As cryptocurrencies grow ever more popular around the world, their presence is causing different reactions among users and governing bodies. One segment of users which has had to grapple with coin use is made up of Muslim believers. Islamic doctrine considers gambling and other games of chance to be maisir because of its speculative nature. However, some people may not see crypto trading as gambling but rather as an investment, and it is this difference in perspective that is making crypto trading among Islamic believers a contentious issue.
This is a very interesting topic to analyze considering that adherents make up 25% of the world’s population. For these religion’s adherents, the problem has been to identify financial services with the actual value and not just relying on speculation or chance. This is a post about the Islamic perspective on crypto exchanging and whether it has the chance of becoming more popular in countries with majority Islamic believers. (This is all you need to know about: OmiseGo (OMG) Coin and Price Prediction for 2020)
The legality of crypto trading according to Muslim laws
Shariah is the Islamic Law – the orders and rules that oversee the conduct of a Muslim individual towards his or herself, family, neighbors, network, city, country, and the Muslim nation, all in all, the Ummah. So also Shariah oversees the collaborations between networks, gatherings and social and monetary associations. Shariah builds up the criteria by which every single social activity is grouped, ordered and managed inside the general administration of the state. (This was: The Strategy Of Cryptocurrency Whales In 2019)
Islam's law involves an exhaustive point of view. As one looks from a satellite at this planet, the Shariah imagines the earth as a solitary 'city' with differing occupants - in current speech, a 'worldwide town.' Islam looks to the advantage of the general public all in all from a general viewpoint and presents a hypothetical model that whenever pursued gives security and assurance to society.
Islam is a finished bundle - a total message and lifestyle. To divide it into segments, and at that point look at them separately will yield almost no comprehension of Islam's all-encompassing entirety. Unavoidably too, parts of Islam analyzed independently, without a wide-running handle of its totality, will be taken in a divided setting, in which case viewpoints may assume the presence of fanaticism. Be that as it may, when seen from an extensive point of view by any reasonable individual, Islam will be discovered as reasonable in the entirety of its angles and practices. (Discover more about the: Launch of The Binance Decentralized Exchange Future (DEX))
It is therefore for this reason why we can only depend on Muslim scholars with complete knowledge of the law that we can determine whether it is legal to trade coins or not.
Is coin exchanging halal or not?
Unfortunately, there is no mention of Bitcoin or any other cryptocurrency in the Quran, but neither is there any mention of it in other religious texts. For this reason, cryptocurrencies occur in the wild wild west of religious views, leaving experts and scholars to interpret these new technologies and how they fit in with religious beliefs. When it comes to Muslims, the religion’s experts are scholars who have complete knowledge of the Quran. As mentioned earlier, it is important to interpret Islamic teachings by considering the Quran as a whole instead of only choosing specific parts. At the same time, this presents a problem because many of the Islamic law scholars do not understand the nitty-gritty of crypto and how it works to accurately determine if it is halal or not. (This is the: aelf (ELF) Network Long-Term Forecast)
That being said, these scholars have not hesitated to express their views, and there have been different views on this topic. Egypt's Dar Al Ifta has been completely against coin trading, going as far as issuing a religious decree terming all commercial transactions in Bitcoin as haram. The institute went as far as claiming that coins could destabilize financial systems and even be used to fund terrorism. Meanwhile, Darul Ihsan Centre based in Durban expressed concern that coins may act as pyramid schemes, and have thus advised against them. Other scholars India, Turkey, and Britain have also spoken against crypto for various reasons, all discouraging Muslims from using them.
