Are Cryptocurrencies ḥalāl? On the Sharia-Compliancy of Blockchain-Based Fintech (original) (raw)

A Critical Analysis of Cryptocurrencies from an Islamic Jurisprudence Perspective

Turkish Journal of Islamic Economics, 2021

Money has changed its form many times throughout history and has begun to turn into digital form as an alternative to the current situation. The newest type of money form is a cryptocurrency which has been developed independently of any central authority. The usage areas of cryptocurrencies are increasing day by day. Bitcoin is one of the most accepted crypto-currencies in the world, which was issued in 2009, dominated the cryptocurrency market and attracted the attention of large masses with its rapid rise in value. Cryptocurrency market size exceeded $800 billion in early 2018. Most of the cryptocurrency users want to get a share from value increases of cryptocurrencies. However, these behaviours are not in line with the philosophy of cryptocurrencies. Cryptocurrencies also cause problems of legitimacy for Muslim users in terms of Islamic Jurisprudence (Fiqh). Although many religious institutions and Islamic scholars say that cryptocurrencies are haram, several Islamic scholars co...

The Halal and Haram Aspects of Cryptocurrencies in Islam

This paper takes into view the conditions that render an investment or transaction haram in Islam and relates them to cryptocurrencies through a literature research methodology. Furthermore, elements that exist in the cryptocurrency ecosystem such as tokens, initial coin offerings (ICOs) and cryptocurrency derivatives are assessed to check as to whether they are compatible with Islam. The difference between Bitcoin and its alternatives is also recognized by analyzing their underlying technology and how they could be a major tool in defining whether or not a cryptocurrency falls in the Islamic permissibility criteria. It concludes that although the technology of cryptocurrencies in itself is Halal; different aspects contribute in deciding whether the specific digital currency in question is Halal or Haram. Future research is needed on a couple of key issues related to Proof of Stake protocol which has been discussed.

ISLAMIC PERSPECTIVE OF CRYPTOCURRENCY WITH SPECIAL FOCUS ON HANAFI JURISPRUDENCE

DARUL HUDA ISLAMIC UNIVERSITY, 2022

ABSTRACT Money has undergone numerous form changes throughout history, and as a replacement for the current system, it has started to take on a digital form. The most recent kind of money is a cryptocurrency, which was created decentralized from any central authority. The sectors in which bitcoins are used are expanding daily. One of the most popular cryptocurrencies in the world, Bitcoin was introduced in 2009, where it quickly gained popularity and dominated the cryptocurrency industry. In early 2018, the cryptocurrency market was worth more than 800billionandnowitworthmorethan800 billion and now it worth more than 800billionandnowitworthmorethan3 trillion. The majority of cryptocurrency users seek to benefit from rising cryptocurrency values. These actions, however, do not adhere to the principles of cryptocurrencies. In terms of Islamic law, cryptocurrencies also present issues with legitimacy for users who are Muslims (Fiqh). Despite the claims of many religious organisations and Islamic academics, some Islamic scholars believe that bitcoins are halal, while others believe as haram. Our study uses current literature and fatwas to conduct a multidimensional analysis of the legitimacy of cryptocurrencies in terms of hanafi fiqh .We also try to identify the characteristics of Islamic cryptocurrency. Keywords: Cryptocurrencies, Bitcoin, Islam, Islamic law, Hanafi Fiqh, Money.

Title: Harmony or Discord: Examining the Compatibility of Cryptocurrencies with Sharia Principles

In the ever-evolving aspect between innovation and tradition, the question is posed: is there harmony or discord in the compatibility of cryptocurrencies with Sharia principles? This Paper explores the intricate threads that weave through the intersection of digital currencies and Islamic finance and unveils a compelling narrative of ethical considerations, financial evolution, and the delicate balance between tradition and the disruptive force of the digital age. Analyzing the ethical considerations of cryptocurrencies within the context of Sharia, the abstract navigates through the potential conflicts and synergies. It investigates issues such as speculation, interest (riba), and uncertainty (Gharar), shedding light on the discord and harmony that may arise.

Cryptocurrency from the Perspective of Shariah

Universiti Utara Malaysia, 2018

The purpose of this study is to investigate one of the types in Fintech area, which is cryptocurrency from the perspective of Shariah. Until now, there are around 1,600 types of cryptocurrencies around the world. However, one of the most sought cryptocurrency in Malaysia is Bitcoin. Since it is still a new in Malaysia, the in-depth study on this has not yet been fully completed. By the realization to study this issue, a research has been conducted to become an eye-opener for those who want to dig deeper to gain the knowledge about this especially on the views from Islamic perspective or to be specific, from Shariah views. On the other hand, many issues arise regarding this cryptocurrency especially bitcoin. Therefore, this research will investigate the concept of money with its characteristics, and analyze if cryptocurrency does have all the characteristics of real money in it. Move forward to the next objective, this study will also explain on the Islamic perspective, and to be exact, Shariah views of cryptocurrencies as the currency or as a medium of exchange. Until now, there is still not much current views from the current scholars on this exact matters. Most of the views are regarding on whether their countries accepting it to be used or not, and the majority are the views from the government. Still, there is no specific hukm on the uses of cryptocurrencies. So, the outcome of this study will provide an important insight for potential customers who still want to invest their money in cryptocurrencies.

