Since Bitcoin’s inception date of January 3rd, 2009, Muslims around the world have been asking the question, is Bitcoin halal? And in the early days of Bitcoin, more times than not, many scholars gave a blanket ruling that Bitcoin was haram and cited their reasons as to why.

Now, in 2021, some 12 years later, we have come a long way in our understanding of Bitcoin and our scholars have also progressed in their understanding of not only Bitcoin but cryptocurrency as a whole.

So when the recent news came out that Indonesia’s National Ulema Council issued a fatwa saying that Bitcoin and all cryptocurrency is haram, that surprised not only Indonesians, but many Muslims worldwide as Indonesians have not only been steadily increasing in cryptocurrency adoption, but the Indonesian government has also signalled its interest in providing cryptocurrency regulation to make cryptocurrency trading safer for Indonesians.

Let’s discuss the Indonesia Bitcoin ban and what this means for the future of cryptocurrency in Indonesia.

Bitcoin in Indonesia

Indonesia, the largest Muslim country in the world, has seen steady adoption of crypto acquisition and trading with crypto transactions amounting to 370 trillion rupiah (around$26 billion) in the first five months of 2021 alone. Make no mistake about it, Indonesians are serious about crypto.

In fact, we are now seeing that Indonesians have been investing more in cryptocurrency than they have in the stock market and the government has taken notice.

Indonesia’s Minister of Trade, Jerry Samuaga, held an interview with Metro TV News discussing the government’s initiative to create a Crypto Bourse to bring more regulation to cryptocurrency in Indonesia making it safer for Indonesians to transact with crypto.

So how is it that the government is moving forward with crypto adoption, yet the country’s National Ulema Council has completely opposite opinions declaring Bitcoin and all cryptocurrency haram?

Indonesia Bitcoin ban

In 2017 the Central Bank of Indonesia, Bank Indonesia (BI) banned using virtual currency in payment system activities. The message was clear, the Central Bank of Indonesia does not see Bitcoin as legal tender and aims to protect the country’s economy from misuse of virtual currencies.

Still, the government did not ban owning and/or trading cryptocurrencies. It only banned crypto being used in payment systems and does not recognize Bitcoin or virtual currencies as legal tender.

Four years later, in 2021, the Minister of Trade, Jerry Samuaga, has also continued to clarify this and has stated that Bitcoin is not seen as a currency or legal tender in Indonesia, but rather is classified as an asset.

And what of the country’s religious scholars?

Even with the progress in the understanding of cryptocurrencies among scholars worldwide with scholars beginning to have a more nuanced opinion on Bitcoin, crypto, and virtual currencies, the National Ulema Council in Indonesia still holds the opinion that Bitcoin and all cryptocurrencies are haram as they believe that “cryptocurrencies as commodities or digital assets are unlawful for trading because they have elements of uncertainty, wagering and harm.”

According to the National Ulema Council, Bitcoin and cryptocurrency are also seen as haram because:

• Trading them is likened to gambling
• Cryptocurrencies are not physical, tangible assets
• Cryptocurrency values are volatile and fluctuate greatly

However, Asrorun Niam Sholeh, head of religious decrees for the National Ulema Council, made it clear that “if cryptocurrency as a commodity or digital asset can abide by Shariah tenets and can show a clear benefit, then it can be traded.”

5 benefits of cryptocurrency

So are there any benefits with cryptocurrency? Yes, we can list at least five.

1) Easy transactions

Cryptocurrencies such as DASH and Cardano make it easy to conduct transactions such as remittances for extremely low costs.

This can prove most beneficial for those living in countries whose currencies are not as strong as the British Pound Sterling (GBP), US Dollar (USD), Singaporean Dollar (SGD), Brunei Dollar (BND), Jordan Dinar (JOD), Omani Reil (OMR) and others as utilizing cryptocurrencies directly between parties could help save greatly on remittance fees by cutting out expensive third-party vendors.

