What’s the Difference Between Conventional and Islamic Tokenization?

Asset tokenization is becoming an increasingly popular way to attract investment. However, the approach to tokenization can vary significantly depending on legal, ethical, and religious principles. This distinction is especially important for investors and entrepreneurs who follow Islamic guidelines. Let’s explore the key differences between conventional and Islamic tokenization.

Conventional Tokenization
In traditional tokenization, assets (such as real estate or businesses) are converted into digital form and divided into tokens, which are then sold to investors. This process typically:

• Focuses on profit generation, including interest-based returns;
• Does not take religious restrictions into account;
• Uses financial instruments that may involve interest-based lending (riba), speculation (maysir), and ambiguous contract terms (gharar).
• The main goal of conventional tokenization is to maximize returns, with little or no emphasis on the ethical structure of the deal.

Islamic Tokenization
Islamic tokenization, as implemented by the Mulk platform, is based on Sharia principles. This means:

• Prohibition of riba — all forms of interest-based income are excluded.
• Transparency and fairness — transactions must avoid uncertainty and ambiguity (gharar).
• Ethical investment models — only Sharia-compliant partnership structures are used, such as:
• Musharakah — joint ownership and management of a business;
• Mudarabah — one partner provides capital, the other manages the business;
• Ijarah — leasing or transfer of usage rights (e.g., property rental).
• Sharia review — each project undergoes verification for compliance with Islamic law.
• Profit-sharing — investors earn a share of the profit, not fixed interest.

Why Is This Important?
For Muslim entrepreneurs and investors, adhering to Sharia principles is not just a choice — it is a religious obligation. Islamic tokenization makes it possible to:

• Raise capital ethically and in full compliance with Sharia;
• Build greater trust among investors, especially those from the Islamic world;
• Access new sources of funding that are not available through conventional financial methods.

Conclusion
Conventional tokenization focuses purely on financial gain without restrictions. Islamic tokenization, on the other hand, is a financing model rooted in spiritual and ethical principles, where earning profit goes hand in hand with complying with Sharia law. Platforms like Mulk open the door to investments that combine technology, faith, and transparency.