Is Cryptocurrency Halal or Haram? A Shariah analysis

Introduction

What is Blockchain?

What are Cryptocurrencies?

  • It is lawful and permissible in the Shariah. Alcohol or pigs aren’t permissible and are not regarded as Mal.
  • It can be owed or possessed. Fishes in the ocean, birds in the air aren’t considered Mal as well.
  • It is beneficial.
  • It is valuable and treated as such by people and is compensated for if destroyed.

Are cryptocurrencies Mal?

Is cryptocurrency an asset/commodity or a currency?

  • Serve as a medium of exchange
  • Measure of value
  • Generally accepted
  • Unit of account
  • High volatility (prone to crash and huge fluctuations in price),
  • online heists of millions,
  • not an effective means of payment.
  • However, as the industry matures, there would be a reduction in these and set them as better virtual currencies.

Why are Cryptocurrencies regarded Haram by some scholars?

  • no cryptocurrency is a legal tender
  • the issuers are unknown
  • no central authorities or government are backing it
  • they are highly speculative and not stable
  • they are easily used for money and drug laundering, and illegal purposes
  • All transactions are transparent. There is no hidden movement of currencies. All transactions made are available on the blockchain for everybody to see. This is very useful in accounting-forensics, and so on.
  • The blockchain isn’t hackable. The security of the blockchain is secured by every node(computer) on the network. Therefore there is no single point of failure, unlike centralised systems that can be hacked. See Bangladesh bank robbery.
  • Cryptocurrencies serve as a store of value. As seen before in history, governments and central banks destroy wealth through inflation. Examples are Weimar Germany in 1923, Greece in 1944, Hungary in 1946, Yugoslavia in 1994, Indonesia in 1999, and Zimbabwe in 2008. And more recently, Venezuela. Venezuelans have turned to bitcoin to store their money as inflation is estimated to run at 500%.
    Venezuelans have since traded other virtual currencies, such as selling in-game gold to other players and using it to pay for their basic amenities.

Conclusion

References

  1. Prof. Abdul Majeed Alaro (FIFP, MCIARB, CIAE), CRYPTOCURRENCY: An Islamic Law Perspective
  2. Mufti Muhammad Abu-Bakar, Shariah Analysis of Bitcoin, Cryptocurrency, and Blockchain
  3. Mufti Abdul Kadir Barkatulla, How Does Sharia View Crypto-Currencies?
  4. Fatwa: Is Bitcoin Halal or Haram?
  5. Scholars Who Say Cryptocurrency is Haram and Those who say its Halal
  6. Shariyah Review Bureau, The Shariah factor in Cryptocurrencies and Tokens
  7. Ibrahim Khan,Is bitcoin halal? What about other cryptocurrencies?
  8. Jake Frankenfield, Investopedia, Virtual Currency

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Muhammad Tahir

Muhammad Tahir

a foodie

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