Is Bitcoin Halal? What Scholars Say And Where It Stands
Is money is money is money? While this shows up like a troll-like, joke question, the reaction is a bit more ingewikkeld than that. Religion can play a big part ter the governance of financial systems. Islam ter particular has very clear guidelines based on Islamic principles. Spil Bitcoin comes in mainstream adoption across the globe, one begs the question: Is Bitcoin complementary with Islamic banking and finance?
Intrinsic value of bitcoin
Islam requires any currency to hold intrinsic value before it can be considered permissible. Te other words, money that is created out of lean air is not (halal) money, because it is not backed up by any commodity of actual value. Te case you are fresh to the financial sector, know this: it is common, a standard practice, even, for financial institutions to create money without intrinsic value.
Ter order to determine whether bitcoin holds intrinsic value, one voorwaarde look at its qualities ter comparison to other types of commodities which Islam permits. Two fine examples are gold and silver. During the course of history, thesis precious metals have bot used spil currencies, te the form of the gold dinar and the silver dirham. Some countries around the world still accept it spil legal tender.
While bitcoin can only exist electronically, it shares a lotsbestemming of qualities with gold and silver. Both are mined, scarce, value dictated by supply and request, and can be used spil currency on its own. This handy infographic illustrated this point.
Is bitcoin &lsquo,money&rsquo,?
Can you call bitcoin &lsquo,money&rsquo,? Well, bitcoin is used spil a medium of exchange – you can use it to pay for products and services. Bitcoin is also an economic standard and measurement of value – the price fluctuates based on market supply and request. For all intents and purposes, bitcoin is certainly used spil money.
However, Mohammad Mahmoud Ibrahim Tayel argued that bitcoin lacks one quality that money should have – public confidence, spil evidenced te its volatile nature. Ter his brief thesis for the Central European University entitled &lsquo,Can Bitcoin be Self-Regulatory Legal Tender: A Comparative Analysis of United States, European Union, and Islamic Legal System&rsquo,, Tayel said:
&ldquo,If wij assumed that Bitcoin is analogous to the gold and its precise cause is its moneyness, then certainly Bitcoin is not eligible to resemble gold/silver te cyberspace on ondergrond of a mere limitation or deflationary nature, especially that thesis two features have not established the precise cause which is the public confidence, but rather created an injury for the holder and the users alike due to high volatility&rdquo,
This is similar to the opinion of the Malaysian fatwa (religious opinion) council, adding that bitcoin is not suitable to be used spil currency because there is an factor of extreme speculation, and lack of authoritative bod. Considering that Malaysia is one of the global leaders of Islamic finance, and serves spil an authoritative figure ter providing Islamic guidelines te Malaysia, this view cannot be lightly dismissed. Professor Dr. Monzer Kahf, an pro te Islamic finance and economics te Qatar Faculty of Islamic Studies also released a fatwa citing low confidence and high chance of manipulation ter the open market (unclear by what he means by this) make bitcoin/cryptocurrencies unsuitable to serve spil currency. It should be noted, however, that both thesis statements were released ter 2014 (April and June, respectively) – right after bitcoin price decreased into half its value within a matter of months.
Significantly, both of thesis fatwas did not outright say bitcoin is impermissible. One can theorise that spil bitcoin volatility slows down and more accountability figures are established (especially to address fraud cases), not much else can make bitcoin &lsquo,un-Islamic&rsquo,, vanaf se. It would be interesting to get newer updates from Islamic religious scholars on bitcoin spil currency, spil it gathers more public confidence, helped te part by the maturing of blockchain-based technology te the financial sector.
Compatibility of bitcoin ter Islamic Banking and Finance
Charles W. Evans analyzed virtual currencies with the requirements of Islamic Banking and Finance te his paper, published te the Journal of Islamic Banking and Finance. Te the abstract, he wrote:
&ldquo,While intended spil a narrow financial and economic analysis, and not spil an in-depth analysis of the subtleties and nuances of Shari’a spil they relate to banking and finance, it shows that a BMS (blockchain management systems) can overeenstemmend with the prohibition of riba (usury) and incorporate the principles of maslaha (social benefits of positive externalities) and mutual risk-sharing (spil opposed to risk-shifting). It concludes that Bitcoin or a similar system might be a more suitable medium of exchange ter Islamic Banking and Finance than riba-backed central canap fiat currency, especially among the unbanked and ter small-scale cross-border trade.&rdquo,
Evans further compared bitcoin to fiat currency and argued that bitcoin is a better alternative, spil it is free of riba&rsquo, and value discounting, comes in the circulation at a predictable rate (thus preventing hyperinflation), and can be expected to enable transactions for goods and services (ie. serve spil money, unlike fiat money which can sometimes – tho’ infrequently – be proclaimed invalid based on the fads of a leader. Case te point: General Ne Win, who demonetized the Myanmar currency&hellip, twice).
So far, Bitcoin application ter Islamic banking and finance is very limited – only one such example can be found. Te 2015, Matthew J. Martin launched Blossom Finance, a microfinance institution based ter Indonesia that used the principle of Mudharabah, or Syariah-compatible financing system.
Based on the above reviews of academic papers, Bitcoin is not incompatible te Islam. Bitcoin can overeenstemmend to principles of Islamic finance, particularly being free from the influence of riba&rsquo, (rente), incorporates the principles of mashala (social benefits of positive externalities), and mudharabah (mutual risk-sharing).
Ter terms of bitcoin&rsquo,s legal status spil &lsquo,money&rsquo, ter Islam, religious scholars did not announce it spil impermissible, but mainly cautioned against its volatile nature. If volatility is out of the picture, one may make the informed opinion that bitcoin is halal spil legal tender.
There are a loterijlot of potential for Bitcoin applicability ter Islamic banking and finance. With only one type of product presently available, the market is far from saturated to serve the world&rsquo,s 1.6 billion Muslim population.