Is Cryptocurrencies Halaal? Some myths about Cryptocurrencies.
To read urdu version of this post click here.
Cryptocurrency is essentially a digital means of currency exchange and digital payments platform that uses blockchain technology.
Why this post?
The fact there are still some people out there who think that cryptocurrency is not halal or authentic according to Islam I have personally talk to lot of people what actually make them feel this way but trust me most of them actually didn’t know how crypto currency works but on other hand some people new the logic behind cryptocurrency and they had some valid reasons also like they are some cryptocurrencies that clearly supports products, causes and ideology that is against Islam.
But based on hand full of tokens or coins we cannot say that cryptocurrency as whole is haram. It is certain that we should avoid those crypto tokens.
It’s like saying I don’t use mobile phone because it has a music player in it, well having a music player in it does not mean you are going to play music in it you can play MP3 Quran or any other thing that is not prohibited so it’s just an analogy I guess a silly one 😅. But I hope you understand my point.
Why do I think cryptocurrencies aren’t haraam?
I believe that cryptocurrencies are more authentic and more genuine means of transaction that’s actually how the transaction was meant to be not just relying on a value with respect to US dollar (fiat) whose value and amount of circulation ( causes inflation, riches getting richer and poor getting poorer) is governed by the people whome we don’t even know or we don’t know there intentions. They can circulate how much of dollars as they want and your country is obligated to follow that because all other countries wanted to centralise the assets instead of directly setting the value of the respective currency to the world’s available natural assets like gold after world war II
- To make a fully understand why I think to currencies more authentic then actual paper money. Let me give you a brief gist how transaction in exchange of an interest were happening and how we ended up with paper money and why it needs to be changed.
Well back in early days when people had to trade they use barter system where they were directly trading something with respect to something let’s say if a person A wanted to buy fruits from person B, but the person A had to pay exact value that those fruits were of obviously the person A cannot pay in fruits because he don’t have any that’s why he is purchasing that. To close the deal person A pays exact value in chicken eggs that of fruits.
But the problem with above scenario was what if person B never wanted eggs but to make a sale they had to make some kind of sacrifice in those days in barter system.
That is why people wanted to get something that has a value that can be exchanged in spite of its form that is why gold coins where introduced so if a person wanted to purchase fruits he can give some amount of gold coin and person B can re-use those coins and purchase something that he was interested in.
- Here is the catch
People were not comfortable carrying gold coins across and those gold coins had very highest value let’s say if a person wanted to buy small goods so buying with gold coin was not a good option because it would be 1000 part of it so the transactions will not accurate and people tried to find more accurate way to do transactions.
Thats why paper based money (fiat) was introduced, tell here you would have some idea that the way we make transaction is bound to change we cannot rely on one particular mode, it’s a human nature would always try to find a better and improved version of what was already existing.
But when fait money came, it made entry of banking system so strong that most of the Muslim countries are slaves to this system, credit systems, loans, life insurance and interest based schemes were also born. Which I believe is major fall of Muslim era.
Cryptocurrency works on blockchain and blockchain is a decentralized system that is not governed by a country or an organization. Its circulation is limited (some exceptions) and its value may increase decrease and these tokens are mined similarly it possesses characteristics just like gold.
The authentic part is that every transaction gets recorded permanently and is open to everyone anyone connected to the blockchain network can see what transaction has been made from which wallet (just like your bank account number but in a different way).
I believe cryptocurrencies will eliminate central banks that are the main cause behind world hunger and poverty and prohibited in islam. We all are in this banking system even of we want or not and cryptocurrencies are way out of it and an upgrade to the way we transact.
What Aalims say
A comprehensive Islamic interpretation, one that sparked a massive rise in Muslim investment in Bitcoin and Ethereum in 2018, was provided by Sharia advisor Mufti Muhammad Abu-Bakar (former advisor to Blossom Finance) who argued that Bitcoin is permissible under Shariah law. He considered arguments that crypto itself was speculative, but his view was that all currencies have a speculative element and this did not automatically deem crypto as haram.
From the perspective of Islamic contract rules, there must be an element of consideration - Mal. Mal refers to possession and effective storage, and cryptocurrencies meet the criteria required as they can be possessed and stored and have commercial value (Mutaqawwam). Crypto is a real and viable digital asset, its worth and value lies in what is paid for it, and it is capable of being owned and traded commercially so the Shariah requirements are satisfied.
The Shacklewell Lane Mosque in East London became one of the first mosques in the UK to accept cryptocurrency donations and Zakat contributions in 2018 during Ramadan.
DIGITAL CURRENCIES AND SHARIAH LAW
Islamic finance principles dictates that in order for income, or investing in any product or asset, to be deemed halal it has to meet certain criteria. The principles of Shariah law should be applied to the financial systems we operate in and there has been some discussion about whether rules devised centuries ago can still be applied to a technologically modern digital financial marketplace.
The answer quite simply is yes, Shariah principles can be applied to modern crypto analysis as they are based on social justice, accountability and ethics which transcend all forms of financial transactions. As long as there is no illegal activity, then trading or investing in crypto should not be deemed to be contrary to Shariah principles. Ref Here
There are some cryptocurrencies out there which are clearly against our sharia and islam we must do our research before making any transactions or any trade. We need to look into the whitepaper( a detailed information about the particular token) of the ever cryptocurrency we deal with.
P.S: I may have done lot of errors in this post both logical and typing mistakes,
for typing mistakes, I felt lazy to type this long post so I used voice to text software.
as far as if I have made some logical error, please let me know with valid justification, so I can correct myself.
May Allah swt guide us all and help us in getting rid of banking system.