The rise of cybercash and digital money in this day and age leads to innovative revolutions throughout the world. Cryptocurrency has been a vital breakthrough in the digital world since its origination. In 2009, Bitcoin was launched as the first Cryptocurrency. Millions of payments and investments are settled in these digital currencies.
The demand and value of digital cash increase day by day due to finance houses and commercial banks. These financial institutes are gaining benefits in their commercial infrastructure through adding Cryptocurrency. Moreover, many people are making business through selling Cryptocurrency. Not only that but they accept Cryptocurrency in exchange for their goods.
While many believe in investing in Bitcoin, the majority of the population is still doubtful whether to accept Bitcoin or Cryptocurrency as a whole. Among those dubious populations is Islamic finance. The idea of Cryptocurrency has arisen many queries among Muslims. Understanding the digital system and its acceptance according to shariah is essential. We have put forward this guide for you.
Narrative of Currency in Islam:
In prehistoric times, there was no concept of money. For a long period of time giving and taking of commodities was common. That means every individual used to trade goods with one another. But this wasn’t enough to sustain the successful business or high commercial value. During the Islamic era, the time of Prophet Mohammad (P.B.U.H), two types of currencies gained interest, dirham, and dinar.
But after some time many Muslim societies started mishandling the gold and silver ratio. This was against the law of Islam. This in turn leads to the initiation of trading money. However, after the emergence of fiat money, or say paper money, the economy evolved for the better. In the same way, the evolution of virtual currency has taken secular interests in the world.
Understanding the concept of cryptocurrency:
Cryptocurrency is a digital blockchain technology-based money. These are fully dependent on online databases. The transaction of crypto is done online and not through banks. Until now many types of cryptocurrencies have been known including
- Bitcoin: most popular among cryptocurrency
- Altcoins: Alternative cryptocurrency coins
- Utility tokens and more.
Few attributes of cryptocurrency:
- Cryptocurrency is private money. These are not issues via the government, unlike fiat money.
- These are computerized cash.
- Don’t have intrinsic value
- Doesn’t exist physically
- Doesn’t require information from the receiver or seller.
Justification of Cryptocurrency through shariah:
In spite of the increasing competition of technology, Muslims still stand unfit with the notion of Bitcoin. Regarding Bitcoin the opinions of many scholars are divided. Few scholars accept the idea of cryptocurrency because crypto complies with the concept of Mal and mutaqawwam. Hence, they declare it as Halal. Although some proclaimed bitcoin as haram.
Crypto considered Halal (permissible) by scholars:
Economical asset: Many scholars accept and allow transactions through cryptocurrency. According to them, these currencies are not considered valuable in economic growth. Hence, cryptocurrency has no contribution to the benefit of society. These currencies fall in the category of assets. Thus investing in Bitcoin is not necessary but permissible.
Appreciable form: Few scholars even hold the opinion that Bitcoin can lead to enhancement in Islamic finance. According to Muslim jurists, any form of payment that is extensively accepted by the community is money. Therefore, this makes Cryptocurrency Halal.
Legal value: Similarly, any form of payment legalized by the government is considered Halal. As crypto is legalized by the German government, trading of crypto becomes permissible.
Crypto Considered Haram(Impermissible) by Scholars:
Lack of knowledge: Cryptocurrency can disturb the faith of Muslims. The mass of people who lack honesty and knowledge regarding shariah could use Bitcoin. Which can lead to fraud and tricking people. This However causes damage to society, institutions, and communities. As a consequence, it is not permeable according to shariah.
Suspicious matter: The fiat money is authorized by the government. Contrary to that, Cryptocurrency does not have any reliability. These currencies are not legal and do not represent real worth. Many scholars even refuse to trust these digital currencies and consider them a suspicious matter.
Illegal means: Most of the population is unaware of the spending of cryptocurrency. It raises many questions. Indirectly it means that cryptocurrency could be used for drug trafficking, illegal activities, or money laundering. However, none would find out because it is not verifiable.
Commercial merit of Bitcoin in Future:
As the uncertainty increases, different opinions arise. The dispute among scholars as to whether accept or decline the cryptocurrency can only be resolved IF:
Recognition by the government: Cryptocurrency is authorized by the government. This will give value to Bitcoin from an economic point of view.
Exchange medium: The trading of cryptocurrency should be monitored and verified by legal financing companies. This in turn could enhance the trust of society and scholars in digital money.
Speculative value: The unsettled matter of cryptocurrency should be resolved completely. This is crucial for the whole community. Including minors as well as the wealthy public.
Progress of cryptocurrency:
The growth of cryptocurrency can be a major source of moral investments. Also, as a financial frame of reference, cryptocurrency can benefit hugely in charity. Zakat or any other charity work can be done through cryptocurrency. Many commercial finance companies accept crypto as a means of trading and medium of exchange.
This increases the value of cryptocurrencies including Bitcoin as well. From the shariah point of view, many Islamic countries are starting to recognize cryptocurrency. For example, the Dubai agency for cryptocurrency is named One gram. Similarly, Hello Gold agency in Malaysia is also an agency for cryptocurrency.
Gathering cryptocurrency for the future:
Developing interest is not allowed in our deen. In Qur’an, Allah says:
“Those who eat Ribâ(usury) will not rise from their graves except as one rise who is being beaten by Satan into insanity”
Islam does not stop trading. But having gained in trading through unjust means(Ribâ) is prohibited. Many consider Cryptocurrency as an opportunity to pile the digital money. Which leads to earning interest on staked money. Thus, this goes against the law of Islam.
Similarly, predictions of the price of crypto money for the future are considered gambling. Gambling as well is not allowed in Islam.
As per Qur’an:
“O ye who believe, indeed, Intoxicants, gambling, (sacrificing on) stones altars[to other than Allah] and diving arrows are but defilement from the work of Satan, so avoid it that you may be successful”
In short, gambling and Interest can cause harm and loss to people. Islam prohibits any kind of activities that might leave mankind in torment.
Final analysis regarding shariah complaints cryptocurrency:
Finally, yet importantly, cryptocurrency in Islamic law is a sensitive yet crucial topic. Government and Islamic scholars are still pondering over the suitability of digital money in Islamic perspectives. However, until the uncertainty remains the cryptocurrency will not gain much interest in Islamic countries.
Those scholars who are in favor of cryptocurrency might get held back in the future if cryptocurrency doesn’t meet the conditions of shariah law. Likewise, those who oppose cryptocurrency might change their perspective and start favoring digital cash. Therefore, there is no absolute answer to whether or not there is a future of cryptocurrency in Muslim states.