2) Preservation of wealth

Bitcoin, in particular, is seen as a store of value to hedge against the inflation of fiat currencies worldwide and preservation of wealth is one of the five objectives of the Shariah.

3) Transparency

Cryptocurrencies can run on public blockchains for all to see providing much needed transparency for financial structures such as stock markets and sukuks. I foresee a future where stocks will be represented as digital assets on a blockchain as a way to deliver better transparency for its investors and to prevent the trading volume from exceeding outstanding shares as can happen today.

4) Fraud prevention

Cryptocurrencies such a VeChain provide accountability for goods being produced and traded since they are tied to a blockchain that allows the consumer to validate the authenticity of a product through the entire supply chain of its production.

Utilizing cryptocurrency for fraud prevention can be highly beneficial as it can help prevent counterfeit products from entering the marketplace and harming people while also allowing the tracking of food products to make sure that they are halal.

5) Increase in economic equity

Over the years we have only seen an increase in finance and e-commerce products grow online and access to these markets can be near impossible for those who are unbanked creating wealth inequality worldwide. However, it has been reported that there will come a time when there will be more people that have smartphones than bank accounts.

Smartphones along with cryptocurrency serve as a gateway for many people to now enter the growing finance and e-commerce markets providing economic equity, or at least economic inclusion, to those who are unbanked around the world, particularly in Asian, Middle Eastern, and African countries, allowing them the possibility to participate in the market at low cost in a manner that would have been impossible years ago.

These are five examples, and there are more, of how cryptocurrency can be of benefit to humanity while also being compliant with the Shariah.

The future of cryptocurrency in Indonesia

While fatwas are not necessarily binding, Muslims generally view them with importance and Indonesian Muslims are no different. Do I believe that the ulema of Indonesia will change their view on Bitcoin and cryptocurrency? Yes, I believe they will.

Cryptocurrency is the natural evolution of money, but we must still remember that cryptocurrency is a new technology that is not adopted nor used by the masses worldwide for everyday use. The number of people that are active cryptocurrency users as of 2020 was around 100 million people in a world of billions. This is still small.

And as for how much money all cryptocurrency accounts for worldwide, well, as of the time of when this article is published, that only sits at a mere 7%.

In other words, cryptocurrency is still not mainstream, but in time, as better infrastructure is built throughout cryptocurrency markets focusing on ease of use and government compliance; where we will see better security, faster transaction times, interoperability between blockchains, a better balance between privacy and transparency, better user interface (UI) and user experience (UX) design, along with many countries implementing their own central bank digital currencies, I do believe that we will see more stability in crypto markets, easier and more beneficial use of the technology, and more acceptance by governments and scholars worldwide and this includes Indonesia.

Indonesia is the largest Muslim country in the world with a people naturally inclined to business and technology and who, by and large, hold their Islam with importance. I believe they will find a way to integrate cryptocurrency within their country in a beneficial way while still upholding their Islam.

This is already taking place in Indonesia as we see it in projects like Cardanesia, a Cardano staking pool earning halal yield from Cardano’s proof of stake protocol. Cardanesia’s participation in proof of stake block validation is seen as environmentally friendly and as a way of giving back, some of the income they earn from staking is given as charity to Rumah Zakat.

Insha’Allah I look forward to seeing the opinion of scholars change and look forward to having them participate in the formation of halal financial products, security, and IT infrastructure based on cryptocurrency, blockchain, and digital currencies in a manner that is not only beneficial for the government, but also for the everyday user.

I do believe that this is possible in Indonesia, and in the end, Allah knows best.

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In 2017 I wrote a blog post called, Is Bitcoin Mining Halal or Haram?, and we came to the conclusion that at that time there was no consensus among scholars about whether mining Bitcoin is halal or haram. Rather, we stated that Bitcoin mining is halal because there was no obvious evidence to suggest that mining Bitcoin is haram.

However, years later, this question is still being asked by many so I figure it’s time for an update.

