Caiz Insights: CRYPTOCURRENCY and the Question of Halal-Haram
Our recent Alliance with the UFC Superstar, Khamzat Chimaev, has brought to light a very important question: Is Crpyto Halal or Haram?
Our recent partnership with Khamzat Chimaev has caused quite a spur in the UFC world as it has brought forth a long-overdue point of discussion about the compatibility of cryptocurrencies with Islamic finance values principles.
Interestingly, our analysis of the fans’ reactions on our socials regarding this alliance has revealed that about 21% of the fans’ comments expressed deep concerns about the place of crypto within the Islamic rulings regarding finance. This encouraged us to delve deeper into this topic and provide clarity on this important issue.
With the increasing interest in cryptocurrencies, Muslim investors have been grappling with the question of whether investing in crypto aligns with the principles of the Islamic faith. The issue of whether cryptocurrency is Halal has stirred a fierce debate among Muslim scholars. Rather than a consensus, various Fatwas have arrived at different conclusions, fueling intense discussion within the global Muslim investment community.
At the heart of the disagreement lies the larger dispute about what cryptocurrencies are and what gives them value, if anything. Despite the ongoing discussions and disagreements, many Muslims around the world have embraced the use of cryptocurrency.
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In 2018, Mufti Muhammad Abu Bakar, a Sharia adviser and Compliance officer at Blossom Finance in Jakarta, published a widely-read paper affirming that Bitcoin is Halal, a paper that some believe could have contributed to the surge in the cryptocurrency’s price.
In the same year, a London Mosque began accepting Bitcoin for donations and Zakat contributions, further demonstrating the growing acceptance of cryptocurrency within the Muslim community.
So, what makes something Halal or Haram in Islamic Finance?
Islamic finance operates under a set of guiding principles called Sharia law, which is derived from the Quran and the teachings of Prophet Muhammad. This means that some financial practices are allowed or permitted (Halal), while others are prohibited (Haram). For instance, charging excessive interest (Riba) on loans is considered exploitative and therefore Haram. Speculative behavior and engaging in morally prohibited business activities like selling alcohol or tobacco are also Haram.
On the other hand, Halal financial practices include equity finance, leasing (Ijara), and profit-and-loss sharing joint ventures. In Islamic finance, money is not considered to have intrinsic value, and making money from money through interest is forbidden. Wealth can only be created through legitimate investments and trade, and investments should benefit society socially and ethically.
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By following these principles, Islamic finance offers an alternative to traditional finance that takes into account the ethical and moral considerations of its practitioners. It’s not just about making money, but doing so in a way that aligns with one’s values and beliefs.
What do Islamic Scholars say about this?
The world of cryptocurrency has been a hot topic for Islamic scholars trying to determine whether digital assets are halal or haram, with varying opinions. The matter becomes even more complex due to the newness and complexity of the technology. While some believe that cryptocurrencies like Bitcoin (BTC) and Ether (ETH) are permissible (Jaiz, also Caiz) under Fiqh Law, others argue the opposite.
Sharia Review Bureau in Bahrain
In 2018, According to this Sharia Review Bureau in Bahrain came out with a statement that investments in cryptocurrencies like bitcoin and ether (ETH) are considered halal under Sharia law, hence, making them halal.
Mufti Taqi Usmani
However, Mufti Taqi Usmani holds a different perspective, arguing that cryptocurrencies are Haram due to their use in speculative investments and illegal transactions.
Furthermore, Mufti Usmani believes that a currency should only be a medium of exchange under Sharia law, and when used to generate profits, it becomes haram. Consequently, Muslims are not permitted to accept crypto as currencies, according to Usmani’s interpretation. The question of whether digital assets are halal or haram remains a topic of debate among Islamic scholars.
The Shariah Committee Chairman of HSBC Amanah Malaysia Bhd, Dr. Ziyaad Mahomed
Dr. Ziyaad believes that a currency’s intrinsic value is not necessary for it to be considered halal under Sharia law. He argues that society’s acceptance of a currency’s value is enough for it to be used in day-to-day transactions. Based on this view, it could mean that the Islamic community may deem Bitcoin or Caizcoin halal if there was a social consensus to use it as a currency.
Mufti Muhammad Abu-Bakar
On the other hand, Sharia advisor Mufti Muhammad Abu-Bakar’s interpretation of crypto in 2018 triggered a significant increase in BTC and ETH investment within the Muslim community. He believes that all currencies have a speculative element, and cryptocurrency’s speculative nature doesn’t necessarily make it haram, as every other currency can also be considered speculative. Therefore, he considers cryptocurrency halal.
Sheikh Shawki Allam
The Grand Mufti of Egypt, Sheikh Shawki Allam, and other Sharia scholars from the Middle-East, have deemed digital assets as haram due to their lack of credibility as currencies and their high-risk nature.
Sheikh Allam voiced his opinion on the matter, stating that, “the trading of cryptocurrency is haram.” His reasoning stems from the fact that digital currencies have not been approved by legitimate bodies as a medium of exchange, making them susceptible to contraband trading and money laundering.
