Acceptance of Sharīʿah‐compliant precious metal‐backed cryptocurrency as an alternative currency: An empirical validation of adoption of innovation theory

Abstract

In the crypto world, there is a proverbial (and literal) gold rush now occurring. Currently, more than 37 gold-backed cryptocurrency companies have now emerged.Interestingly, some of them also claim to be Sharīʿah-compliant. Introducing precious metal-backed cryptocurrencies is perceived to be an innovation among global payment systems, hampered in part by lack of supporting empirical evidence. Therefore, this research investigates potential users' tendency to adopt a Sharīʿah-compliant precious metal-backed cryptocurrency. As such, this study adopts an extended adoption model, which consists of eight factors. Partial least squares structural equation modeling (PLS-SEM) analysis was conducted on data elicited from economic active residents in Klang Valley from questionnaires. Overall, it was found six out of the eight constructs specified to influence the adoption of precious metal-backed cryptocurrency were statistically significant where 54.5% of the variation in adoption of PMBC can be explained by the structure model provided by this research. It was also found 63.55% of the respondents are willing to adopt precious metal-backed cryptocurrency in their future transactions. K E Y W O R D Sadoption model, cryptocurrency, Malaysia, precious metal, Sharīʿah-compliant

Potential Users’ Acceptance of Shariah-Compliant Precious Metal Backed Crypto Currency: A Malaysian Perspective

“…Compatibility refers to "the extent by which an innovation is perceived as being compatible with the current values, needs of possible adopters, and past experiences" (Rogers, 2003:240). PMBC could be compatible with the lifestyle of current generation, values and sociocultural beliefs, this mainly because gold and silver are money by itself, and the desire to accumulating them did not fade away (Ajouz et al, 2020a). Therefore, this research proposes that: H2 Compatibility of using precious metal-backed crypto currency will have a positive effect on its adoption.…”

“…Anxiety refers to "the extent by which an innovation is perceived as relatively difficult to use and understood" (Rogers, 2003:257). The complexity factor in PMBC mainly associated with the precious metal (Ajouz et al, 2020a;Yusuf et al, 2013). According to Yusuf et al (2013:100-101), there are three main challenges obstruct implementing gold dinar as a currency that are exchange risks, price volatility, and political risk.…”

“…PMBC is a completely different form of money that individuals are used to. Potential users need to experiment with the consequences of PMBC before choosing to use it (Ajouz et al, 2020a;Karahanna et al, 1999). Hence, giving potential users the opportunity to try PMBC would enhance the adoption process.…”

“…Thus, some ideas are easy to observe, described, and communicate among society members about theses inventions, while other inventions are much difficult to be observed or described by society member (Rogers, 2003:258). Thus, the usage rate of any new invention would increase significantly if the potential adopters can easily able to observe and describe the value added by the new payment mechanism, which is PMBC (Ajouz et al, 2020a;Yusuf et al, 2015). Therefore, this study hypothesizes that: H5 Observability of using precious metal-backed crypto currency will have a positive effect on its adoption.…”

“…Presenting of precious metal-backed crypto currency is supposed to be an innovation among the world's payment system (Ajouz et al, 2020a;Yusuf et al, 2013). That is because after the downfall of the Bretton Woods system in the early 1970s, the precious metals were not used as a currency, and the concept of crypto currency has only arisen in early 2009.…”