As per news reports, Software firm R3 has entered into a strategic partnership with Wethaq, which is a Dubai-based fintech startup. This partnership has taken place with the aim of building next-generation financial architecture for Islamic capital markets.
R3 is an enterprise software company specializing in developing distributed ledger platforms for financial institutions. It offers CRYPTO 2.0, which is the application of cryptographic technology and distributed ledger-based protocols in global financial markets. R3 leads an ecosystem of more than 300 firms that work together to build distributed applications using Corda for use in industry verticals such as financial services, healthcare, insurance, digital assets, and trade finance.
Wethaq Takaful Insurance Company is a Kuwait-based shareholding company which engages in providing cooperative insurance and reinsurance products and services. The insurance products and services of the company include motors, fire and property, construction and engineering, liabilities, financial, health and life, and marine and aviation insurance. Wethaq has the right to own, sell, and purchase real estate and financial instruments. Wethaq Takaful Insurance Company in Egypt is a subsidiary that is engaged in insurance and reinsurance activities. Wethaq is a platform-as-a-service firm that aims to use Corda to manage the issuance, pre-sale, management, and financialization of Sukuk securities, which are Islamic financial certificates similar to bonds.
As per the International Islamic Financial Market Annual Sukuk Report 2019, Sukuk’s total issuance reached $123.15 billion in 2018, thus representing a 5 per cent increase from $116.7 billion in 2017. In 2018, Wethaq started working on a proof-of-concept for a blockchain solution to Sukuk management. It worked with the aim of having distributed ledger operate as a registry and central securities depository, improve interoperability with other payment and settlement platforms, and create a network for regulators, participants, and providers to communicate.
Wethaq has also sought regulatory approval from jurisdictional and Shariah bodies. As mentioned in a joint report by R3 and Wethaq in light of the highly regulated Islamic environment, “the employability of ‘smart clauses’ give Shariah boards the opportunity to ensure Shariah compliance by building and mapping real-world Shariah requirements within the structure itself.”
In the words of David E.Rutter, the CEO of R3, “Blockchain is driving an unprecedented period of innovation across capital markets, with more assets moving towards complete digitization.” He also added, “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 that.”
The blockchain platform will digitize Sukuk, thereby decreasing both the cost and time of issuance, a process that currently involves input from many clearinghouses, banks, and trustee entities. Corda will streamline this “lifecycle.” Furthermore, Corda may enable wider distribution, which will lead to more issuers and investors, by standardizing the digital assets with global financial infrastructure.