Cryptocurrencies From Islamic Perspectives: The Case Of Bitcoin

Abstract

Cryptocurrencies’ popularity has surged during the last few years. This is
especially the case of bitcoin, one among cryptocurrencies which price has soared
from USD1,000 in the first quarter of 2017 to USD20,000 by the end of 2017. It
has now being used by merchants as a medium of exchange. Upon realizing its
popularity, the CME Group that owns the Chicago Mercantile Exchange launched
a futures contract on bitcoin. Yet, there are cases where bitcoin is banned by
the country. This article examines the implication of bitcoin on Islamic finance
and questions its acceptance as a medium of exchange (money) based on its
compliancy with shari’ah. By analyzing its nature and characteristics, the paper
concludes that, strictly speaking, cryptocurrencies that are not backed with real
assets are not shari’ah-compliant. However, the majority of shari’ah scholars
are leaning towards approving bitcoin on maslahah basis. Bitcoin is neither fiat
money nor real money. The absence of an intrinsic value coupled with lack or
zero supervision by the central bank will result in misusing bitcoin. Furthermore,
we content that it has the elements of maysir and gharar. This can contribute
towards socio-economic injustices, thereby jeopardizing the maqasid al-shari’ah.
Hence, based on a thorough analysis, we conclude that fiat cryptocurrencies are
not shari’ah compliant. However, gold-backed cryptocurrencies are argued to be
desirable and consistent with the maqasid al shari’ah.