Beyond Bitcoin: Developing a Hybrid Shariah-Compliant Blockchain Model for Islamic Finance – Empirical Evidence and Simulation Analysis

The rapid growth of cryptocurrencies has revealed a significant disconnect between speculative digital assets and the ethical principles of Islamic finance. Bitcoin’s volatility, three to four times higher than traditional equity indices, along with its energy-intensive mining process, directly contradict Shariah principles emphasizing stability, asset-backing, and minimization of gharar (excessive uncertainty). This study addresses the gap between blockchain technology's potential and the requirements of Islamic financial systems by proposing and empirically testing a Shariah-compliant digital finance model.A mixed-methods approach was employed, integrating a PRISMA-guided systematic literature review, panel data analysis of 100 fintech firms from 2018 to 2024, and Monte Carlo simulation. Fixed-effects regression was used to assess the impact of blockchain adoption on financial performance (ROA, ROE) in both Islamic and conventional fintech firms. The simulation evaluated the efficiency of a Hybrid Shariah Blockchain Model for tokenized waqf (Islamic endowment) operations.Results indicate that blockchain adoption significantly improves financial performance in Islamic fintech (ROA: β = 0.023, t = 3.41; ROE: β = 0.067, t = 2.79). Simulation results demonstrate a reduction in transaction latency from 3.2 days to 12.4 seconds (95% CI: 10.1–14.7), complete auditability, and transaction costs below $1.00 per operation.This study presents the first simulation-based validation of waqf blockchain governance grounded in Islamic jurisprudence, offering a scalable framework for ethical, decentralized financial services benefiting 1.8 billion Muslims worldwide. Policy recommendations include regulatory sandboxing and institutional integration strategies to mainstream Shariah-compliant blockchain applications.