Cryptocurrencies from Islamic perspective

M. Kabir Hassan, Aishath Muneeza and Ismail Mohamed

Journal of Islamic Accounting and Business Research, 2023, vol. 16, issue 2, 390-410

Abstract: Purpose - This paper aims to derive a compatibleShariahopinion on the permissibility of using cryptocurrencies by Muslims by reviewing the opinions expressed byShariahscholars on the permissibility of cryptocurrencies. Design/methodology/approach - This is a qualitative desk review research where the opinions expressed by theShariahscholars on the permissibility of cryptocurrencies and the issues related to it have been analyzed using the literature. All theShariahparameters checked pertaining to currencies have been studied and assessed to derive theShariahopinion. Findings - The research findings suggest that cryptocurrencies do not fully meet the characteristics of money according toShariahprinciples. Scholars debate their classification as a medium of exchange due to concerns about volatility, intrinsic value and governance. The treatment of cryptocurrencies varies, and their decentralized nature prevents monopolization. Governance and resistance to manipulation are facilitated by blockchain technology. Classifying cryptocurrencies as hard money and their recognition as the primary unit of account face challenges. While they can be a store of value, price volatility and regulations must be considered. The network effect is crucial for their success, and their supply is controlled through complex protocols. These findings have implications for policymakers in Islamic finance. Originality/value - The differences inShariahopinions on using cryptocurrencies have been a major debate in the Islamic financial industry. A clear and comprehensive study is not found on the differences in theShariahopinions on their reasonings, which is important for researchers and professionals in the field. Therefore, this research provides valuable insights for policymakers, scholars and practitioners in Islamic finance, contributing to the understanding of applying Islamic principles to cryptocurrencies.

Keywords: Cryptocurrency; Islamic perspective; Money; Shariah; Digital currency; Nuqood (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-09-2022-0238

DOI: 10.1108/JIABR-09-2022-0238

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