To understand the underlying rationale behind the acceptance of digital currencies in the Islamic world, we must understand the history of currencies in Islam and what makes a business transaction permissible or impermissible under Sharia (Islamic law). ).
How does Islam view money?
definition of currency in Islam
history of coins in Islam
many coins were used before the 7th century AD. Even after the origin of Islam, people used many forms of currency to trade in markets. however, the two currencies that became the most popular and widespread during the Islamic era were the dinar & dirham.
Reading: Is bitcoin halal mufti menk
din
The Byzantine dinar (gold), which weighed a ‘mithqal’ (a unit of weight equal to approximately 5 grams), was the money used by people throughout the early Islamic era. Even though it was the official money at the time, the government had little control over how people used it for transactions due to diverse demographics, unique transaction methods, and other factors at play.
dirham
The Persian (Sassanid) currency, the dirham, was used both before and after the arrival of Islam in the Middle East. ali (r.a) issued new coins with the name of the islamic government inscribed on them during his reign as the fourth caliph of islam. In the Kufic script, certain Qur’anic phrases, the year, and the location of minting were printed on both sides of dirhams and dinars.
what can we learn from this?
The history of currency in Islam has been based primarily on physical assets, such as gold and gold. silver. Muslims depended on dirhams and dinars to purchase goods and/or services. Over time, the exchange ratio between the dinar and the dirham was altered by Muslim countries, however, the principles of Islamic sharia, such as the prohibition of interest during trade and the misuse of currencies in the markets for influence the price of the dinar or the dirham, among other aspects. , were strictly maintained.
a) the problem of counting and exchanging silver and gold coins
b) the natural value of these coins was sometimes compromised by dishonest people.
Gradually, the Islamic world adopted fiat currencies and the field of Islamic finance took root.
types of money in Islam
Two types of money are generally considered in Islam. one is “natural money” and the other is “customary money”.
Anything that has an intrinsic monetary value can be called natural money. A great example of this would be gold and silver or any other form of precious metal.
See also: Jordan Peterson At Bitcoin 2022 – Bitcoin Magazine – Bitcoin News, Articles and Expert Insights
On the other hand, traditional money can be divided into two main types.
The first is fiat money, which we are all well aware of. fiat money has no intrinsic value, meaning that it has no independent value, but instead has to rely on an outside authority, in this case, the government to authorize it as legal tender.
The second type of common money is anything related to a product or a commodity and also has some monetary value in the eyes of the public. great examples of such money include barley, salt, rice, etc.
How is a tradable item considered legitimate in Islam?
Different schools of thought have weighed in on this issue.
‘’when currencies and money are exchanged with the intention of investing and making a profit, it defeats the very purposes of money and thamaniyyah’’.
Most of the principles on this matter remain the same among the major schools of thought. In general, three conditions must be met for a traded item to be acceptable in Islam:
- the item being traded must have some form of monetary value, known as ‘thamaniyyah’ in Arabic. Monetary value, in this case, would be defined by a) independent price and value plus acceptance and stability and b) a primary point reference that helps record prices and manage debt; in other words, a proper transaction mechanism.
- the item must have some kind of legal value, known as ‘taqawwum’ in Arabic. refers to something valuable and also ‘halal’ in Islamic sharia.
- The third and final condition is that the item must be labelled as property, which is known as ‘maal’ in Arabic. property in Islam is defines as something desirable, created for the welfare of humans, can be stored and retrieved for transactions during a given period.
what is a cryptocurrency?
bitcoin’s rise to power
why is accepting bitcoin a problem for muslims?
allah says in the quran:
“so ask those who know the scriptures, if you don’t know them”
– quran – chapter: an-nahl, verse: 43
It is a common practice among Muslims to refer every doubtful matter to scholars who provide a decision (‘fatwa’ in Arabic) based on sharia. When it comes to bitcoin and other cryptocurrencies, scholarly opinions are divided. some say cryptocurrencies are ‘halal’ meaning they are allowed, others consider them ‘haram’ meaning they are not allowed, and there are some academics who are in between and have chosen to take more time to think in the nature of cryptocurrencies to declare them haram. or halal.
Opinions of Islamic scholars on the legitimacy of cryptocurrencies
See also: 10 Best Crypto Debit Cards for 2022 • Benzinga
There are no official rules (yet) on whether Muslims should invest in bitcoin or refrain from doing so. This would be the responsibility of the legislators who formalized the religious doctrines of Islam, but that work has not yet been done. despite this, various Islamic scholars have opined on how the law relates to bitcoin.
scholars who believe that cryptocurrency is haram (not permissible)
1. sheikh shawki allam – grand mufti of egypt
2. shaykh haitham al-haddad – british islamic tv personality & Islamic jurist
3. Sheikh Assim Al-Hakeem – Saudi Arabian Scholar & Islamic TV personality
scholars who call cryptocurrencies halal (permissible)
1. Maulana Jamal Ahmed & mufti faraz adam – scholars at islamqa.org
2. mufti abdul qadir barakatullah – sharia scholar
3. mufti muhammad abu bakar – scholar of sharia & mufti
scholars deferring their opinion to a later time
1. mufti taqi usmani – pioneer in the field of islamic finance
2. dr ziyaad mahomed – chairman of the sharia committee, hsbc
bitcoin can be completely halal, yes?
While scholars are divided on the permissibility of bitcoin and other cryptocurrencies, most of their concerns can be put to rest and a consensus can be reached on the state of crypto assets. for it to happen here are the three conditions, bitcoin must meet these conditions:
academic consensus on haram uses of bitcoin & other cryptocurrencies
Although most cryptocurrency use cases are a point of contention among scholars, there are some common ones that all schools of Islamic thought consider inadmissible. the reason is that these problems come from the main sources i.e. the quran and the sunnah (sayings of the prophet muhammad ﷺ)
1. is futures trading halal?
gambling is categorically prohibited in islam. Allah says in the Quran:
– quran – chapter: al-maidah, verse: 90
According to Islam, the wisdom behind the prohibition of gambling is based on several reasons. the main two include:
- depend on the opportunity to earn money that can be detrimental to the person in case of loss
- promote greed for wealth by earning quick money in a short period, as well as taking someone’s money as “gambling winnings”.
2. Is cryptocurrency staking halal?
interest is also not allowed in islam. Allah says in the Quran:
– quran – chapter: al-baqarah, verse: 275
in islam, interest (known as ‘riba’ in sharia) is defined by this hadith of the prophet muhammad ﷺ:
– hadith book – sahih bukhari – volume 5, book 59, number 426
Final thoughts: Cryptocurrencies are a controversial topic in the Islamic world
It is quite clear that investing in cryptocurrencies occupies a debatable position in Islamic finance. While many Islamic scholars have accepted that digital currencies may be the future, the conditions set by Sharia prevent them from taking a clear stance on this matter. however, when things become clearer later on, it is expected that many academics will come forward and present an official stance on the use of cryptocurrencies.
See also: Does ARKK hold DocuSign? [Solved]
