Whether or not cryptocurrency, which is essentially a means of currency exchange via digital payments platforms using blockchain technology, can be Sharia-compliant, or halal, has been the focus of much religious, professional and academic Islamic debate since cryptocurrencies first emerged with the launch of Bitcoin in In the past 18 months, the volatility of Bitcoin in particular and reports of cryptocurrencies being used by criminal organisations to launder stolen or illegally earned money, commit fraud and demand ransoms in software hacks, have heightened fears that using cryptocurrency may be contrary to Islamic teachings.
In December , the Kuala Lumpur, Malaysia-based Islamic Financial Services Board IFSB , an international standard-setting body for the Islamic financial services industry, said in a note on investor protection in capital markets IFSB , that the Sharia debate about the permissiveness of cryptocurrency should be focused on digital tokens that are treated as currency, with no inherent value of their own. By contrast, digital tokens treated as securities, conveying an interest in the assets or earnings of a business, or asset-backed or utility tokens, which are tethered to some underlying asset or service of value, have not attracted the same controversy.
The IFSB has not yet stated a definitive position on cryptocurrency, preferring to host, and relay perspectives from, regular programmes and events for the Islamic finance industry, where the role of cryptocurrencies and other fintech products in Islamic finance are discussed. Dr Gapur Oziev, Associate Professor in the Department of Economics at the Kulliyyah of Economics and Management Sciences, part of the International Islamic University of Malaysia, said the main concerns about cryptocurrency relate to how such currencies may enrich users at the expense of others, rather than their fundamental nature as digital forms of money.
Harm, in an Islamic finance context, is generally taken to mean deception, corruption or money laundering, but Dr Oziev said concerns about crypto could be broader. While using cryptocurrencies to pay for assets is not reprehensible from a Sharia perspective, he said, activities such as trading currency, crypto-mining and swapping cryptocurrencies maybe unacceptable.
From an academic perspective, Dr Oziev suggested it might be possible for cryptocurrencies to be accepted as Sharia-compliant, if they are recognised and integrated into the central banking systems of Islamic countries, removing their ambiguity, drastic volatility and susceptibility to speculation. However, others experts see no contradiction between Sharia law and cryptocurrency and are fervently in favour of all cryptocurrency use cases within the Islamic finance system.
In Professor Muedini's view, cryptocurrency is compatible with Sharia law because, unlike traditional fiat government-issued currency that may not be backed by a commodity such as gold , the supply of Bitcoin and many other digital currencies is fixed, thereby eliminating potential for gharar deception and inflation.
The MUI's ruling was striking because it was the most explicit stance taken against cryptocurrency by a major Islamic authority to date. Other Islamic finance authorities have generally taken a measured but tolerant approach to cryptocurrency, approving its use for certain purposes.
The ambiguity around cryptocurrency's Sharia status has not deterred issuers of digital tokens from targeting the Islamic finance market. Users of CoinMENA can buy, sell, store, and receive major cryptocurrencies such as Bitcoin, Ethereum and Ripple, as well as deposit and withdraw funds in their local currency.
In March, Switzerland-based Caizcoin launched what it claims is the first fully Sharia-compliant cryptocurrency. Like other cryptocurrencies such as Bitcoin, Caizcoin is built on a decentralised blockchain, however it is the design of the blockchain that its developers say will ensure Cazcoin is halal. For example, the system's e-wallet for holding the tokens will be kept separate from "haram activities", such as businesses dealing in mortgages, weapons, tobacco, alcohol or pork, or lending with interest, and Caizcoin can only be invested in "halal activities", such as government bonds, stocks, property and transferring funds, or being used to make Zakat payments to charities.
According to Islamic scholars Mufti Faraz Adam, Shaikh Muhammad Ahmad and Mufti Irshad Ahmad, part of the scholarly network of the Shariyah Review Bureau, a Sharia advisory service for the financial sector based in Jeddah, Dubai and Bahrain and with clients across the world, there is no agreed Islamic law perspective on crypto-assets. We are of the view that a general view cannot be taken as a Fatwa [a formal ruling or interpretation on a point of Islamic law], because of the various nuances and possibilities with crypto-assets," they explained in a joint statement sent to Salaam Gateway.
They said that the term "cryptocurrency" is used to refer to a vast array of digital assets with different uses and functionalities. They also dispute that the potential for speculation is an innate feature of crypto-assets, arguing that Sharia concerns with crypto-assets arise when the contract used, and the underlying asset, are not Sharia-compliant. Speculation […] exists everywhere, and it is only an issue when the tools used to speculate and the reference point of speculation are problematic," they said.
In the view of the scholars of the Bahrain-based Shariya Review Bureau, an advisory institution, each Islamic finance authority is likely to take its own approach to the use of cryptocurrency in its respective jurisdiction. This advisory institution is licensed and regulated by the Central Bank of Bahrain. Regional crypto-operators … are regulated and have Sharia supervisory boards in place to ensure Sharia-compliance with periodical Sharia audits in place.
In this detailed guide which we will add to live we will cover off all the big question on this topic. Each of the links below refers to a detailed article that we have done to address that question. Zakat on Crypto is a topical question. You can calculate your zakat on crypto here plus you get a free portfolio health check too. We have also screened the top 50 cryptocurrencies by market cap here. We provide our sharia screening analysis for them as well. We will be doing detailed articles on each of these topics, but for now we share our high level thoughts below under each heading.
