S&P Global Ratings believes blockchain and smart contract protocols could change the global sukuk industry for the better. They can increase the transparency of cash flows and the underlying assets, while enhancing investors' decision-making through a greater supply of information. These technologies could also pave the way for more robust Sharia and financial auditing of sukuk after issuance, thereby reducing the risk of default because of non-Sharia compliance.
To date, only a handful of financial institutions have used blockchain to issue conventional bonds and none to issue sukuk. Some market participants argue that blockchain was created a decade ago, but has not had much impact on the financial system. However, in our view, this technology and the increasing prevalence of peer-to-peer services are opening up opportunities for small innovative market participants to challenge established financial groups.
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