Is cryptocurrency mining halal or is Bitcoin mining halal? The simple answer is, yes. Bitcoin mining is halal. Bitcoin mining is nothing more than the act of verifying transactions on the Bitcoin blockchain by a Proof of Work protocol. Bitcoin miners who successfully verify transactions are providing a service to Bitcoin users as well as providing security to the Bitcoin network and they are rewarded Bitcoin for their effort and there is nothing haram with this.

Great! You have an answer to your question. But now you must be thinking, but what about those who say Bitcoin is haram and in addition to that also say, or imply, that Bitcoin mining is haram?

If this is your thought process, then please read on.

Is mining crypto haram?

In my previous blog post, Is Bitcoin Halal? 10 Scholars’ Opinion on Bitcoin, I noted that some scholars have said that all aspects of cryptocurrency are haram and this includes mining Bitcoin.

Two of the main reasons some scholars have said that crypto mining is haram are:

1. Bitcoin (or any cryptocurrency for that matter) is not backed by a government; therefore, all aspects of Bitcoin, including mining bitcoin, is haram since there is no government approval.
   
2. Bitcoin mining is resource intensive and uses too much energy which in turn is bad for the environemnt; therefore, Bitcoin mining is haram.

But how accurate are these two reasons as to why some scholars would rule Bitcoin mining as haram and can we say that the above-mentioned reasons are, reasonable?

Bitcoin backed by government

For those scholars who say that all aspects of Bitcoin are haram because Bitcoin has no government backing, they mean that governments do not recognize Bitcoin as currency, money, or legal tender; therefore, Bitcoin, and this includes Bitcoin mining, would be seen as haram.

However, over the past 10 years since Bitcoin has been around, more and more governments have changed or updated their laws allowing their citizens to participate in crypto markets with governments recognizing Bitcoin as either a currency, an asset, or even property.

2021 has also marked the first time that a country’s government has not only allowed the permissibility of Bitcoin use for its citizens, but it is the first time that a government has also recognized Bitcoin as legal tender. In other words, we finally have Bitcoin backed by a government.

In June of 2021, President Nayib Bukele of El Salvador made history by passing a bill in the Salvadorian congress making it a law approving Bitcoin to be used as legal tender.

This now begs the question, since Bitcoin is backed by a government, El Salvador, is it then halal for Muslims in El Salvador to use Bitcoin? It seems that the answer would be, yes.

And what about mining Bitcoin? El Salvador has not only recognized Bitcoin as legal tender but the government will launch a Bitcoin mining initiative for the country as well. We’ll touch on that later in this blog post.

Now, are we saying that all countries recognize Bitcoin as legal tender or all countries approve the use of Bitcoin – and this includes Bitcoin mining – of course not. We know that China has just recently banned Bitcoin mining in their country.

Update: China has now banned ALL cryptocurrency activities.

Regardless of this, we are observing a growing acceptance by governments worldwide to explore the use of cryptocurrencies in their countries and/or allow their citizens to use cryptocurrencies even when there are no clear laws or guidelines in place or even if the government does not implement a law stating that Bitcoin is legal tender.

Bitcoin energy consumption

Another argument made by some scholars as to why Bitcoin mining is haram is because it is commonly stated that Bitcoin mining electricity consumption utilizes large amounts of energy to mine transactions and is therefore bad for the environment.

This has also been mentioned by our sheikh, Assim Al Hakeen, and I have touched on this in a blog post called, 10 Reasons Why Bitcoin is Haram. Sheikh Assim Al Hakeem Bitcoin Fatwa.

I have also been of the mindset that Bitcoin mining is resource-intensive and uses a high amount of energy to mine Bitcoin. However, the question that I failed to ask myself was, Bitcoin mining is resource-intensive compared to what?

When comparing Bitcoin mining to the energy consumption of the banking and gold industry, two industries that Bitcoin is regularly compared with, then we begin to see a different story.

