The Fourth Industrial Revolution in Islamic Finance: The Case of Digital Currencies of Central Banks and DeFi

Recent advancements in artificial intelligence, robotics, neural networks, prosthetics, automation, virtual and augmented reality, and machine learning represent significant potential for enhancing efficiency and facilitating the acquisition of knowledge. One prominent trend within the contemporary global financial market is decentralization. The ancient hawala system exemplifies an early form of decentralized finance. The growth and worldwide spread of the Western banking system marked the beginning of financial centralization and globalization. However, with the arrival of blockchain technology, it has become technically possible to create decentralized financial systems again. In these systems, the removal of trust issues between participants is key to how they work. The growth of the Islamic finance and banking sector, coupled with the rising global Muslim population, has heightened researchers’ interest in digitalization. This research examines the potential, strategies, and viewpoints surrounding the integration of digital currencies in Islamic finance. The authors employ various methods, including analysis, synthesis, and comparative analysis. There is still no consensus in the Islamic world about whether digital currencies are permissible and how they might be used. The authors conclude that digital currencies can fit well within the principles of Islamic finance. This compatibility is supported by factors such as the transparency of decentralized finance and digital currencies, their role in protecting societal wealth, and their focus on social benefits, which align with the ethical goals and social values of Islamic finance. © 2025 Elsevier B.V., All rights reserved.