The Shariah standards and regulations governing financial transactions in the Metaverse technology.
Praise be to Allah, Lord of the worlds, and peace and blessings be upon the Messenger of mercy to the worlds, our master Muhammad, his family, his companions, and those who follow his guidance until the Day of Judgment.
Today, the world is rapidly evolving, especially in the world of technology and intangible technologies, and has reached this new technology called "Metaverse" with innovative projects. Science has no end, as Allah says, "And above every knowledgeable person is one who has more knowledge." This means that no matter how much knowledge you gain, there is always someone who has preceded you or will surpass you.
In this research, we delve into introducing this new technology that emerged clearly in 2021, highlighting its risks, positives, negatives, and the possibility of utilizing it in financial transactions, Islamic banking, financial institutions, zakat, awqaf, and the like.
One of the legislative miracles of Islam is that no matter how new the issues are, the diligent researcher in the Holy Quranic verses and purified prophetic Sunnah reaches their rulings through general texts, general principles, and basic rules.
We are the ones who seek in this faith, according to the previous curriculum and according to the criterion. We ask Allah to grant us success, guidance, and acceptance of what we offer with good acceptance. May He inspire us to do what is right, protect us from sin, error, and deviation in belief, speech, and action. He is our sufficiency and our Lord. Indeed, He is the best guardian, supporter, and guide to the straight path.
Definition of Metaverse: Metaverse is an English word consisting of two words, "meta" meaning "beyond" and "verse" meaning "composed of several pieces." But the meaning of the compound word "Metaverse" is "beyond the world," that is, the world of imagination. It is as if the first use of this term was in the science fiction novel "Snow Crash" in 1992, where its author (Neal Stephenson) imagined the existence of a three-dimensional virtual space where fictional characters interact. Then this term was used in virtual world platforms such as "Second Life" since 2003, and it has been used since 2019 for three-dimensional simulation, connected permanently to virtual worlds that can be accessed through virtual reality glasses, desktop computers, and the like.
One of its main applications is online video games that are characterized by a three-dimensional fantasy world, as well as virtual reality. Its most important equipment includes computers, smartphones, mixed reality (Augmented Reality, AR), virtual reality (Virtual Reality, VR), and virtual world technologies that have led to the development, spread, and programming of Metaverse.
In essence, Metaverse is a unified virtual world based on fixed three-dimensional virtual spaces linked to the physical world, where users enter using avatars, interact with each other and with the applications and services available in this world (which is a virtual place where we work, learn, entertain ourselves, earn and spend money). Metaverse is a qualitative leap and a jump from the physical internet to the virtual internet, where virtual spaces can be accessed between the real world and the virtual world by using technology and devices used in Metaverse to input commands and receive feedback, including brain-computer interfaces designed to collect and process electrical signals that occur in the human brain and convert them into meaningful inputs for a computer or any external device.
Metaverse is still not widely adopted, but major technology companies such as Meta (formerly known as Facebook) and Microsoft have invested billions of dollars in developing Metaverse, and Meta has hired ten thousand highly skilled technicians and has also allocated ten billion dollars to achieve the first version of Metaverse technology. Similarly, Microsoft is in a race to acquire companies working in this field, and finally, Varjo Reality Cloud has announced the completion of its trial version and is preparing for the first release.
Metaverse is coming, bringing with it its positives and negatives, challenges, and risks, but it also carries good opportunities for us to benefit and advance in the fields of financial services, manufacturing, and entertainment. Therefore, governments and scientists should accelerate the establishment of appropriate laws to protect moral values, privacy, and strengthen the state's presence in this vital field of development, protection, progress, and advancement.
It is worth noting that the struggle between major technology companies is not primarily for privacy protection but for enrichment, superiority, and scientific advancement at any cost. Therefore, Meta focuses on the consumer and revenue, and thus its version differs from others in terms of performance restrictions and usage methods, such as requiring the availability of headphones or Oculus AR glasses to enter Metaverse. On the other hand, Varjo-Nvidia focuses on stronger performance and collaborates with other global companies in this world, such as Amazon, Apple, Google, and Microsoft, seeking to regulate the Metaverse era and prepare for major product launches. McKinsey & Company estimates that investments in this virtual world in the first five months of 2022 will be around $120 billion.
How can we benefit from and enter the world of Metaverse?
Metaverse is an advancement of the internet and computing itself, with a unique technological approach that utilizes virtual reality headsets and gloves, making it a 3D technology. It includes Blockchain, Algorithms, Augmented Reality (AR), Virtual Reality (VR), and reconstructs 3D relying on Artificial Intelligence (AI), Internet of Things (IoT), and other similar technologies.
