Mufti Muhammad Abu Bakar has released a paper which has clarified the position of Sharia law on bitcoin., While in the past, the position of crypto as a halal form of trade was debatable, the paper provides a comprehensive analysis of the token in the eyes of the Sharia law which has deemed it legal.
“In Germany, Bitcoin is recognized as a legal currency and therefore qualifies as Islamic money in Germany. In countries such as the US, Bitcoin lacks official legal monetary status but is accepted for payment at a variety of merchants, and therefore qualifies as Islamic customary money.” – an extract from the paper.
Islam and economics
Islam’s views on finances mean that gaining interest on money or the concept of making money from money, essentially usury, is frowned upon and advised against by religious texts. Even in Western countries many religious Muslims avoid the use of traditional banks as not only do they provide interest on deposits, they also charge interest on loans. The question of crypto being halal was also proposed at the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) conference which was held in Bahrain.
The conference aimed to classify crypto such as bitcoin when compared to traditional forms of monetary exchange such as commodities. Known as Ribawi in Islam, there were a number of categories which crypto has to fulfil before it can be seen as halal including complete ownership of assets when transferred. This comes at odds with traditional banking systems which use a fractional reserve system in order to maintain trade, but leaves a fraction of deposits not backed by money or commodity. The blockhain on the other hand accommodates Islamic beliefs as all transfers of money are back in crypto and are visible on the blockhain.
To conclude, with the announcement fro one of the biggest Muftis in Jakarta, Bitcoin has essentially passed as a Halal technology. Not only does the blockhain effectively prove ownership of funds, the use of Bitcoin which was debated as haram due to the volatile nature of markets has now been made legitimate in the eyes of the Sharia law. It is hoped the announcement can put to rest worries many Muslims have regarding crypto trade.