R3 and Wethaq will produce sukuki on the blockchain on Islamic capital markets

R3 has entered into a strategic partnership with Dubai-based FINTECH startup Wethaq to create a next-generation financial architecture for Islamic capital markets.

Wethaq plans to use the Corda R3 blockchain to manage the pre-sale, release, management and financing of sukuk. A sukuk is a financial document common in Sharia countries and known as the Islamic equivalent of a bond that allows investors to make a profit without violating Islamic law.

According to the Annual report
according to the sukuk of the International Islamic financial market for 2019, the total issue of these financial instruments reached $123.15 billion in 2018, which is 5% more compared to the same indicator in 2017.

The blockchain platform will digitize sukukas, reducing both the cost and time of their release. Currently, this process involves the participation of a number of banks, clearing-houses and Trustees. The Corda platform will reportedly simplify this “lifecycle”. In addition, Corda can provide more widespread adoption of the technology and, consequently, more issuers and investors by standardizing digital assets with a global financial architecture.

R3 CEO David E. Rutter said:

“Blockchain is driving an unprecedented period of innovation in the capital markets, and more assets are moving towards full digitization. Saudi Arabia and the wider Middle East region are areas where we see huge potential for Corda to modernize the economy, and our partnership with Wethaq is a step towards achieving this.”

Starting in 2018, Wethaq started working on a proof of concept for a blockchain-based solution for managing sukukas. The goal of the initiative is for the distributed registry to function as a registry and Central securities Depository, improve interaction with other settlement and payment platforms, and create a network for interaction between market participants, suppliers, and regulators. The firm has also applied for permission from the authorities regulators.

Last year, another financial institution, Al Hilal Bank, implemented
a deal to sell sukuk on the blockchain. Last fall, Blossom Finance said it was also planning to issue blockchain-based bonds under Sharia law.