Access to Metaverse is achieved by using virtual reality headsets (Oculus AR), and major companies that developed this technology have created a digital twin that allows users to attend virtual halls where they can stay in their offices wearing virtual reality headsets (Virtual Reality.AR), while their avatar representing them attends the meeting or takes a walk in the streets of Mecca or Istanbul.
Difference between Augmented Reality (AR) and Virtual Reality (VR):
The primary differences between these two technologies are:
- Augmented Reality (AR) uses digital visual elements and characters to transform the real world that is more accessible than Virtual Reality. Its use is available on any smartphone or digital device with a camera, allowing users to see their surroundings through interactive digital visuals similar to what we have in mobile games like Pokemon, where players use their cameras on their phones or devices.
- On the other hand, Virtual Reality (VR) differs from AR because users create a virtual environment made through the internet that they see through using virtual reality headsets or gloves (Oculus AR) - as mentioned earlier.
- The sensors of the VR devices demonstrate the workings of both realities, where Virtual Reality is an innovative model of Metaverse that creates a digital world with imaginary visual content that can be expanded to include physical simulation, using virtual reality (VR) equipment.
Risks of using Metaverse technology: We can divide the risks in this regard into two main sections, which are: The first section is for general risks, and the second section is dedicated to the risks specific to Islamic financial institutions through the application of Metaverse technology.
Section One: General Risks:
First: Technological Fundamental Risks:
1- Advanced new technological advancements, while having their benefits, are increasingly compromising privacy. This has been clearly seen in social networks that have sometimes been used for defamation and harassment, and sometimes even for threats.
According to experts, the personal and sensitive information that will leak through the metaverse will include a large amount of true information about the user's habits and physiological characteristics, which is currently difficult to obtain over the internet but will be easily accessible in the metaverse due to the stronger link between the virtual and physical worlds.
To secure against these fundamental risks and treat them to some extent, high-capacity technologies must be implemented to control access to the metaverse, such as implementing a program that controls the authentication of the person and maintains everyone's privacy as much as possible.
2- Risks of identity theft, espionage, pursuit, hacking, and infiltration and other new internet technologies. As confirmed by experts, there is no official process for identity verification in the metaverse, making digital identity theft and espionage easier. This is definitely one of the potential crimes that may go unpunished.
To address or mitigate these risks, current conventional means can be used to reduce these problems, but the solution lies in significant efforts by specialists to study and research them through scientific studies to protect privacy more effectively and prevent them.
Second: Risks of Ambiguity: Some associate the danger of ambiguity with this technology. The website Reader's Digest published an article by writer Mimona Konte stating that this technology is shrouded in mystery, and video game enthusiasts are the ones who benefit most from the metaverse.
Satya Nadella, CEO of Microsoft, confirmed that this technology will not only change the way we see the world but also affect how we participate in it, from the factory to the conference room.
Therefore, it is not impossible for sports and music enthusiasts to wear virtual reality glasses and appear live on the air without ever leaving their homes.
Third: Risks of Negative Culture and Cyber Addiction: Manufacturers do not give enough attention to these aspects, and these risks in their various forms will have very negative effects, especially on children, leading to negative addiction.
Part One: General Risks:
First: Technological Risks:
1- Undoubtedly, advanced new technological technologies - with their positives - have become, in most cases, at the expense of privacy. This has become clear through social networks that have sometimes been used for defamation, distortion, and sometimes even threats, as is well known.
According to experts, personal and sensitive information that will leak through the metaverse will include a large amount of true information about the user's habits and physiological characteristics... which is very difficult to obtain over the Internet at present, but it will be easy to obtain in the metaverse due to the stronger link between the virtual and physical worlds.
To ensure safety from these essential risks and to treat them somewhat acceptably, it is necessary to put high-capacity technologies in place to control access to the metaverse, including the use of a program that controls authentication of the desired person while maintaining everyone's privacy as much as possible.
2- Risks of inability to identify identity, espionage, pursuit, hacking, intrusion, and other new internet technologies, as experts confirm that there is no official identity verification process in the metaverse, which undoubtedly makes digital identity theft and espionage easier. This is one of the potential crimes that could go unpunished.
To address or mitigate these risks, current conventional methods can be used to reduce these problems, but the solution lies in significant efforts by specialists to study and research through scientific studies to protect privacy more effectively and prevent it.
Second: Risks of Obscurity: Some attribute the risk of obscurity to this technology, as the writer (Mimouna Konta) published an article in the Reader's Digest website stating that this technology is shrouded in mystery, and added that video game enthusiasts are the ones who benefit the most from the metaverse.
