<![CDATA[The development of Islamic banking has given rise to legal and product-related disputes, as normative differentiation often goes hand in hand with operational adaptations to national conventional banking practices. Islamic banking in Indonesia has developed within a dual banking system that combines Sharia principles, national regulations, market pressures and the needs of modern institutions. This study analyses the transformation of legal recognition, product changes and regulatory dualism to formulate a more coherent reconstruction of Islamic economic law. The research employs a normative legal methodology through legislative, historical, conceptual and comparative approaches to examine the development of Islamic banking within the Indonesian context. Data were sourced from laws, regulations, fatwas, journal articles, books, institutional reports and relevant academic documents, collected using documentation techniques. The analysis was conducted qualitatively through the stages of data condensation, data presentation, drawing conclusions, and verifying the consistency of norms and the implementation of Islamic banking. The findings indicate that the legal recognition of Islamic banks has developed gradually towards institutionalisation through regulation, institutional expansion, and the strengthening of Indonesia’s dual banking system. Regulation has also driven product innovation, standardisation of contracts, risk management, and operational adaptation, whilst simultaneously resulting in both differentiation and convergence with conventional banks. The study emphasises the need for multi-tiered harmonisation through normative coherence, proportional differentiation, the strengthening of Sharia governance, and the integration of economic and social welfare. Further research should employ a socio-legal approach, empirical data, longitudinal analysis, and cross-jurisdictional comparisons to test the effectiveness of the proposed regulatory restructuring.]]>
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