Cryptocurrency legalization and economic growth dynamics: empirical evidence from OIC member states

Introduction: This study examines how cryptocurrency legalization and prohibition impact economic growth, with a particular focus on Islamic countries where regulatory approaches vary widely. The unique context of Sharia law considerations adds complexity to cryptocurrency adoption in these regions, creating distinct regulatory environments worth analyzing. Methodology: The research employs the Difference-in-Differences (DiD) method with staggered treatment to analyze the economic effects of different regulatory frameworks across multiple Islamic nations. This approach controls for time-invariant differences between countries and common time trends, allowing for causal inference about regulatory impacts. Results: Cryptocurrency legalization has significantly boosted economic growth in Islamic countries, while banning cryptocurrencies has considerably reduced it. Discussions: Despite ongoing debates about Sharia compliance, cryptocurrency legalization enhances financial inclusion and provides legal clarity, both crucial for economic development. Strict prohibitions limit innovation, discourage investment, and reduce economic opportunities. Conclusions: While debates continue about whether cryptocurrencies are halal under Sharia law, the economic benefits of legalization provide compelling evidence for policymakers to adopt inclusive and supportive regulatory frameworks.