Galaxy Digital has released a report called, On Bitcoin’s Energy Consumption: A Quantitative Approach to a Subjective Question, which states that Bitcoin mining uses less than half the energy of what is used in the banking or gold industry.

The chart below shows that the banking industry uses around 263.72 TWh per year and the gold industry uses about 240.61 TWh per year and Bitcoin uses less than half the energy of both of these industries, 113.89 TWh per year.

So, is Bitcoin mining resource-intensive? Does Bitcoin mining use a lot of energy? The answer is, yes. But so are other industries that are a mainstay of human life – the banking and gold industry. As we stated, annually, they both consume more energy than Bitcoin.

So if the argument is that Bitcoin mining is haram because it is resource-intensive and not environmentally friendly, then the same argument must be made for the banking and gold industries.

So what are possible solutions? Are there alternatives as to how we can mine or verify Bitcoin and cryptocurrency transactions in a manner that is environmentally friendly?

The answer to that is, yes. We are now seeing cryptocurrencies such as Cardano, Dash, and Ethereum already utilize or plan to move to a Proof of Stake (PoS) protocol which utilizes less energy consumption than a Proof of Work (PoW) protocol.

Cardano claims that their PoS protocol utilizes 6 gigawatt-hours of energy annually which is far less than Bitcoin. Now, will we see Bitcoin move to a PoS protocol? I doubt it, as many Bitcoin advocates hold the belief that Proof of Work is the most robust and secure way to secure the network and do not want to see that change, but it could be that future cryptocurrencies will put their focus on PoS rather than PoW to address environmental concerns.

In addition to moving to Proof of Stake, another solution would be to utilize renewable or clean energy for mining cryptocurrencies.

Remember how we noted that El Salvador has also launched a Bitcoin mining initiative? Well, the El Salvadorian government is planning to utilize their geothermal resources, volcanic energy, to mine Bitcoin thus making Bitcoin mining environmentally friendly by utilizing renewable and clean energy.

So, do we finally have Bitcoin that is backed by a government? Yes.

Do we have Bitcoin being mined by clean energy or do we have cryptocurrencies moving to a more environmentally friendly way of verifying transactions by protocols such as Proof of Stake? Again, yes.

Since this is the case, then I foresee scholars changing their opinions on their ruling of Bitcoin and not making such blanket statements.

Muslim countries and cryptocurrency mining

Now you may be saying, well, that all sounds great for El Salvador, but what about Muslims in Muslim countries? Is cryptocurrency mining halal in Muslim countries?

Well, I have another blog post called, Muslim Countries Where Bitcoin Is Legal Or Illegal, where you will not only see a list of Muslim countries and their legal stance on Bitcoin but you will also see that some of the countries highlight cryptocurrency mining initiatives that are underway in their respected countries.

Pakistan is one of those countries. Pakistan has launched a cryptocurrency mining initiative for the province of Khyber Pakhtunkhwa to build Bitcoin mining farms with the hopes of opening up their mining farms to investors in the future.

Kazakhstan has also been taking lead in the Muslim world when it comes to having government-backed cryptocurrency mining initiatives and has already produced a number of cryptocurrency mining farms.

In an article by Aizhan Abilgazina, A New Kind of Mining: Kazakhstan Stakes Its Claim in the Cryptocurrency Industry, Aizhan states,

Kazakhstan has seen a significant growth in cryptocurrency mining activities with around $200 million having been already invested in 13 mining farms that are operational around the country with four more under construction.

By Aizhan Abilgazina

The Kazakhstan government also has plans to actively seek outside investors who are seeking cryptocurrency mining in their country.

Last month, Kazakhstan’s minister of digital development, innovation and aerospace industry, Askar Zhumagaliyev, announced that the department is planning to attract 300 billion tenge, or $738 million, worth of investments by 2023 for activities related to cryptocurrency mining.

Source – Asia Times

The only downside I see to cryptocurrency mining in Kazakhstan is that half of their energy consumption comes from coal and coal tends to be considered as “dirty energy”.

