Since the appearance of the first cryptocurrency, Muslim scientists and financiers have been trying to clarify the question of whether digital finance is considered halal and whether crypto and blockchain comply with Islamic finance rules. The solution to this issue is extremely important because of the level of cryptocurrency market confidence, where at the moment (beginning of 2022) there are already more than 17,000 cryptocurrencies and tokens depending on it. In 2019 Mufti Muhammad Abu-Bakr, the former adviser at Blossom Finance compiled a study in which he stated that cryptocurrencies, including Bitcoin, should be considered halal and allowed by Shariah. Mufti Abu Bakr’s decision was made on the basis that all traditional (and permissible) currencies have a speculative element, and therefore cryptocurrencies, which are not considered as money in traditional comprehension, should be allowed in Islam. Unlike other cryptocurrencies Islamic Coin is designed to bring practical value to Muslim community and become the true Shariah-compliant digital money.
In 2018, a group of scientists from the Shariah Review Bureau in Bahrain stated that investments in cryptocurrency can be allowed in accordance with Shariah and Halal laws. Their opinion was that cryptocurrencies are equated to a special type of property and do not contain a speculative element.
Similarly, the Fiqh Council of North America has unanimously ruled that Bitcoin is acceptable. In addition, the office of the Shariah Advisory Council of the Malaysian Security Commission reported that trading and investing in cryptocurrencies is permissible. This means that digital currencies can also be used to pay Sadaqah.
While many Muslim scholars have researched and analyzed the digital currency market, they have not yet come to a consensus on whether its halal or not. Therefore, we will go a little deeper into the history of money from the point of view of Islamic finance, so that we can consider the centuries-old Shariah rules concerning finance and investment.
A bit of history
The history of money from an Islamic point of view can be traced back to the very beginning of Islam. According to Islam and Shariah law, money is used for exchange, not for speculation or exploitation. This is one of the reasons that riba ( ربا , interest) is strictly prohibited in Islam, as it is seen as making a profit from money. The Islamic point of view on money and business is based on the principles of social justice and non-exploitation.
Shariah law regarding money states that in order to be used as a medium of exchange, money must be safe, stable and efficient. The reason why some Muslims doubt the legality of Bitcoin and whether it complies with Shariah law is that when the Quran was written, there was obviously no mention of digital currencies, since the technology was not at the advanced stage it is at today. This meant that the permissibility of cryptocurrencies was open to the judgments and interpretations of scientists.
The question of whether cryptocurrencies are considered halal from the point of view of Islam is raised again and again, as Muslims around the world consider whether it is worth investing in cryptocurrency. Cryptocurrency is based on supply and demand, as is often the case with conventional currencies, and the coins themselves have a value based on the market.
Crypto in Islamic Finance
Bitcoin heralded the birth of a free, transparent global financial market. Therefore, it is not surprising that Muslims have begun to interact with this market. The rules of Islamic finance set boundaries and rules regarding financial transactions. While cryptocurrency is still an important area of news and research for scholars and experts in the field of Islamic finance, it is clear that most scholars and imams have interpreted that cryptocurrencies do not violate any of the rules regarding Islamic finance.
The main features of Islamic finance that need to be considered when it comes to cryptocurrencies are:
1. Interest (riba) – interest is prohibited in Islam;
2. Speculation (maysir) – speculative investments are considered akin to gambling and are unacceptable;
3. Distribution of profits and losses – the parties to the transaction must share the risks and benefits in accordance with Islamic finance;
4. No Excessive Risk (gharar) – Islamic finance dictates that transactions that are uncertain or carry excessive risk are unacceptable;
5. Application of trade and commerce (albac’).
Unlike other cryptocurrencies Islamic Coin is designed to bring practical value to Muslim community. Instead of just harnessing the benefits of being halal IslamicCoin aims to serve the Muslim community, by creating a decentralized endowment which value will raise with the raise of popularity of IslamicCoin. Our mission is to empower the followers of Islam with a financial and technological tool that allows for independent financial interaction while supporting technological evolution and philanthropy.
The Islamic Coin Shariah Board consists of the World’s most renowned Islamic Scholars. Prior to the launch of the project members of the Shariah Board performed a thorough analysis of the proposed system and issued a FATWA in line with the Islamic Finance International codes of Conduct and Compliance.
IslamicCoin CANNOT be arbitrarily printed and thus devalued. It also CANNOT be inflated through a rise of the Central Banks interest rate; its price is determined by the market and thus always fair. IslamicCoin may only be minted (issued) by those who contribute work and investment as validators of the network at a pre-determined announced rate. Unlike fiduciary money, IslamicCoin is not operated by the banks whose main business is to earn money by charging interest. Charging interest is what leads to Riba and is therefore forbidden.
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