Islamic Perspective – Crypto Currency

Islamic Perspective – Crypto Currency

The issue of cryptocurrency as money is an interesting issue. This is because cryptocurrency was based on cryptography in the financial system. The value calculation of cryptocurrency is also based on an algorithm in the system of the blockchain. The blockchain is claimed to have some advantages as it is a safe, undeleted, complicated, and efficient system. To meet the criteria of a tool of exchange or money in Islamic teaching, money has to be stable, safe, and effective. Cryptocurrency may have some money characteristics, but it needs further research to see the characteristic of this “money.” In general, there are three groups regarding cryptocurrency: the cons, the pros, and the neutral group.

Cons group Bakar et al. (2017) found three conditions excluding cryptocurrency from the category of money. It is characterized by (a) no intrinsic value, (b) has an anonymous holder, and (c) it is unstable. A similar issue was proposed by Meera (2018), who suggested that “Islamic” money should be backed by an asset. Therefore, cryptocurrency does not fulfill that requirement. He suggested that to meet the Islamic principles, cryptocurrency should be backed by a real asset. Nurhisam (2017) stated that Bitcoin is not permissible as money because it is not under government regulation and the risks and weaknesses are greater than the benefits. He was concerned with the legality of money issuance by government and uncontrollable issues.

Pros group Oziev and Yandiev (2018) have identified the conformity of Bitcoin to Islamic teaching and found that it has no emitter, monetary control, or transparency. Some Islamic scholars also have different opinions on this issue. The Shariah Review Bereau (2018) identifies that cryptocurrency and tokens are permissible as money as they meet habits of exchange transactions besides other requirements such as maal (property), manfa’ah (usufruct), haqq (right), and dayn (liability). Furthermore, there are some differences between coins and tokens. Tokens are also varied but the function as a medium of exchange is similar. Amalin (2018) opined that cryptocurrency fulfilled for money exchange it is transparent and clear regulation for trading. It does not contain usury (riba), which is banned in Islamic teaching. Similar reasons proposed by Zain (2018), he also stated that Bitcoin can be used for illegal transactions due to unregulated by central bank.

Neutral group Azulbaidi and Abdullah (2017) argue that the issue of digital money needs further study to see the suitability of Islamic teaching. This opinion was similar to that of Asif (2018), who stated that the system is not against Islamic teaching, but is not for the derivatives. Then, similar issues were raised by Bangash (2017). He stated that old Islamic scholars (such as Ibn Taymiyyah) did not specifically elaborate on the requirement of money. They only highlighted the behavior of users. Money should not be traded like a commodity, otherwise, it will cause a crisis (as stated by Imam Ibn al-Qayyim). Meanwhile, Imam Abu Hanifa and Imam Abu Yusuf permitted treating money as the commodity with some restrictions. He also concerned with the issue of safety and the unreal economy of Bitcoin. Adam (2017) identified three requirements for money. They are (a) mal  (wealth) (b) taqawwum (legal value) and (c) thamaniyyah (monetary usage). Bitcoin may fulfill points a and b as Bitcoin can have a value of store and is lawful based on Islamic teaching. However, it fails to be monetary usage as it has such risks as volatility, circulation, and transparency. All kinds of coins of cryptocurrency and tokens may be in line with Islamic teaching but not buy-back tokens as they must have separate contracts (Adam, 2018). Another issue is that no more Bitcoins will be created after 2140 when 21 million Bitcoins have been created (Koropenko, 2018). Money should be able to cover any transactions as they are available for the transaction.