Conclusion

Again, we are seeing an evolution as to how governments, more specifically, Muslim governments, are interacting with cryptocurrency and the blanket argument that Bitcoin does not have government backing and therefore Bitcoin mining is haram does match realities on the ground.

And in all fairness, many of the scholars who said that Bitcoin and Bitcoin mining is haram had declared such opinions years ago. Times change, new information becomes available, and it may be that these scholars have also changed their opinion.

We have come a long way since Bitcoin and cryptocurrency hit the world stage over 10 years ago and as our overall understanding and education of cryptocurrency has evolved, so has the opinion of our scholars.

So, is Bitcoin mining halal? According to a number of scholars, yes. You are providing a service and being compensated for that service. The only thing you must do now is to check your government’s legal rulings on cryptocurrency.

And in the end, Allah knows best.

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Is cryptocurrency legal in your country? Want to know the legality of cryptocurrency in other Muslim countries? With the expansive growth of cryptocurrency worldwide, many governments are now developing laws to deal with the use of cryptocurrencies by their citizens.

Below you will find a list of Muslim countries along with the legal ruling of cryptocurrency by their governments.

Bitcoin Legality in Africa

Bitcoin Legality in Asia

Bitcoin Legality in Europe

Bitcoin Legality in the Middle East

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Assalaamu Aleikum everyone! Back in 2017, I wrote a series of blog posts addressing the question, is Bitcoin halal or haram? And in 2017, I was not able to find a single scholar that mentioned whether Bitcoin was either halal or haram. In fact, many simply said, “I don’t know.”

So now, what do our scholars have to say? Is Bitcoin halal?

The answer is, there is still no consensus among the scholars as to whether Bitcoin is halal or haram but we are seeing some movement with scholars having a better understanding of cryptocurrency where some scholars now say it is halal while others still say it is haram and some say it is makruh (disliked). As for scholars who say it is halal, they fall into two groups, one who sees bitcoin as an asset and the other that sees bitcoin as a currency. For those who see bitcoin as a currency, then the rules of Riba Al Buyu would apply.

The chart below gives a quick overview of scholars and their opinions on Bitcoin. Let’s take a more detailed look at what our scholars have to say about Bitcoin. Insha’Allah this will help you make a decision as to how to proceed when it comes to Bitcoin and cryptocurrencies in general.

Dr. Salah Al Sawy and Bitcoin

Dr. Salah Al Sawy is currently the Secretary General for the Assembly of Muslim Jurists in America (AMJA) as well as President of Mishkah University. Dr. Salah takes a very balanced approach with Bitcoin and adheres to the general Islamic principle that when it comes to business transactions, all transactions are considered halal unless we have clear proof that it is haram.

When it comes to Bitcoin, it is the position of Dr. Salah that we cannot say that Bitcoin is haram as he sees no direct proof that it is haram. He even notes that he sees many positives and benefits of Bitcoin such as, it can be easy to use, can be an inexpensive way to send money, it can be faster to send money with Bitcoin as opposed to wiring money, and its secrecy is a positive `and also other benefits.

However, even with these positives, he does see some negatives such as, there is no supervising body over the currency, there is no authority backing the currency, and one can make huge profits but can also experience huge losses.

He also notes that even though it is not necessarily haram to attain huge profits from cryptocurrencies, making huge profits as such is not something that is normally found in other products. Also, the secrecy of the coin could be used for money laundering, buying illegal items, and financing haram things.

Dr. Salah also notes that one of the principles of Islamic economics is that money has some tangible benefit to the country such as creating jobs and businesses, and he does not see cryptocurrencies adding work or jobs to the economy at this time. Rather, it is just an investment that people are putting their money into.

As of now, Dr. Salah Al Sawy sees Bitcoin and cryptocurrencies as very “shaky and dangerous territory” where people could potentially lose all of their money by investing in it and that we must proceed with caution and be very careful when using cryptocurrencies.