Sheikh Asrorun Niam Sholeh
Sheikh Sholeh, the head of religious decrees for Indonesia’s council of Islamic scholars, shares similar views on the matter. In his opinion, digital assets are illegal due to their potential for uncertainty, wagering, and harm.
Sheikh Anas Amatayakul
However, Sheikh Amatayakul, a scholar leading the committee directing the Islamic Bank of Thailand in Sharia, offers a different perspective. While he acknowledges the potential benefits of technological advancements, he advises Muslims to steer clear of crypto for now to protect their wealth. His Fatwa suggests avoiding digital assets until the crypto space stabilizes, as it is moving too fast for Muslims to keep up.
The intersection of religion and technology has led to varying opinions on the permissibility of cryptocurrency under Islamic law. While some Muslim scholars and institutions view crypto as high-risk or even Haram, others have taken a more permissive stance.
The Fiqh Council of North America, for example, issued a unanimous Fatwa stating that cryptocurrency like Bitcoin is halal under Islamic Finance Law. Similarly, the Sharia Advisory Council Branch of the Security Commission in Malaysia has permitted crypto trading and investment under Sharia law.
London-Based Shacklewell Lane Mosque
In the UK, the Shacklewell Lane Mosque made headlines when it began accepting crypto donations in 2018, suggesting that its leaders view crypto assets as halal.
Turkey’s Directorate of Religious Affairs
On the other hand, Turkey’s Directorate of Religious Affairs considers cryptocurrencies haram due to their speculative nature, lack of central authority oversight, and association with illegal activities.
With this being said, however, the Turkish Board of scholars in Frankfurt have a different perspective. They consider cryptocurrencies that conform to Islamic finance principles, such as Caizcoin, to be halal. They believe that these digital assets have real-world applications that can benefit society.
As technology continues to evolve, so too will the debates surrounding its compatibility with religious principles.
So, is Crypto Halal or Haram?
The debate over whether Cryptocurrency is halal or haram rages on, with Muslim scholars split on the matter. Some argue that digital currencies like Bitcoin and altcoins are haram due to their association with speculation and illegal activities in the market, but so is fiat money. They also point out the absence of any centralized governing authority, making these assets unregulated and unpredictable.
Those who argue that Cryptocurrency is halal believe that it is a legitimate investment option, provided it adheres to the principles of Islamic finance. Ultimately, the question of whether Cryptocurrency is halal or haram may come down to personal interpretation and belief.
On the other hand, scholars that consider Crypto halal look at the following aspects:
- Decentralization: BTC is decentralized, hence preventing exploitation by central authorities.
- Transparency: cryptocurrency transactions are visible for anyone’s viewing.
- Islamic contract rules: Based on these rules, there must be mal (money) to regard crypto as halal. Mal alludes to effective storage and possession. Bitcoin fits these criteria because people can possess and store it, and it has commercial value (mutaqawwam).
- Anti-interest: The concept of cryptocurrency emanates from a need to empower society rather than profiting its founder(s).
The Halal or Haram status of crypto depends on various factors and the interpretation of Muslim scholars. As an example, Egypt, and Turkey have partly taken the haram stance on all cryptocurrencies, while Malaysia and Bahrain consider it halal based on their scholarly analysis.
Interestingly, some majority Muslim countries like the UAE, Saudi Arabia, and Morocco are planning to create their own digital cryptocurrencies in the form of CBDCs, indicating their positive view towards digital assets. This trend suggests that the perception of cryptocurrencies is rapidly evolving and may change in the future.
As the crypto sector continues to gain mainstream traction, it is becoming increasingly difficult for the Islamic community to ignore it; and this was strongly expressed in how fans reacted to our Partnership with Khamzat Chimaev. With big players like Google, Visa, and Apple joining the crypto bandwagon, the debate on whether cryptocurrencies are halal or haram will become even more pressing.
Moreover, as the world of finance continues to evolve towards the integration of decentralized finance (DeFi) and Decentralized and Centralized finance (DeCe), it is important for Islamic finance to keep up with the pace. Therefore, the Islamic community may have to find a way to reach a consensus on the status of cryptocurrencies in the future to avoid being left behind in the rapidly changing financial landscape.
As we have seen in our latest partnership with Khamzat Chimaev, many fans commented whether crypto investments are halal in Islam or not and requested proof from Fatwas. However, it’s important to note that many Muslim scholars and Muftis have announced that crypto investments that align with Islamic finance principles can be Halal, just like fiat currency. The Sharia Advisory Council in Malaysia and the Sharia Review Bureau in Bahrain have both deemed cryptocurrencies such as Bitcoin and Ethereum to be Halal. Similarly, the Turkish Board of Scholars in Frankfurt considers crypto adhering to Islamic finance principles, like Caizcoin, to be Halal due to their real-world use-cases. Ultimately, it is up to individuals to make their own informed decisions after consulting with their religious authorities.