defi in UAE

[petal355]

Hello, I am seeing more and more people aqking for Shariah compliant Defi protocol, does it mean it is forbidden to use as an uae resident some defi lending protocols ?

I quote the law : "It is illegal in the UAE to give a loan on interest by an individual to another individual or a corporate. This is in accordance with Article 409 of the Federal Law No. 3 of 1987 related to Penal Code of the UAE (the 'Criminal Law')."

Pretty surprised if this law is applied most protocols cannot be used

https://beincrypto.com/defi-islamic-finance-and-crypto-culture-in-the-uae/
"Accordingly, the prohibition of interest has implications for DeFi. Anyone in the DeFi space is well aware of the prevalence of lending products."

 

[troubled soul]

How can banks function without taking interest?​

Islamic Banks work on the principles of an interest free banking. Riba or interest under Islamic Law basically means anything in “excess” – the investor should not make an “undue” profit from the hard work of the other. But it is permitted to follow a system of reasonable profit and return from investment where the investor takes a risk that is well calculated. Thus, Islamic banks make available accounts which provide profit or loss instead of interest rates. The banks use this money collected by them and invest in something that is shariat compliant, that is not haraam and does not involve high risks. Thus, businesses involving alcohol, drugs, war weapons etc. as well as all other high risk and speculative activities are prohibited. Islamic Banking, therefore, acts as an agent by collecting the money on behalf of its customers, investing them in shariat compliant projects and sharing the profits or losses with them. The Dow Jones Islamic Market Index came into being in the year 1999 for investors willing to invest in shariat compliant projects.

There are various products in Islamic Banking that cover the needs and requirements of the consumers. Some of them are Mudarbah (profit sharing – one party provides finances, the other provides expertise), Musharaka (joint venture – both parties share everything equally), Murabaha (cost plus profit), Ijara (letting on lease), Istisna amongst others.

Just rename Interest to Profit.
As I mention so many times In Dubai some laws are quite funny.
Even They have Government Bond National Bonds Corporation - Savings & Investment, Dubai UAE