This opinion has been backed by the Egyptian government, which warned people against exchanging coins. Most Islamic countries including Saudi Arabia, UAE, and others have only issued warnings against the trade and use of coins. Nevertheless, these countries have not issued any outright bans of cryptocurrencies except urging residents to use legal currency issued by central banks. Only a few countries like Iran had issued a ban on coin exchange completely. (Do you ever wonder: Will Forex Trading Be Illegal in the Future? Last Law Decisions)
On the other hand, some religious scholars have deemed coins to be halal. Mufti Muhammad Abu Bakar is a Sharia advisor and compliance officer at Blossom Finance in Jakarta, Indonesia. Following a meeting by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), Abu Bakar published a paper that basically labeled Bitcoin as halal. In the paper, the scholar argued that Bitcoin can be considered as money because it is legal in countries like Japan and Germany. In these countries, Bitcoin is considered as a form of currency, and thus Muslims in these countries can also take it as currency. Even in countries where Bitcoin is not considered as legal tender, Bitcoin can still be used to buy goods and services. For instance, in the US, many companies accept Bitcoin and other coins as a form of payment. Therefore, Muslims in such countries can also consider coins as actual currency. (Look back at our: Binance Coin Price Prediction 2019)
But even before the AAOIFI, Monzer Kahf based in California had already endorsed crypto back in 2014. That was way back even before most people had heard of Bitcoin or any other coin. According to Kahf, Bitcoin should be considered to be a medium of exchange, but he still cautioned against the risk of price manipulation.
As you can see from the conflicting opinions above, there is obviously a huge divide on how coins are perceived by Islamic religious scholars around the world. On one side are the critics who see Bitcoin as a speculative asset, hence against sharia law. Then there are the progressives who actually see Bitcoin as an even better asset than a currency. According to sharia law, only assets with intrinsic value are supposed to be used as currency but fiat currency is not. Ever since the gold standard was abolished, fiat currency only has value due to government mandate. But Bitcoin has some intrinsic value, which makes it act like both a commodity and currency. (This is the: Cosmos (ATOM) Price Prediction 2020)
Although this does not augur well with financial regulators, this property makes Bitcoin even more sharia-compliant than fiat currency. Add to that, no one actually owns the money they have represented in fiat currency due to fractional reserve banking. This is also not compliant with sharia law. But when it comes to Bitcoin, every individual with the coins does own them. Both of these arguments were used by Mufti Muhammad Abu Bakar in his paper to show that Bitcoin should be acceptable in Muslim countries. (Everything you need to know about: Trading with Bitcoin Futures on US Stock Market)
An argument could also be made about bankers in Islamic countries who do not adhere strictly to Muslim laws. In fact, only about 20% to 30% of bankers in the Gulf and Southeast Asia regions stick to sharia law while the rest just act as any other bankers. They do this in order to increase profitability and make their clients money, despite this speculative nature of the financial markets being against sharia law. This is definitely a major sticking point for Islamic financial institutions that want to increase profitability, especially in a market as ripe as the coin industry.
A problem for the proponents of legalization arises, though, when the number of coins is counted, where there are over a thousand different coins, all with different structures and properties. We have covered a lot of coins at TopBrokers, and there are some that are completely different from Bitcoin in structure. (It’s interesting to see: How Libra Coin Will Change the World's Financial System)
Recently, the debate seems to be winding down as scholars start to view Bitcoin trading as an exchange of rights rather than currency. According to sharia law, this is permissible and it is allowing adherents to gain access to the crypto markets.
Alternatives to the industry
Despite this conflict in how Bitcoin and other coins are perceived, people are still attracted to the crypto industry. To this end, there have been some coins developed to attract the Muslim investor. An example of this compromise is OneGram founded in 2017 in Dubai in May 2017 following an ICO. The difference between OneGram and other crypto companies is that its native token is backed by physical gold. Every token issued by OneGram called OneGram Coin (OGC) is backed up by a gram of real gold and this makes the token less speculative. Since sharia law is discouraging speculation and chance, OneGram has managed to create a suitable alternative.