His opinion is that even though we cannot say that Bitcoin is haram, at this time, he sees it as makruh. You can watch his talk on Bitcoin here.

Grand Mufti Shawqi Allam Bitcoin Fatwa

Shawqi Ibrahim Abdel-Karim Allam is the current Grand Mufti of Egypt and a Ph.D. graduate of Al Azhar University where he earned his degree in Jurisprudence and Sharia Law. Mufti Shawqi has taken a more stern stance with Bitcoin and has issued a fatwa stating that Bitcoin is haram.

“Dr. Shawqi Allam, the Grand Mufti of the Republic, affirmed that it is not permissible according to Sharia to trade in the currency of “Bitcoin” and deal in it through buying, selling, leasing, and so on. Rather, it is prohibited to participate in it because it is not considered as an acceptable medium for exchange by the competent authorities, and because of the harm it entails resulting from deception, ignorance and fraud in its bank, standard and value, in addition to the high risk that its practice lends to both individuals and states.” Read his fatwa here.

Mufti Shawqi was also interviewed by the Egyptian magazine, Egypt Today, and had the following to say,

“Allam told Egypt Today that he met with a group of economic experts to reach his final ruling. He clarified his findings on the cryptocurrency, stating that Bitcoin could allow for tax evasion, piracy, money laundering, fraud and corruption, and therefore is forbidden in Islamic Sharia Law.” See the article here.

Mufti Shawqi also sees Bitcoin as haram because of its price volatility as well as being a high-risk investment where investment is focused on speculation. He also notes that Bitcoin is not controlled or issued by a government bank and that this can be problematic for the state.

In short, Mufti Shawqi has not noted any good that Bitcoin or cryptocurrencies can offer to humanity.

Sheikh Assim Al Hakeem Bitcoin Haram Fatwa

Sheikh Assim Al Hakeem is a prominent scholar and imam based out of Jeddah, Saudi Arabia who takes the position that Bitcoin is haram and lists a number of reasons as to why he holds such a position. Here are the 10 reasons why Sheikh Assim sees Bitcoin as haram.

• The origin of Bitcoin is unknown and it has sustainability and security issues.
• The price of Bitcoin fluctuates too much.
• Bitcoin is not physical. You cannot hold it and it is not real.
• Bitcoin is a Ponzi scheme and/or is similar to a multi-level marketing scheme.
• People are only using Bitcoin to make fast money.
• Bitcoin is not backed by people or a central bank.
• Bitcoin’s price is inflated and Bitcoin is in a price bubble.
• It is unknown what will happen after all 21 million bitcoins are mined.
• Bitcoin is used for criminal activity.
• There is ambiguity with Bitcoin.

After closely reviewing his reasons as to why he sees Bitcoin as haram, I can see that he has some slight errors in his understanding of Bitcoin and I have written a blog post commenting on his fatwa. Please see my following blog post here, 10 Reasons Why Bitcoin is Haram. Sheikh Assim Al Hakeem Bitcoin Fatwa.

Shaykh Haitham al-Haddad Bitcoin Fatwa

Dr. Haitham al-Haddad is an Islamic jurist and judge for the Islamic Shariah Council in the United Kingdom and has given a fatwa stating that Bitcoin is haram.

Shaykh Haitham believes that Bitcoin is haram because it (Bitcoin) is not backed by anything. It is not backed by gold or any commodity. Bitcoin also has no government backing and when a currency has no government backing, then no one can be forced to use it as legal tender.

Price volatility within the market is yet another reason why Shaykh Haitham sees Bitcoin as haram and since it is not backed by the government, the currency could fall to zero value and thus be a hardship on people.

He also notes that Bitcoin is created out of nothing and that there is nothing real or tangible to hold and says that it is haram to have money that is created out of nothing.

His conclusion is that all aspects of Bitcoin are haram. Therefore, it is haram to use it, to manufacture it, to mine it, to trade it, to buy it, and to invest in Bitcoin.

