Shariah Compliance
This page summarizes the structural analysis prepared for scholarly review. It is not a fatwa, and no Shariah board has certified Rayyan. Certification by a board comes before mainnet.
Testnet note: the Sepolia deployment of 2026-08-06 still runs the earlier terms, a settlement fee of 1.5% of collateral value and liquidation credited at 93% against the full contract price. The terms on this page take effect with the next deployment.
The structure
Rayyan implements classical murabaha secured by rahn (pledged collateral), funded by mudarabah capital:
- The pool owns the USDC before providing it. Deposits are verifiable on-chain, which satisfies the requirement that the seller own what it sells.
- The borrower receives USDC at a fixed, disclosed contract price: cost plus markup (ribh), committed on-chain before confirmation.
- The obligation is capped and has a settlement date. Nothing is ever added to it, for lateness or for market movements.
- Early repayment triggers ibra', the rebate of unearned markup, by code, so it is neither discretionary nor negotiable. The same rebate applies when a position is liquidated.
- Depositor returns are mudarabah profit-sharing: variable, tied to actual murabaha profits, with losses borne by the capital providers.
The pledge
The pledged collateral stays the borrower's property. A widely cited hadith says the pledge is not forfeited: its gain and its loss belong to its owner. The contracts follow that rule.
A position whose collateral falls below the liquidation threshold is taken over by the protocol, which credits the borrower the collateral's oracle value less the discount paid to whoever buys it. That discount, 4.2% for WETH and WBTC, is the cost of selling, and the protocol keeps none of it.
The credit is set against the amount owed after ibra', so a borrower liquidated early pays markup only for the time the position was open.
Everything above the amount owed stays with the borrower as a USDC balance they can withdraw.
Example: 10,000 USDC at a locked 4.2%, so a contract price of 10,420, liquidated on day 90 when the collateral is worth 11,500. The amount owed after ibra' is 10,105. The credit is 95.8% of 11,500, or 11,017. The borrower keeps 912 USDC.
Settlement at maturity: a paid agency
When you open a position, you appoint Rayyan as your agent (wakalah) to sell enough of your pledge to settle the position if you have not closed it yourself by the settlement date. The operator that performs the sale charges 0.25% of the amount settled, with a minimum of 1 USDC. On a 10,420 USDC settlement that is 26.05 USDC. The fee goes to the operator, never to depositors, and closing the position yourself at any time costs nothing beyond gas.
A creditor may not take an increment because a debt was paid late, while a fee for a real service, agreed at signing and paid to the one who performs it, is a wage (ujrah). The swap's own pool fee comes out of the collateral sold, so the agency fee pays for the service alone.
The charity fund
Some money has no rightful owner to return it to: a profit Rayyan's own keeper would make if it bought seized collateral and resold it, or income a Shariah board rules must be purified. That money is recorded as charity and moved to a dedicated wallet that holds nothing else, with a public ledger.
It is never called zakat. A protocol has no zakat obligation, and purification money cannot discharge anyone's zakat. USDC you supply as a depositor remains your own zakatable wealth.
Point-by-point compliance mapping
| Principle | How Rayyan satisfies it |
|---|---|
| No riba | The price is fixed when the position opens and accrues linearly to a disclosed cap; nothing is ever added to it |
| No gharar (uncertainty) | Maximum cost, daily cost, settlement date and settlement fee are all known before confirmation |
| Ownership before sale | The pool's USDC is on-chain and verifiable before every murabaha |
| Rahn (AAOIFI Standard 39) | Real collateral at risk in on-chain custody; the surplus returns to the borrower and the protocol keeps no part of it |
| Ibra' (required by Bank Negara Malaysia's guideline BNM/RH/GL 012-5, paragraph 6.1, including on default) | Enforced by code on early repayment and on liquidation; the ibraFactor parameter launches at a 100% rebate and is locked per position at borrow. The prevailing view elsewhere keeps a murabaha rebate at the financier's discretion, so whether a rebate fixed at signing is acceptable is one of the open questions below |
| Settlement date | A universal 360-day maturity; every murabaha has one |
| Agency (wakalah bil-ajr) | Maturity settlement by the operator as the borrower's appointed agent, for a fee disclosed at signing |
| Mudarabah loss-bearing | Depositors' claims are against actual murabaha profits; losses beyond reserves fall on capital |
| Rate discovery | The contract reads no external rate: the price comes from Rayyan's own pool utilization. The curve's parameters were calibrated against other on-chain lenders' average rates and Treasury-bill yields, and the treasury holds utilization in a target band with its own liquidity. Benchmarking a price is permitted |
Comparison with organized tawarruq
Organized tawarruq sells the customer a commodity on deferred terms and resells it for cash in the same breath, usually a metal that never moves. The OIC International Islamic Fiqh Academy ruled it impermissible in Resolution 179 (2009) because the commodity leg is a pre-arranged fiction, and it remains widespread in Islamic banking. Rayyan has no commodity leg:
| Organized tawarruq (banks) | Rayyan | |
|---|---|---|
| Commodity leg | A metal bought and resold on paper, never delivered | None; the pool sells USDC itself, which raises the separate question below |
| Collateral | Often unsecured | Real, on-chain, verifiable (rahn) |
| Price disclosure | Paper-based | Committed on-chain before confirmation |
| Ibra' | "Voluntary," operationally opaque | Deterministic, code-enforced, including on liquidation |
| Verifiability | Trust the bank's books | Anyone can verify every contract |
Open questions for the board
What is USDC?