The genesis of Cryptocurrency in Islamic economics: Shariah analysis of HLC tokens

University Journal , 2018

Crypto cash and payment through electronic money has gained popularity after the computer system is adopted by financial industry. Furthermore, the research on application of blockchain technology in the Islamic economy system precisely the potential of Cryptocurrency in providing a better alternative to current fiat money system which will be the scope of this paper. The cryptocurrency system relies on the payment network, the infrastructure required to manage payments and avoid multiple spending using the same funds has always been costly and manage through a centralized banking network. This paper aims of exploring the potential and capability of Cryptocurrency in Islamic economics that fulfils the Shari'ah requirements which will provide financial and stable currency. The paper will adopt the Shariah mind to analyse Shariah experts different opinions on the Crypto currency. The method used for analysing this object includes a library research on related topics that helps understanding the functions of money and Crypto currencies as well as study of several cases that can assist in fulfilling the aims of this paper. Finally, the paper will use analyse the Shariah experts opinions on the Cryptocurrency and the area of Cryptocurrencies and blockchain requires further research from a Shari'ah perspective in order to facilitate a better understanding and create more awareness.

The requirements of cryptocurrency for money, an Islamic view

Heliyon, 2020

This research aims to evaluate the suitability of cryptocurrency as money from the Islamic perspective. Money, in the Islamic perspective, has specific characteristics and requirements, such as stability and is based on assets. Cryptocurrency may not fulfil this as it has queries as money from the Islamic perspective. The research method applied data of 23 cryptocurrency prices and related information. The result shows that cryptocurrency is hugely volatile and has limits to being called ‘money,’ as it is limited and used for speculation, which is prohibited in Islam. The research implies that Muslims would be reluctant to use cryptocurrency as money, as a currency of transaction. This reason raise an expectation that the cryptocurrency will not develop rapidly in Muslim countries.

An Islamic Approach towards the Nature & Problems of Cryptocurrency

Al-Aijaz Research Journal of Islamic Studies & Humanities (Bi-Annual) Trilingual: Urdu, Arabic and English ISSN: 2707-1200 (Print) 2707-1219 (Electronic), 2020

In an Islamic framework, the scholars need to verify all aspects of the emerging phenomenon known as cryptocurrency. It works as an agent for the prevailing forms of currencies and substitutes the need to carry it everywhere in its physical form which may become a security threat. The theologians have always disapproved what seem to them innovative, alien and working as an agent of change. However, whatever may be their stance about previous innovations, the society had to act otherwise due to the compelling needs that had to be fulfilled. The difference of opinion between the Muslim Scholars about the cryptocurrency has once again divided the Ummah about its acceptance, substituting other forms of currency like fiat currency, plastic currency etc. No doubt these forms of currency have heavily damaged the financial markets due to their speculative nature. It seems that Muslim Ummah is again standing on the cross roads where it is unable to decide its fate. This article presents the basic concept of cryptocurrency & virtual money, its pros & cons, its status regarding Pakistani & Islamic Perspective. At the end, various conclusions and suggestions have been drawn.

Are Cryptocurrencies Ḥaram? A Critical Analysis toward MUI’s Fatwā

Al-Ihkam: Jurnal Hukum dan Pranata Sosial, 2023

This paper critically examines the Indonesian Ulema Council's fatwā which prohibits cryptocurrency. The critique focuses on three aspects of the ban. The first is criticism for banning cryptocurrency which is considered to contain garar and ḍarār, and is contrary to Law No. 7 of 2011 and Bank Indonesia Regulation No. 17 of 2015. The second is criticism of the illegality of buying/selling cryptocurrency, which is positioned as a digital asset/commodity that contains garar, ḍarār, qimār, and does not meet the sil'ah criteria. The third is criticism of the permissibility of cryptocurrency as a commodity/asset when it fulfills the sil'aḥ criteria and has underlying and clear legal benefits to be traded. This study adopted a qualitative approach. The conclusion reveals that MUI's fatwā on cryptocurrencies was not built on solid legal reasoning and did not consider the benefits of technological advances. The MUI's fatwā is based on the principles of Islamic law, specifically garar, ḍarār, and qimār, which are used to evaluate the legality of trading commodities or digital assets, such as cryptocurrencies. However, it is important to note that the MUI's fatwā does not consider the potential benefits of cryptocurrencies, such as their use as a new form of investment and their potential to revolutionize industries by enhancing security, and efficiency, and creating new trading opportunities in the digital age. In terms of non-Sharia technology, it is seen as a tool that can be Are Cryptocurrencies Ḥaram? A Critical Analysis toward MUI's Fatwā al-Ihkam: Jurnal Hukum dan Pranata Sosial, 18 (2), 2023: 420-442 421 used for good or evil, and its permissibility depends on its use. Blockchain technology, which underpins cryptocurrencies, is considered acceptable because it makes transactions more secure and enables the use of smart contracts.