OneGram tokens are available on the company’s exchange called Huulk and stored on the company’s wallet available o desktop and mobile. Transactions are charged 1% commission, and these generate revenue for the company which in turn uses 70% of these commissions to purchase more physical gold. OneGram was so successful that in just over a year more than $400 million worth of tokens had been sold. The company has also received a lot of accolades over the years for this innovation, making it one of the most successful coins that are sharia law compliant. (It’s all over the news: Trade War and How It Affects Forex Markets)
The idea of backing up crypto with real-world assets is not new, so it wasn’t a surprise when more companies came up with a similar service. X8 is another example, this one existing on top of the Ethereum platform. Basically, X8 is an ecosystem that consists of X8 Currency, backed up by 8 separate currencies as well as gold, and X8 dollar that is backed up by US dollar reserves. When individuals make investments, an AI program allocates those funds in the global financial markets to generate returns. This network has been operational since 2015 and has transacted over $1 billion in trades. The company was also the first to receive a Shariah Compliant Investment Certificate from Shariah Review Bureau. (This is: THETA Coin Investment and Price Prediction 2020)
Blockchain has also found uses in Islamic countries, such as Halal Chain (HLC), based in UAE and also available in Indonesia. The platform was launched in May 2018 as a way to keep track of products and ensuring they are halal. These products can involve foods, cosmetics, and pharmaceuticals. Users of Halal Chain will be able to keep track of these products from production to distribution and enhance the integrity of Halal compliance. The native token, HLC, is listed on several major exchanges including HitBTC and CoinBene. This was in line with the UAE Blockchain Strategy 2021 launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum.
What is the future of coin trading in Islamic countries?
There’s no secret that the crypto debate has become a thorn on the side of the Islamic population who want a conclusive and specific answer. Most countries have a national sharia authority in charge of interpreting the Quran within the country it exists. Global bodies also exist, but neither of these has the authority to impose actual regulations in any country. It is for this reason that the future of coin trading for Islamic believers remains in limbo. (In case you’re wondering: Find Out More About Tezos and Its Price Prediction For 2020)
But global financial institutions are starting to recognize that this is an issue worth receiving some attention. Not only do Muslims make up about a quarter of the world’s population, but it is also the fastest-growing religion in the world. It is no wonder, therefore, that the International Monetary Fund (IMF) also held its first discussion about the Islamic banking needs in a meeting last year. Furthermore, countries in the Asia Pacific are mainly Islamic countries, and these are the fastest-growing economies by GDP. Some of these countries include India, Singapore, Indonesia, etc.
Besides the interest by financial bodies, the fact that the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) had a discussion about crypto trading also shows that the religious leaders and scholars are interested in resolving the situation. This is the meeting that preceded Mufti Muhammad Abu Bakar’s statements about Bitcoin and other cryptocurrencies being halal. Following the statements published in Abu Bakar’s paper, the value of Bitcoin shot up by $1,000, further indicating that there is a lot of demand for Bitcoin among the Islamic community. (These are the: Most Secure and Regulated Stablecoins of 2020)
In the end, the decision will likely come down to what will be most favorable to individuals in Islamic countries. As long as crypto trading remains as profitable as it is, it will most likely have to be allowed within these regions. You see, the thing is that the legality of crypto will come down to the interpretation of shariah law, and most people will tend to lean on the side that is most beneficial. You can already start to see the change in perspective from recent interpretations of what cryptocurrencies are. Already, we have seen that some scholars are taking coins as a transfer of rights. Ziyaah Mahomed who works at HSBC in Malaysia also commented on cryptocurrencies being viewed as a form of wealth (maal). This too is acceptable under sharia law, bringing coins even closer to being accepted.
But until experts and scholars decide on what coins really are and specific laws governing these assets are put in place, there will always those who are for and against their trade. Religious leaders need to get acquainted with crypto by experts to understand them well since there is a divide between their understanding of the technology and interpretation of shariah law. This was according to Harris Irfan who is the chair of the UK Islamic Fintech Panel that is responsible for governing fintech products to ensure they are shariah law compliant. Other notable Islamic institutions like the Islamic Fiqh Academy will also be involved in drafting laws about what cryptos are so that other factors such as inheritance and tax payments (zakat) can also be determined.
There is definitely still a long way to go and plenty of hurdles along the way before we can know where cryptocurrencies will stand in terms of legality. But we do know that coins are already very popular in Islamic countries going by the wide acceptance of crypto companies like OneGram and the response in the markets when scholars promote coin trading. In the future, crypto is likely to get even more popular among Muslims just as it is elsewhere around the world.
To learn more about the problems facing the acceptance of crypto among Islamic communities, watch this short clip: