Egypt’s top Islamic cleric has issued a fatwa against bitcoin
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The answer to the question can seem obvious to many. One will, therefore, need to ask herself whether Bitcoin is compatible and complementary with Islamic finance and banking law. We will explore every angle of Bitcoin with regard to Sharia laws. Sharia law says that a currency must have an intrinsic value. This means that money must have some use before it can be considered permissible. Any currency cannot be halal just because it is considered valuable by people.
There are certain instances when financial institutions create currencies which are without intrinsic value. A currency must be backed by a commodity of actual value. The Islam law also forbids the charging of interest and the profiting from the interest which is paid out of loans. Islam does not believe money is a commodity but rather a means of exchange. A currency is considered halal permissible if it is deflationary in nature. This means that a currency should resist inflation and should command a steady market price.
The Islamic law further forbids the use of a currency in haram illegal activities such as alcohol, tobacco, pork, and prostitution. A currency which is based on interest and debt is called Fiat. Such a currency is haram. A transaction becomes Fiat if one party to the transaction is bound to gain unfairly more than the other.
A transaction should be done on the spot and should be void of any speculation. It is, therefore, haram to trade currencies for speculative purposes. Given that Bitcoin comes about because of a mining process, it can be compared to the olden day currencies which were physically mined.
Its circulation in the future is predetermined. Miners get a proportionate value of the currency when they mine it. This serves to authenticate the mining process of the currency.
Some people might argue that Bitcoin is not tangible a requirement for any currency under the Sharia law.
By extension, this makes it halal. There are some Islamic financial experts and Islam bodies who argue that Bitcoin is not really a currency like the rest. According to the Malaysian Fatwa Council, Bitcoin is not eligible to resemble silver or gold in the cyberspace on the basis of mere limitation or deflationary nature. Monzer Kahf, an expert in Islamic finance in Qatar released a fatwa citing high chance of manipulation in the market and also low confidence in the currency.
It is important to note that these opinions even though from authoritative persons were given in when the Bitcoin was not doing very well. A lot has changed since then.
Also noteworthy is that they did not declare Bitcoin as impermissible. When one looks into the Blockchain Management System BMS of the Bitcoin, it is easy to see how it conforms to the prohibition of riba usury.
The BMS also incorporates the principles of maslaha social benefits of positive externalities. Because of the growing demand for the cryptocurrencymany financial institutions in the Islamic countries are embracing BMS.
According to many academic papers, reviews, and expert opinions, Bitcoin is not incompatible with Islam. It is free from riba and it incorporates the principles of maslaha.
It is definitely halal. Stay up to date with the financial markets everywhere you go. Does Bitcoin have intrinsic value? Bitcoin against Fiat currency A currency which is based on interest and debt is called Fiat. What are the Bitcoin critics saying? In conclusion When one looks into the Blockchain Management System BMS of the Bitcoin, it is easy to see how it conforms to the prohibition of riba usury.
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