Tokenization in Islamic Finance: Evolution, Sukuk Innovations, and Shariah-Compliant Block chain Frameworks

Abstract

The accelerating digital transformation of global finance is reshaping the mechanisms through which value is issued, transferred, and governed. Islamic finance, grounded in ethical constraints and asset-backed transactions, faces a distinctive challenge in this transition: how to adopt emerging financial technologies without compromising Shariah principles. Although Sukuk markets have expanded significantly over the past two decades, they continue to face structural limitations related to liquidity, issuance costs, governance transparency, and restricted investor access. This article examines digital tokenization as an infrastructural evolution within Islamic finance rather than a speculative financial innovation. By representing ownership rights and contractual obligations on distributed ledgers, tokenization offers a framework for enhancing transparency, automating Shariah compliance, reducing transactional friction, and enabling broader market participation. The analysis positions blockchain-enabled Sukuk as a mechanism capable of restoring substantive asset-backing and ethical accountability while aligning Islamic capital markets with contemporary financial infrastructure.