A new ruling by Indonesia’s National Ulema Council (MUI) has judged that cryptocurrencies are haram, or banned, on the grounds that it is associated with uncertainty, unlawful betting and harm.
Judging what is halal – i.e. permissible – or haram, that which is not permitted for the Islamic faithful – is tricky, even for Islamic scholars. According to professor Abdulrazaq Alaro, Head of Islamic Law at the University of Ilorin in Nigeria, it is haram to trade in cryptocurrency as it has no intrinsic value, there is high volatility and excessive uncertainty, and a high risk that is akin to gambling; trading in cryptocurrencies is just like a bubble that had the potential of bursting. Moreover, cryptos are used for illicit activities, are plagued by ambiguity and anonymity, and they are not issued/regulated by any government or constituted Shariah (or religious) authority. The Grand Mufti of Egypt – Shaykh Shawki Allam – agrees, as does Shaykh Haitham al-Haddad, chair of the fatwa committee of the Islamic Council of Europe. Other Muslim scholars disagree. The United Arab Emirates has allowed crypto trading in Dubai’s free zone; Bahrain has allowed crypto assets since 2019.
With about a quarter of the world’s population being Muslim, and the rapid growth of cryptocurrencies, deciding whether they and their use is halal or haram is clearly vital. Asrorun Niam Sholeh, head of religious decrees with Indonesia’s MUI, has said that if cryptocurrency as a commodity or digital asset can abide by Shariah tenets and can show a clear benefit, then it can be traded. Crypto transactions amounted to 370 trillion rupiah ($26 billion) in the first five months of the year in Indonesia. Indonesia’s central bank is considering the adoption of a central bank digital currency.
The MUI’s decision doesn’t mean all cryptocurrency trading will be stopped in Indonesia, but it could deter Muslims from investing in the assets and make local institutions reconsider issuing crypto assets.
What of gold and Islam? Muslim men it seems are not allowed to wear gold, although Muslim women are. Under Shariah law gold is generally considered a ‘Ribawi’ item, meaning the world’s 1.8 billion Muslims can’t trade it for future value, or for speculation. But they can, however, use gold as a currency; and Muslim women can own and wear gold jewelry.
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