The classification of a dollar-pegged stablecoin is unsettled jurisprudence, and each reading has consequences.
| If a board treats USDC as | Consequence |
|---|---|
| Money (nuqud), like paper currency | Selling USDC now for more USDC later is riba |
| A claim on the issuer's reserves (a receivable, dayn) | Rules on the sale of debt apply, and a claim to money is treated as money |
| Property (sil'ah), a digital asset | Murabaha on USDC is possible in principle, subject to the next question |
Our own reading is that USDC is most accurately a claim on Circle's reserves. That reading makes the next question harder, not easier.
Malaysia's Securities Commission Shariah Advisory Council (2020) recognised digital currency as property (mal). It classed tokens without an underlying asset as goods, outside the rules of currency exchange, and kept tokens backed by ribawi items under those rules. On our reading, a dollar-backed stablecoin falls in the second group.
Exchanging a thing for more of the same thing later
A higher price for deferred payment is permitted by all four Sunni schools and by the Ja'fari school. What decides whether a sale qualifies is what is exchanged for what. The hadith of the six items (Muslim) gives the rule: gold, silver, wheat, barley, dates and salt are exchanged like for like and hand to hand, and when the kinds differ, trade as you wish, hand to hand.
| Exchange | Excess | Deferral | Example |
|---|---|---|---|
| A good for money | allowed | allowed | ETH now, a higher USDC price later |
| Two different monies | allowed | spot only | gold for USDC |
| The same kind for itself | not allowed | not allowed | USDC now, more USDC later |
Rayyan's USDC market sits in the third row. Even if a board treats USDC as property, the schools differ on a same-kind exchange with excess and deferral:
| School | View |
|---|---|
| Hanafi | forbidden: where the two sides share a kind but are not sold by measure or weight, excess is allowed and deferral is forbidden (al-Ikhtiyar) |
| Hanbali | allowed on the relied-upon position for things sold by count rather than measure or weight, such as one garment for two on credit (Zad al-Mustaqni'); other narrations from Imam Ahmad forbid deferral in the same kind (al-Mughni) |
| Shafi'i | allowed for a thing that is neither money nor food, on the report of one camel taken for two camels later (Abu Dawud) and Ibn Umar's purchase of a camel for four owed later (al-Bukhari) |
| Maliki | forbidden when the two sides are the same kind with the same use, allowed when their uses differ: Ali sold a camel for twenty camels on credit (al-Muwatta) |
| Ja'fari | riba in exchange applies only to goods sold by weight or measure, so counted goods fall outside it; for paper money sold for more of the same currency on credit, Ayatollah Sistani requires precaution (Minhaj al-Salihin, issues 217 and 234); otherwise the question becomes whether the deal is a genuine sale or a loan |
Every school defines a loan (qard) as handing over fungible units to be repaid in like units, and forbids any stipulated increase on a loan. A board therefore has to decide whether the sale form holds over the loan-like substance. We put this question to the board first.
If a board rules against it, the same machinery can sell an asset instead: the pool buys ETH or BTC at market and sells it to the borrower at a fixed deferred USDC price, which is the first row of the table. That design is written and not built.
Other questions in the brief
- Whether the settlement agency fee should carry a cap, and whether the operator can also be the mudarib that shares in profit.
- Whether a rebate fixed at signing is acceptable. Bank Negara Malaysia requires ibra', including on default, while the prevailing view elsewhere keeps a murabaha rebate at the financier's discretion and does not allow it to be stipulated.
- Whether the liquidation threshold should measure collateral against the full contract price (the debt from signing, as today) or against the amount owed after ibra'.
- How losses beyond reserves are shared: pro rata across all depositors is the proposed rule and is not yet built into the contract.
- Whether depositor balances, which are claims on a pool of murabaha receivables, may be transferred at anything other than face value.
Governance parameters with Shariah relevance
ibraFactorlaunches at 1.0, a full proportional rebate and the strongest position. It is governance-adjustable within [0,1] for future positions only, and every position locks its factor at borrow. The prevailing view treats a murabaha rebate as the financier's discretion, while Bank Negara Malaysia requires it (BNM/RH/GL 012-5) and permits early-settlement charges only where they reflect the cost incurred.- The liquidation discount is set per collateral asset at the measured cost of selling it, and the protocol keeps none of it.
Board engagement plan
No board is engaged yet. The plan is a three-scholar board spanning DeFi-native, GCC (Hanbali and Hanafi) and Southeast Asian (Shafi'i, with the ibra' precedent) perspectives, with certification before mainnet. The deliverable is a fatwa citing the AAOIFI standards it relies on, including No. 8 (Murabaha) and No. 39 (Rahn).