By Samer Tellawi
Much of the Muslim world is torn in a debate about cryptocurrencies and blockchain technologies penetrating the Islamic Financial markets. Many people worry that these technologies violate the Islamic Canonical Law (“Sharia”) which is based on the teaching of the Quran and the practices of the Prophet Muhammed (PBUH). Islamic finance forbid practices such as interest or usury, investment in the business that goes against the teachings of Islam (such as vineyards and breweries), and investment in a business that promotes financial ruin for individuals (such as casinos).[1]
Al-Azhar University, in Egypt, is considered the most prestigious and renowned school of Islamic thought. The senior scholar, the Grand Mufti, issues new religious rulings, Fatwa’s, on modern Islamic issues. On January 1, 2018, the Grand Mufti, Shawki Allam, announced that “virtual currency” is not permissible governments do not consider it legitimate or an "acceptable interface of exchange." In addition, the Grand Mufti claimed that the currency:
1. is not subject to the state’s supervising and financial authorities;
2. has the ability to undermine Egypt’s ability to maintain and stabilize its own currency;
3. could lead to an ease of money laundering activities and contraband trading;
4. impedes the state’s ability to preserve currency exchange, and its ability to supervise domestic and foreign trading; and
5. is considered to be a form of gambling. [2]
The Grand Mufti is not the only cleric to criticize cryptocurrencies. Saudi cleric, Assim Al-Hakeem, issued a Fatwa stating that under Sharia Law these currencies are banned because they are “ambiguous.” He explained that these currencies will open the gates for “money laundering, drug money, and forbidden money.”[3]
On the other hand, it is important to note that religious declarations all seem to stem from the uncertainty of what these currencies are being used for and the loss of state control over money exchanges.[4]
Mathew J. Martin, a member of a Fintech Startup in Indonesia, the most populated Muslim country in the world, stated, “[m]odern sovereign currencies are based on debt with usury – this is strictly prohibited in Islam. Therefore, all modern money is not halal (permissible). Bitcoin, on the other hand, is not based on debt - it's based on a proof of work – and this is at least not haram (impermissible).” In addition, Mr. Martin stated that these currencies cannot really be considered money under Islamic Finance Laws because they lack intrinsic value or backing.[5] The UAE found a way around this by only issuing a cryptocurrency that is backed by gold. Similarly, Bahrain went a step further and partnered with Stellar Networks to issue its first Sharia certified cryptocurrency.[6]
There is no easy way to consolidate the differing opinions on cryptocurrencies in the Middle East. However, depending on where you are in the Middle East, these currencies will either be accepted or shunned. Time will tell if Egypt and Saudi Arabia will face their fears and change their opinions surrounding these currencies.
[1] Bitcoin banned by Islam’: Egypt’s Grand Mufti issues fatwa against cryptocurrency, RT News (Online, Jan. 3, 2018), found at https://libguides.murdoch.edu.au/c.php?g=246256&p=2671136
[2] Bitcoin trading is unlawful pursuant to Islamic Sharia, says Egypt's grand mufti, Ahram (Online, Jan. 1, 2018), found at http://english.ahram.org.eg/News/286399.aspx
[3] Bitcoin banned by Islam’: Egypt’s Grand Mufti issues fatwa against cryptocurrency, RT News (Online, 3 Jan. 2018), found at https://libguides.murdoch.edu.au/c.php?g=246256&p=2671136
[4] Islam and cryptocurrency, halal or not halal?, Al-Jazeera Business & Econcomy (Online, April 8, 2018) found at https://www.aljazeera.com/news/2018/04/islam-cryptocurrency-halal-halal-180408145004684.html
[5] Is Bitcoin Halal or Haram?, Coinmama (Online, May 2, 2018), found at https://www.coinmama.com/blog/is-bitcoin-halal-or-haram
[6] Jonathan Kim, Stellar Enters the Middle East, Becomes First Cryptocurrency to Gain Sharia Certification, (Cryptonews, July 18, 2018) found at https://cryptoslate.com/stellar-enters-the-middle-east-becomes-first-cryptocurrency-to-gain-sharia-certification/
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