Cryptocurrency is becoming an increasingly popular medium of exchange. However some argue it isn’t in compliance with Sharia law.
Secretary-General of the International Union of Muslim Scholars Dr Ali Al-Qaradaghi, says that an investment in crypto or digital currencies such as Bitcoin and its other counterparts is forbidden by Sharia law.
Crypto currency is adecentralised digital money designed to function as a medium of exchange through a computer network. It is not regulated by a government or a bank. After an in-depth study on the topic, Qatar-based Dr. Al-Qaradaghi affirms that the investment in these coins is considered forbidden in Islam and one reason given was ‘tahreem al wassail’ (prohibition of means).
He argues that the means of money handling could potentially endanger ‘riba’ which means the ex-ploitative gains made in trade or business under Islamic law.
Digital currencies, he explains, are forbidden due to two reasons. Digital money, in its nature, lacks the value element found in, for instance, gold and silver. He states that as contrasted with credits or bank-notes, digital currencies are not regulated by gov-ernments, further reiterating its forbidden make-up.
Commenting on the topic, Dr Abdulazeem Abozaid an Associate Professor of Islamic Finance in Hamad Bin Khalifa University and an expert on Islamic finance, tells Doha News that cryptocurrencies “do not qualify yet as valid currencies because they do not fulfill the Shariah conditions or requirements for a valid currency.” “Nor are they valid to be traded or invested in. This is in view of the high risk associated with their trad-ing due to their high volatility, which makes the whole process akin to gambling,” he adds.In one of his published works, “Does Shariah Rec-ognize Cryptocurrencies as Valid Currencies?”, Dr Abozaid states that one of the challenges with digi-tal currencies is “whether it can gain people’s trust, and this may not be feasible if it is not controlled and regulated by a trustworthy authority.”
While there is no consensus among the Islamic fi-nance sector regarding the permissibility of the digi-tal currency, Devesh Vijay, Digital and Innovation Advisor, says that “banks, Fintechs and Consumers have been riding the digital transformation wave for a few years.
with the COVID-19 pandemic accelerating the digi-tal agenda, it is no longer a choice to make. It is imperative for survival,” the KPMG reported in their Qatar Banking Perspectives 2021 paper.
Qatar Central Bank (QCB) Governor, Sheikh Ab-dulla Bin Saoud Al-Thani said, “cryptocurrencies are in general considered as speculative assets and the probability of its use for unwarranted transac-tions cannot be ruled out. The restrictions are im-posed due to the inherent risks associated with cryptocurrencies since they pose significant chal-lenges to the stability and integrity of the financial system. However, QCB is closely monitoring tech-nological and regulatory cryptocurrency develop-ments and will take appropriate decisions in due course.” .”—Doha News