Satya Nadella, CEO of Microsoft, confirmed that this technology will not only change the way we see the world, but will also affect how we participate in it, from manufacturing to meeting rooms.
Therefore, sports and music enthusiasts may wear virtual reality glasses and appear live without ever having to leave their homes.
Third: Risks of negative culture and cyber addiction: Production companies do not give this aspect the required attention, and these risks in all their forms will have very negative effects, especially on children, leading to negative addiction.
Fourth: Risks of loss of cultural diversity: The risk of losing cultural diversity is that this technology will result in its integration into a single culture through its link to the virtual world, where participants will spend most of their time, leading to neglect of the physical world and not recognizing the culture, traditions, and arts of different people.
Fifth: Risks of increasing unemployment and poverty: Among the most prominent risks that may be caused by the metaverse technology is the increase in the number of unemployed, leading to an increase in their number, in addition to increasing the wealth of large companies and poverty for the poor.
Sixth: Risks of creating digital twins for users: Experts have pointed out that metaverse technology has tremendous and supernatural capabilities, as it can create digital twins for users in the virtual world, which presents us with great challenges.
Based on this information, metaverse technology intervenes in our lives, culture, identity, and personality if ethical laws and covenants are not put in place to protect what remains of human privacy.
Seventh: Difficulty in proving virtual crimes and proving losses or damages to digital identity: In 2018, the Virtual Reality Research Agency (Extended Minds) conducted a study on this issue and reported that 36% of males and 49% of females of virtual reality technology users were sexually harassed, but the harassers were able to hide their identities behind their digital identities. Common Sense Media confirmed this and pointed out that
Eighthly: Difficulty proving ownership in the metaverse world. Therefore, there must be a technical and legal effort to find a secure way to prove ownership and transfer it. Experts suggest that the best way to prove ownership in this virtual world is through digital proof of ownership, using symbols that are not exchangeable, so they cannot be copied or forged at all, and this requires the use of blockchain technology.
Ninthly: Difficulty achieving fair governance. Governance has become essential, especially in the world of finance and economics. Therefore, the metaverse world urgently needs to apply fair governance. However, achieving it is not easy, and it requires the development of advanced technologies to achieve it in the presence of binding laws.
Second Section: Risks of Islamic Financial Institutions through the Application of Metaverse Technology:
In addition to the general and comprehensive risks mentioned earlier, there are more dangerous risks specifically related to Islamic financial institutions through the use of this technology for financial criminal purposes such as market manipulation, electronic breaches, cyberattacks, violation of financial institutions' privacy, money laundering, illegal transfers, espionage on these institutions, theft of their secrets, or even customer accounts and funds. Experts fear that this may lead to the collapse of surveillance and the growth of criminal networks.
Criminal gangs specializing in electronics may develop special programs for hacking, selling credit card information, or even retinal scanning. They may also introduce materials that are outside of moral and ethical values.
The treatment or mitigation of the effects and risks of Metaverse technology is difficult, but it can be achieved through the following:
1- Cooperation of governments, especially Islamic countries, in developing regulatory laws, ethical procedures, and technical regulations to regulate this technology as tightly as possible.
2- Cooperation of large companies that export, develop, or influence this technology to reduce its negative effects, increase its positives, address its risks, protect the privacy of individuals, ideas, and institutions, and prevent cultural infringements.
3- Collaboration of specialized scientists and experts in these technologies to reduce the effects and risks associated with Metaverse technologies.
4- Research centers and scientific studies in our countries, in cooperation with advanced scientific centers that share in protecting privacy, to conduct practical and credible studies to develop effective alternatives.
5- Islamic financial institutions allocate a portion of their profits to specialized research centers to benefit from these technologies while reducing their negative effects and risks.
6- Islamic financial institutions should spend what they can to reach safe, advanced, and applicable alternatives that avoid all or most of the negative effects.
Benefits of Metaverse:
Despite the risks that we have mentioned, and others that we have not addressed, Metaverse technology carries with it benefits and opportunities, including:
1- It supports the industry sectors in general, and enables healthcare institutions, especially in the field of robotic surgery, as well as the financial industry and Islamic finance in particular. It can also be utilized in manufacturing, entertainment projects, and pushing forward the comprehensive development wheel through activating information and communication technology that has no end in the continuous rapid progress towards the knowledge economy.
2- Additionally, one of the benefits of this technology is that it contributes to solving congestion problems, as people can watch sports or concerts without leaving their homes, through the use of virtual reality glasses.
