Since the introduction of bitcoin, the most heated debate in Islamic banks and financial institutions has been whether Bitcoin is halal. or is Bitcoin haram?
What constitutes money in Islam?
Currency, according to early Islamic laws, is anything with value built into it. Its value should not fluctuate rapidly. This is because, according to Sharia law, the exchange of currencies implies the exchange of items of comparable value.
The dinar and dirham were the two most common currencies in Islam-dominated areas. The Byzantine dinar is a gold coin weighing approximately 5 grams. The dirham, on the other hand, is a Persian silver currency. Their value was determined by their metallic content .
However, the value of the dinar and dirham fluctuated over time due to fluctuations in supply and demand for silver and gold. Despite this, Islamic countries continued to use the currencies, adhering to Islam's anti-interest policy. They eventually had to switch to fiat currencies, despite the fact that they were just papers with no intrinsic value. Scholars sanctioned fiat currencies due to their social acceptance, and they became widespread in Islamic countries.
What about cryptocurrencies?
Cryptocurrencies are simply digitised currencies. It uses blockchain technology to encrypt data in order to facilitate value transactions without forgeries or double-spending. This is consistent with the Islamic perspective on currency in general. Only this time, instead of paper, the data is stored in a decentralised digital ledger.
However, there is a catch.
According to Imam Ibn Taymiyyah, ''When currencies and money are inter-traded with the intention of investment and profit, it opposes the very purposes of money and Thamaniyyah.''
Because of this, Islam forbids interest. This is also why many people argue that bitcoin violates Islamic finance principles.
Bitcoin, like most cryptocurrencies, is notoriously volatile. This generates both exorbitant profits and losses for the holder. Under the current circumstances, it functions as an investment tool rather than a currency, lending support to the counter-narrative.
Bitcoin and Sharia Finance Rules - KEY PRINCIPLES
The main features of Islamic finance that need to be considered when it comes to bitcoin are:
1. Interest (riba) - interest is forbidden in Islam. 2. Speculation (maysir) - speculative investment is considered gambling and is not permitted.
3. Profit-loss sharing - According to Islamic finance, parties to a transaction must share the risks and rewards.
4. No excessive risk (gharar) - Islamic finance prohibits transactions that are uncertain or involve excessive risk.
5. Use of trade and commerce (al bai')
Examining the Islamic finance principles mentioned above, it is clear that digital assets have a place in an Islamic finance portfolio. Bitcoin does not have an interest component, nor does it provide one party with disproportionate profits or losses, or with disproportionate risk.
The demand for Sharia-compliant coins is growing as the world of cryptocurrencies evolves. Caizcoin, the first fully Sharia compliant digital coin, was recently developed and marketed in Germany. It is likely that more digital currencies will emerge that meet all of the requirements of Islamic finance principles.
CONCLUSION:
Most Islamic jurists believe that the concepts of crypto halal and crypto haram will not be easily resolved. Some rules consider cryptocurrency to be halal, while others consider it to be haram. However, the majority of scholars believe that trading in cryptocurrency is haram because it has no intrinsic value. It has no economic value, and it does not return any kind of origin. It has not been adopted by any legitimate government entity, and its value is solely determined by market fluctuations. Most aspects and features of bitcoin or other cryptocurrencies are haram, and they are used for gambling and other crypto haram activities. Cryptocurrency and many emerging areas of Islamic banking and finance are covered in *** *****'s diploma Islamic banking and online Islamic finance courses.
