A few years ago we tried to answer whether Forex is halal or haram, talking to scholars and traders. Now, cryptocurrency trend is growing, while some people comment that cryptocurrencies are not acceptable in an Islamic context. So, I've decided to write a small article trying to answer the question of : Is Bitcoin Halal or Haram?
Plato once said “Human behavior flows from three main sources: desire, emotion and knowledge”.
Of course, the Sharia Law in Islam vetoes certain activities, for example, acceptance of specific types of interest. Especially, those of investment types that are not according to Islamic banking principles. This brings attention to Bitcoin and cryptocurrency investment as well.
Is Bitcoin and cryptocurrency investment sharia law compliant? Is my Bitcoin halal or haram?
These are the questions puzzling many of the Islamic faith followers.
Is Bitcoin Halal?
Before answering this question, I want to look into what bitcoin is. Wikipedia definition of Bitcoin is as the following:
"Bitcoin is a cryptocurrency and worldwide payment system. It is the first decentralized digital currency, as the system works without a central bank or single administrator."
Many also refer Bitcoin as the Gold of digital era. This is because, like Gold, Bitcoin is limited in supply. One the mining cap is hit, there will no longer be any new Bitcoin. What does that mean? Well, supply will be limited, while the demand will keep on rising. And the way you can buy bitcoin without mining is via Cryptocurrency exchanges. Also
Is there an Islamic Bitcoin exchange?
In fact, the UAE has already got a Bitcoin exchange called BitOasis which offers Bitcoin Wallet services. It also offers services across GCC. Since shariah law exists in the UAE, we can say that there is a type of Islamic bitcoin exchange or acceptance in the UAE too.
It is very likely that Bitcoin is halal and I will try to explain my vision as well. Unlike traditional money transaction networks using ledgers with no guarantee, Bitcoin works with blockchain technology basis. The technology and tokenomics behind Bitcoin and other crytpo tokens are what make them valuable. While traditional banks use the principle of fractional reserve, which Islam has prohibited, Bitcoin transactions are not like that.
To even bring my claim further, I believe Bitcoin is the most halal currency in circulation today! However, it still fails to meet the definition of money in Islam. Not like modern currencies, Bitcoin is not based on debt, which is not haram in Islam. So, from just this perspective all the existing money in the world would be haram as they are based on debt. Bitcoin is not based on debt, but a proof of work. This is not haram in Islam.
The Turkish Government's Opinion on Bitcoin
Earlier in 2017, Turkey did once again what they are good at, attracting attention. Some of the Turkish officials started comments that Bitcoin is not in accordance with Islam. They warned Turkish citizens against dealing with Bitcoin. Turkey's Directorate of Religious Affairs, known as Diyanet, said that Bitcoin as the leader of the top cryptocurrencies has close connections with illegal activities and has a lack of regulation. The state had not authorized Bitcoin, it added:
“Buying and selling virtual currencies is not compatible with religion at this time because of the fact that their valuation is open to speculation, they do easily use in illicit activities like money laundering and they are not under the state’s audit and surveillance.”
In November, the Turkish central bank also said it is looking into Bitcoin and other cryptocurrencies together if they can “contribute to financial stability.” In September, the apartment complex in Turkey Miavita Beytepe announced that it would be accepting Bitcoin for luxury homes. So, all that fuss was for nothing?!
Besides just the warning, the Turkish religious body failed to convince people on their politically driven comments.
Verdict: Do the Islamic laws allow cryptocurrency investments?
Is Bitcoin Halal or Haram, in the end? We believe that it is something that left to official religious bodies to decide on. Even the match does not match up with the illegal activity comments of authorities. while at its top market cap Bitcoin never passed above $300 Bln, the criminal world is having over $1 Trln. Hence, even if the world underground gangs had the entire bitcoin supply, it would not have sufficed.
As long as religious bodies keep on having political agendas, it is likely that we will keep on hearing about Bitcoin halal and haram discussions. Indeed, as we stated in the previous Forex Halal or Haram article, this topic is open for discussions and we encourage you to share your thoughts with us.
Is Bitcoin Halal or Haram in your opinion? Share your opinion with us in the comments section below.