3- It also has other benefits that will appear when this technology is fully developed and becomes usable in an acceptable manner.
How to Benefit from Metaverse Technology in the Islamic Financial Institutions: Metaverse technology can be used in the following ways within Islamic financial institutions:
A) Blockchain and Islamic Banking:
It is well-known that blockchain technology provides a decentralized and transparent solution for digital proof of ownership, digital collection, value transfer, governance, accessibility, interoperability, transfers, and more. Therefore, banks and Islamic financial institutions can benefit from this technology in the aforementioned matters, in commerce, and in the virtual world by purchasing legitimate virtual lands and encrypted virtual currencies (assuming they are valid).
B) Artificial Intelligence (AI) and Islamic Banking:
Artificial intelligence is widely used today in strategic plans, programs, vital projects, decision-making, faster computing, and more. However, experts in the field of artificial intelligence have begun to use it in a more realistic metaverse experience, creating three-dimensional iconic images using AI engines to analyze 3D images or create iconic images to appear more realistic and dynamic.
Islamic financial institutions can benefit from artificial intelligence with Metaverse technology in all of the aforementioned, in data processing and financial reports at lightning speed, machine learning technologies, unique product outputs and insights, analysis processes, and passing three-dimensional spatial data to computers.
Pros of Metaverse:
Despite the risks we have mentioned, and others we have not touched upon, Metaverse technology brings with it opportunities and advantages, including:
1- Supporting various service industries, enabling healthcare institutions to develop, especially in the field of robotic surgeries, and supporting the financial and Islamic finance industries, as well as benefiting the manufacturing and entertainment sectors, and contributing to the overall development through activating the fields of information and communication technology, which have become endless in the rapid continuous progress towards the knowledge economy.
2- Metaverse technology also contributes to solving congestion problems, where people can follow sports events or concerts without leaving their homes, by wearing virtual reality glasses.
3- It has other advantages that will appear when this technology is fully completed and becomes usable in an acceptable way.
How to benefit from Metaverse technology in the Islamic financial institutions domain: Islamic financial institutions can benefit from the development of Metaverse technology in the following ways:
(A) Blockchain and Islamic banking:
It is known that blockchain technology provides a decentralized and transparent solution for digital proof of ownership, digital collection, value transfer, governance, accessibility, interoperation, and transfers, so banks and Islamic financial institutions can benefit from this technology in the aforementioned matters, as well as in trade and the virtual space by buying legitimate virtual lands and encrypted virtual currencies (assuming they are valid).
(B) Artificial Intelligence and Islamic banking:
As is known, artificial intelligence is widely used in strategic plans, programs, vital projects, decision-making, faster computing, and more. AI specialists have started to use it in a more realistic way to experience Metaverse, create 3D symbolic images using AI engines to analyze 3D images, or create symbolic images to look more realistic and dynamic. Islamic financial institutions can benefit from artificial intelligence with Metaverse technology in all the aforementioned, in data processing and financial reports at lightning speed, AI learning techniques, unique product outputs and insights, analysis processes, and passing three-dimensional spatial data to computers.
(C) Internet of Things (IoT) and Islamic banking:
IoT first appeared in 1999 as a system that connects the physical world to the Internet through sensors with a unique identifier and the ability to automatically send or receive information, such as connecting heating regulators, speakers, and medical devices to a wide range of data. For example, one application of IoT on Metaverse is collecting and providing data from the physical world, which can change the way of business concerned, and IoT also helps improve the Metaverse environment, as well as using artificial intelligence and machine learning to manage the data it collects. These three technologies are very important, and they can be used individually, collectively, as well as integrated into Metaverse technology.
(D) Metaverse tools and Islamic banking:
The tools used by Metaverse can be utilized, as it has benefited from using digital currency wallets, such as Trust Wallet and Meta Mask, which allow it to create a digital economy with various types of non-exchangeable tokens.
The reason for linking Metaverse to video games: Although the world of Metaverse is vast, most of its activities are related to video games because people want to have fun and play more and achieve the greatest profit from them. For example, in the multiplayer game Fortnite, 12.3 million players participated in the virtual music tour of singer Travis Scott inside the game.
