Islam is reported to be the fastest growing religion in the world with an estimated 1.5 billion Muslims in the world; Muslims just about make up for well over 21% of the entire world population. Any community this big must have it sets of rules that help to, guide and instruct its members and certainly, Islam provides all Muslims with fundamental principles for conduct of their everyday lives.
The Islamic canonical law popularly known as the Sharia law is the religious law that forms part of the Islamic tradition. It is gotten from the religious precepts of the Quran and the Hadith. The Islamic Canonical Law, prohibits certain activities such as; the acceptance of specific interests which are considered usury (Riba) or investments in businesses which are contrary. Whether or not cryptocurrency is in accordance with Sharia laws is a topic that has caused no Small controversy most importantly, amongst Islamic scholars.
Is Bitcoin acceptable?
Some Islamic scholars have said that “as a payment network, Bitcoin is halal. And in actual facts, Bitcoin goes far beyond what most conventional closed banking networks offer. And very much unlike conventional bank networks which used private ledgers where there’s no guarantee that the originator actually owns the underlying assets, Bitcoin guarantees with mathematical certainty that the originator of the transfer owns the underlying assets. Conventional banks operate using the principle of fractional reserve, which is prohibited in Islam. In Islam (Sharia Law) theres the ‘Gharar concept’ which implies that contracts should not be unnecessarily uncertain.” In April 2018, a Muslim expert by the name Muhammad Abu Bakar analysed the possibilities of bitcoin being acceptable (Halal) or forbidden (Haram) with respect to the Sharia Law. Muhammad Bakar’s report posited that Bitcoin was indeed as far as Muslim users have a certain intent when they buy the cryptocurrency; “crypto-traders should not buy or purchase cryptocurrencies for investment purposes,” he stated. “Rather, it is more advisable to utilize cryptocurrency networks as a kind of payment system especially in the situations where cryptocurrency networks offer specific benefits and advantages over conventional financial exchange systems.”
So in very simple terms, the “virtual currency” philosophy and use of cryptocurrencies are acceptable (Halal) under the Islamic canonical law (Sharia law) but the idea of buying and holding cryptocurrencies for investment or in a bid to invest, might not be acceptable (Haram).
Following the publishing of Muhammad Abu Bakar’s report on the acceptability or rejection of cryptocurrencies by the Sharia Law; the price of bitcoin rose to roughly about a thousand dollars ($1000). Lots of media reports attributed the price bump to an influx of new, Muslim users.
Keeping in mind how vastly different virtual currencies are from government controlled coins and paper notes I think its indeed a thing of reason to tackle issues like this. Before the report by Muhammad Abu Bakar, an earlier report compared bitcoin to precious metals. We know that digital currency’s biggest challenge is the fact that it does not have any physical representation but even at that, bitcoin can be proved to exist when needed; although not tangibly but cryptocurrencies are of value to diverse sets of persons from different places and its value to different sets of persons gives it a market and consequently, value.
Another condition for a currency to he acceptable by Sharia law, the report stated; was that the currency had to have intrinsic value and cryptocurrencies have fit in those shoes pretty well. Sighting bitcoin as an example, the report stated that it was almost impossible to duplicate or tamper with the worth of cryptocurrencies and in addition to this, the cryptocurrency, bitcoin, is generated through a process known as “mining” and this requires a computation power in the form of “proof-of-work” and this gives bitcoin its intrinsic value. Also worthy of mention is the fact that cryptocurreny (bitcoin) is recognized as a legal currency in Germany and this therefore qualifies cryptocurrency as Islamic money in that country.
“Bitcoin is permissible in general as long as bitcoin is treated as valuable by market prices on global exchanges and it is accepted for payment by a wide variety of merchants. Moreover, lots of private individuals now accept bitcoin as a medium of exchange in their private transactions.” another study stated.