Cryptocurrencies: the most pro-Islamic payment instrument or haram?
On January 3, 2018, Egypt's supreme mufti, Shawki Allam, published a fatwa to completely ban the use of bitcoin by Egyptians. According to the spiritual leader, the cryptocurrency cannot be used for monetary exchange and also carries the threat of undermining the state's economic systems.
Shawki Allam's opinion caused a great storm of discussion, but Islamic experts refrained from harsh assessments. Religious scholars have not yet reached a consensus on cryptocurrencies. Discussions on the issue continue
Islamic finance experts, such as Ziyat Magomed, deputy dean of business education and e-learning at the International Islamic Finance Educational Center (INCEIF), express a more democratic attitude toward bitcoin, drawing analogies to the emergence of paper money in the economy.
Ziyat Mohammed, referring to the norms of Shariah, says that for something to be recognized as a currency, public consent is necessary. In fact, if Muslims agree to use cryptocurrency as money - it will become money.
What does Islam say about money?
According to Shariah, money cannot be a resource that is easily extracted. With universal access to means of payment there could be an economic collapse. For this reason, Muslims are divided.
On the one hand we understand that anyone can become a miner. However, without buying equipment, this process will not bring a cent. Mining by proof-of-work algorithms involves a certain amount of hardware, which is indirectly taken into account by the market when forming the current market value of a digital coin.
But the receipt of income from mining like a proof of stake has the signs of a riba (making a profit in the form of interest). However, this issue cannot be unequivocally closed, because in this case the miner acts as a guarantor of the means of payment, rather than a usurer.
Islamic law makes it compulsory to prove the existence of money. Any cryptocurrency, first of all, is a computer code. All information about transactions made within the network of a particular cryptocurrency is recorded. People can see not only the number of coins in their wallet, but also the availability of funds from their counterparties, if they know their identifier.
But various ICO projects may not pass the Shariah check because of poor security as well as unclear prospects. Many of them even have signs of pyramid schemes promising hundreds of percent profit.
Money and Maysir
Perhaps the most acute point in the question of the acceptability of the use of cryptocurrencies by Muslims is their high volatility. According to some religious leaders, sharp jumps in exchange rates are indicative of maysir.
But what about the Turkish lira, which has halved in a short period of time against the U.S. dollar? Volatility - the normal process of today's actively developing products. For example, Apple's stock price rose 25% during 2018, and Visa's rose 29%.
There are cryptocurrencies with a high degree of reliability, which has been proven by several years of successful operation. These coins can be used to pay for goods or services. The number of businesses that accept these assets to pay for their business results is increasing every day.
Cryptocurrencies and the state
Until recently, currency issuance was entirely in the hands of national governments. Only central banks could inject additional money into the economy.
The lack of connection between the state and cryptocurrencies is recognized by some experts as unacceptable for Muslims. At the same time, popular cryptocurrencies, such as bitcoin, bitcoin cash, litecoin, etc., have limited issuance volume by source code.
Due to their specific nature, cryptoassets are not subject to inflation or central bank interest rates. And this is most in line with Islamic law, which condemns bank interest.
Individual segments of the crypto market have already begun to build ties with the government. The example of the Dubai government, which created the cryptocurrency emCash, has already had an impact on other countries, and Japanese and American citizens are already paying taxes on income generated in cryptocurrencies. South Korea, Russia and many other countries are actively working in this direction.
To summarize
It is impossible to unambiguously characterize the entire digital cash market in terms of Shariah. However, the leading cryptocurrencies not only do not contradict the basic provisions of religious norms, but also turn out to be even more suitable for a Muslim than classical fiat currency.