CRYPTOCURRENCIES FROM ISLAMIC PERSPECTIVES:THE CASE OF BITCOIN

Ahmed Kameel Mydin Meera ()
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Ahmed Kameel Mydin Meera: International Islamic University Malaysia

Bulletin of Monetary Economics and Banking, 2018, vol. 20, issue 4, 475-492

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. Yes, there are cases where bitcoin is banned by the country. This article examines the implication of bitcoin on Islamic finance and question 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 learning 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 cry cryptocurrencies are argued to be desirable and consistent with the maqasid al shari’ah.

Keywords: Cryptocurrency; Bitcoin; Islamic Money; Islamic Finance; Shari’ah Money; Fintech (search for similar items in EconPapers)
JEL-codes: O31 P44 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:20:y:2018:i:4d:p:475-492

DOI: 10.21098/bemp.v20i4.902

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