There is also a game called Axie Infinity, which aims to profit players by buying 3 creatures called Axies, giving them as a gift, where the player can obtain unique SLP tokens, and when selling these tokens on the open market, the individual can earn $200 to $1,000 depending on the market price and the amount of gameplay, and this game itself allows players to have the opportunity to get a job similar to the Metaverse world. There are other
The potential for financial institutions to benefit from the Metaverse technology:
Islamic financial institutions can use Metaverse technology and benefit from it in the following ways:
- Investing in this technology, as it is expected that investments in the Metaverse will reach trillions of dollars. Bloomberg Intelligence published a report in 2021 confirming that Metaverse technology has enormous economic prospects, and it is expected to reach $800 billion by 2025 and $2.5 trillion by 2030. Islamic financial institutions can invest in it with Sharia-compliant controls and contracts.
- Advertising and marketing through Metaverse technology with the help of virtual marketers to market financial, investment, and economic products, as well as sukuk and services.
- The ability to enter into financial contracts such as sales and leases.
My suggestions are for countries and institutions, especially Islamic financial institutions, to seek the following:
Firstly, creating secure protected areas for individuals, institutions, or a cohesive group to establish a private protected encrypted zone, as is the case with WhatsApp.
Secondly, creating a virtual world dedicated to inviting people to Islam, such as the world created by Islam Online, where discussions and debates take place on various Islamic issues, especially regarding doubts, desires, and fundamentals.
Thirdly, inviting Islamic financial institutions to create a virtual world dedicated to introducing Islamic banks, investment portfolios, sukuk, takaful insurance companies, leasing, financing, and all aspects of their Sharia-compliant financing systems, services, contracts, and other financial products.
This virtual world can serve as a public exhibition showcasing all of the above through various multimedia formats, ethics, and more. A market can be added within this virtual world for those who wish to enter into Sharia-compliant contracts for various Sharia-compliant products. The commercial market can be allocated to a separate virtual world, which may be preferable.
Fourthly, organizing a virtual world dedicated to training on contracts, formulas, products, and legal mechanisms.
Fifthly, organizing a virtual world dedicated to Islamic economics, its fundamentals, theory, and applications.
Sixthly, organizing a virtual world dedicated to Zakat, including its collection, disbursement, regulations, and conditions. This virtual world can also cover the process of spending Zakat and the procedures that can be carried out in this virtual world, starting from the appointment of the Zakat accounting container, the threshold, the calculation of Zakat, its withdrawal, and its disbursement to the eligible beneficiaries.
Seventhly, organizing a virtual world dedicated to Waqf (endowment), its history, role, types, and everything related to it.
Eighthly, organizing a virtual world dedicated to charitable and humanitarian organizations (non-profit institutions) to contain everything related to them regarding organization, collection, disbursement, registration, and so on.
To regulate the technology of Metaverse, the following regulations and standards are needed:
A) Contractual, ethical, and legal regulations in everything related to this technology in all its aspects and reasons, to avoid anything that conflicts with our contracts, values, and Sharia.
B) Precise technological regulations to prevent all crimes related to privacy, property, and confidentiality, through deterrent laws that oblige exporting companies or those supervising this technology to organize technologies that achieve immunization and encryption to provide full sufficient protection. Without that, countries do not allow such technologies or impose severe fines and penalties.
C) Regulations related to the contracts that take place in this virtual world, so that their effects are real, and their subject matter is realized truly, even if it is intangible, such as electronic programs. Within the Sharia contracts, each contract must meet its pillars and conditions, and there should be no legal obstacle or violation. Also, the requirements and regulations of Sukuk (Islamic bonds) and investment portfolios must be achieved.
D) It is essential for Islamic financial institutions to adhere to the Sharia and accounting standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and its standards for control, ethics, governance, risks, and other standards issued by the Islamic Financial Services Board (IFSB), as well as the valid resolutions and fatwas.
In conclusion, "Metaverse" is coming, and it is a three-dimensional virtual world that we must prepare for, benefit from, and protect ourselves from, as we mentioned in this article. All of this can be achieved, God willing, through the cooperation of Islamic countries, Islamic financial institutions, technology companies, and cybersecurity.
We can summarize this by achieving the Islamic balance based on the scale of precise knowledge - no matter how advanced - and the scale of ethics and values, so that scientific technologies do not harm or damage humans, animals, and the environment in all their aspects. This is the approach that the first revealed verse emphasized, which is "Read" - meaning read everything and achieve good and progress through knowledge - but under two conditions or by achieving the balance of the two scales, which are:
A) "Read in the name of your Lord" - meaning under the sovereignty, faith, and ethics.
B) "Read and your Lord is the Most Generous" - meaning under the shade of human dignity and rights.
And God knows best, and our final prayer is that all praise is due to Allah, the Lord of the Worlds, and peace and blessings be upon our Prophet Muhammad, his family, and his companions.
Written by Dr. Ali Mohyeddin Al-Qara Daghi.