Halal Crypto List We have also screened the top 50 cryptocurrencies by market cap here. Sign up to the waitlist below. How does blockchain work? What is a cryptocurrency? What is bitcoin? What is an initial coin offering ICO? Major cryptocurrencies A list of sharia-certified cryptocurrencies Islamic Issues with Bitcoin and Cryptocurrency Is bitcoin halal? Are cryptocurrencies halal? Is bitcoin or other cryptocurrencies really currency?
Is bitcoin mining halal? Is Crypto Staking Halal? How can I make halal yield on crypto?
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Keeping this in mind, bitcoin qualifies as a digital asset. Further, with advancements in technological developments, it is not essential for something to be like a classical asset; the very nature of bitcoin and cryptocurrencies lies in its innovation. Thus, bitcoins are means of merely settling of prices and speculation and that they are a digital representation of a value that can be transferred and used.
Thus, bitcoins are deemed to be digital assets and not money and can be considered as a currency. They have some intrinsic utility and benefit. There is no real substance or underlying asset; it is just speculation on the fluctuation of numbers.
This argument results in cryptocurrencies being Shari'ah non-compliant from the standpoint of maysir speculation. However, to understand the reality of bitcoin, one needs to observe the benefits and uses to see how different it is from other financial assets such as derivatives; bitcoins can be used and are used to trade. The bitcoins in themselves are the assets, whereas, derivatives and financial instruments are nothing in themselves but representations of the price fluctuations of underlying assets they represent.
Thus, the difference between the two is: The value of bitcoin is in themselves and not in an underlying asset, whereas, derivatives do not hold any value, instead, the value represents an underlying asset and the derivative contract and instrument is purely a price reflecting the price of the underlying asset. Now, let us focus on those who consider bitcoins as money and a currency.
As per Shari'ah interpretations, something to be considered as money and a currency needs to have Thamaniyyah, implying that they possess an independent standard of value and a unit of account. Currently, bitcoins do not possess an independent measure of value. Rather, the values of fiat currencies such as the US dollar are used to determine the value of bitcoin. Thamaniyyah demands that the currency itself should provide a clear reference of value, but bitcoin falls short of being an independent reference of value.
Additionally, the instability and instability in bitcoin contradicts the entire purpose of money being a stabiliser and balance for our worldly life. Therefore, with the volatility and uncertainty, bitcoin loses its primary role and function since something unstable cannot bring stability to others. So, those who propound that bitcoin is a digital asset and not money but is currency can support their argument that bitcoin can still serve as a medium of exchange in isolated transactions; also, something which does not have Thamaniyyah can still be traded and used as a medium of exchange in a transaction.
Cryptocurrencies are not fiat currency as fiat currencies are part of a centralised system. Besides, upon being withdrawn, fiat currencies serve as collectible items due to their coinage. On the other hand, cryptocurrencies are part of a decentralised system. Upon withdrawal or decline, it is questionable whether they will serve as collectibles or merely be strands of random digits?
However, cryptocurrencies resemble fiat currencies from the aspect that in and of itself, it has no intrinsic value, rather, something extrinsic is giving it value. Finally, cryptocurrencies are not electronic money. Electronic money is part of the centralised system and a digital representation of a fiat currency. The move highlights how fintechs are broadening their footprint to include growth markets in the Middle East and Southeast Asia, prompting Islamic scholars to assess the religious validity of digital currencies.
Over the past year the firm has been exploring partnerships with financial firms in the Gulf region and seeking sharia-compliance certification helped widen those discussions, said Lisa Nestor, director of partnership at Stellar. Its a huge market. Stellar's digital ledger could be used in areas beyond cross-border payments, such as asset digitisation, and the firm has an ongoing partnership with IBM to develop such blockchain applications, Nestor added.
Cryptocurrencies such as Bitcoin and Ethereum enjoyed a bumper year in as mainstream investors entered the market, but they saw a drop in value earlier this year because of concerns over a potential regulatory crackdown. Some Gulf regulators have also expressed scepticism, but Bahrain has bucked the trend by exploring the use of digital currencies to boost its role as a regional financial hub.
Stellar held discussions with Bahrain's Economic Development Board early last year which led to wider engagements in the region, Nestor said. In February, Saudi Arabia's central bank and U. The Shariyah Review Bureau SRB , an Islamic advisory firm licensed by Bahrain's central bank, provided the certification for Stellar, alongside guidelines for the types of assets that can be traded in its platform. Islamic scholars have pondered over the permissibility of cryptocurrencies, wary of price volatility and the types of assets behind digital tokens.
Islamic finance emphasizes real economic activity based on physical assets, shunning interest payments and outright monetary speculation. Cryptocurrenices have drawn conflicting rulings from scholars, but the assessment from SRB could help narrow the debate as it compared trading of Lumens to transfer of rights, which is deemed permissible in Islam.
SRB also set rules for trading assets other than Lumens, including requirements to ensure price certainty, constructive possession and timely settlement - while allowing for a short delay to verify transactions on the blockchain. Taking to Twitter today, Dorsey answered a couple questions posed by a Twitter user: Was Musk investing contingent on Dorsey leaving?
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crptocurrencyupdates.com › /03/08 › bitcoin-crypto-islam-haram. This is a detailed guide exploring what cryptocurrency and bitcoin are, the Islamic implications, and whether they are a good investment. Key words: cryptocurrency, bitcoin, digital finance, Shari'ah view Islamic finance, both proponents and opponents of cryptocurrencies, are available on.