Cryptocurrency: The never ending debate of halal or haram
Recently with the crashing of the worldwide cryptocurrency market, the debate has been initiated in our Ummah. Is Cryptocurrency and trading in crypto considered haram in Islam?
To be honest, Cryptocurrency’s relation with Islam can become a little complicated at times. In Islamic countries, the use of crypto lies in the grey region of Shariah law.
As we know, the Shariah acts as a list of duties that should be fulfilled by a true Muslim. The laws also include penalties for those who break the law. According to Shariah, everything is either halal or haram. For true Muslims, these two aspects are applied to all facets of life. Therefore the above-written question is actually a pretty serious one.
Halal and Haram at the same time?
After a long time of debate, an analysis of cryptocurrency by Shariah laws was done by some certified Muslim legal experts. The name of the paper is ‘Shariah Analysis of Cryptocurrency’.
According to this detailed paper and a few other papers, there are instances where crypto can be considered halal. It is said to be halal when there is an intent to use the payment system angle. In this, cryptocurrency has a number of advantages over traditional methods.
But, when it comes to investment, crypto is definitely haram. But, this also has a grey area. Some religious authorities allowed investment in cryptos. Like Malaysian religious authorities announced the permissibility of cryptocurrency as halal. Many religious scholars in Malaysia say that crypto is a venture worth investing in.
Similarly, the Turkish Government’s Religious wing issued a similar edict that bitcoin is haram based on excessive uncertainty and the potential to be abused by criminal elements.
The Grand Mufti of Egypt, Shaykh Shawki Allam, views bitcoin as haram.
What are the reasons for cryptocurrency becoming halal and haram at the same time?
There are a number of reasons behind this.
1. It is important to note that according to Shariah, bitcoin and other cryptocurrency is a ‘customary money.’ It is defined as anything that obtains the status of being called money either by society’s acceptance of government laws. Like, in Germany, the use of bitcoin is legalized. So, it qualifies as Islamic money in Germany. In some countries, where the user is still in the legal grey area but is still accepted as payment, there it can also qualify as Islamic money.
2. Some Islamic scholars say that crypto is not permissible as has the potential for being used in illegal activities.
3. Another reason why cryptocurrencies remain in the grey area is due to the uncertainty of it all. The volatility is a big issue, markets face extreme ups and downs. Investors are always reminded to take caution with these investments.
4. Moreover, there is the issue of initial coin offerings (ICO) and the way they affect cryptocurrencies in terms of being halal and haram. The shariah prioritizes preserving and protecting one’s wealth. In regards to Ico’s, there is a lack of clarity about what investors are buying and the rights they have as investors. Also, the ICO’s have gharar.
5. Bitcoin is permissible for some as it is valuable and available on currency exchanges. It is also a medium of payment accepted by a number of shops and platforms today.
It can be said that the avenue of Cryptocurrency is very new to the Muslim ummah. There is a lot to learn yet. And the aspect of it being haram and halal, for now, is totally dependent on the government laws. The validation of cryptocurrency is still very open to interpretation.