You can read his fatwa here and also watch a video on his fatwa here.

Mufti Faraz Adam and Bitcoin

Mufti Faraz Adam holds a Master’s degree in Islamic Finance, Banking and Management. He is currently President of Amanah Advisors where he works as a finance and fintech consultant.

Mufti Faraz is one of the few scholars I have found to have a very deep and solid understanding of Bitcoin and cryptocurrency as a whole, yet you will not find him giving fatawa on Bitcoin. He will defer that to other scholars.

Instead, he looks at the overall technology of cryptocurrency, its features, and if it is in harmony with an Islamic paradigm that could be of benefit to humanity.

If I was to summarize my understanding of Mufti Faraz’s position on Bitcoin, I would say that he does not view Bitcoin as haram but rather holds the view that at this time,

“Bitcoin is not ideal as a long-term investment and neither should the Islamic finance industry consider its use in exchange unless there is a specific need to until a regulated and transparent framework is established.

At this current time, Bitcoins are just another investment which are for individual profit maximisation. Nevertheless, returns on Bitcoin investment would be lawful and Shariah compliant according to this understanding.” Read the full paper here, “Bitcoin: Shariah Complaint?” Page 6

In addition to his statement above, there are also six key areas in his research that he touches on that have led me to the conclusion that he does not see Bitcoin as haram.

1) Bitcoin does exist and it is real:
Mufti Faraz offers a counterargument to scholars who say that bitcoin is not real and is made out of nothing. He argues that even if you cannot see or touch something, this does not mean it is non-existent or not real.

As for Bitcoin, he notes that we can see digits [addresses and transactions] on a blockchain and we can see the results of these digits in real life [purchasing coffee, buying a house, paying for a service, etc.] so therefore we know that Bitcoin is real.

2) Bitcoin is mal:
Mal is commonly translated as, “money”. However, in Islamic law, the technical meaning of mal is something that is retrievable.

Mufti Faraz argues that bitcoin is mal. He notes that bitcoin can be stored and retrieved when needed from a Bitcoin wallet, therefore, we can say that Bitcoin holds the characteristic of mal.

3) Bitcoin has taqawwam:
Taqawwam means, legal value. Islamic law states that valid trade can be done only with items that have legal value.

Mufti Faraz makes it understand that we cannot conduct trade with a bottle of wine and/or pork because they are considered haram; therefore, wine and pork do not hold legal value.

Mufti Faraz argues that Bitcoin is nothing more than software code and software code in and of itself is not haram; therefore, we can say that Bitcoin passes the test of having taqawwam, legal value.

4) Bitcoin as a currency:
Is bitcoin a currency? To determine this, Mufti Faraz examines whether Bitcoin has what is called, thamaniyyah.

Please note that the video of his conversation was held sometime after he wrote his research paper, “Bitcoin: Shariah Complaint?”, so his conversation on thamaniyyah may differ slightly in the video when compared with his research paper.

You can find the video of his talk here, Bitcoin: Shariah Compliant? | Mufti Faraz Adam | AMAL.

Thamaniyyah can simply mean, the fundamental features of currency. Those features are a store of value, a medium of exchange, a unit of account, and a standard of debt repayment.

Mufti Faraz highlights that there are differences of opinion on this matter as some scholars have valid ijtihad that Bitcoin is an asset and not a currency while other scholars have valid ijtihad that Bitcoin is a currency.

He also notes that past scholars have made it clear that the Qur’an and Sunnah provide no characteristic or definition as to what is a currency. Allah has left it to mankind to define this for themselves.

5) Bitcoin is not issued by the government:
Mufti Faraz notes that Hanafi jurists have made clear arguments that the people of a society can determine what is a currency just as a government can determine what is a currency.

This would mean that we cannot say that just because Bitcoin is not issued by a government that this now makes Bitcoin impermissible.

6) Risk: 
Mufti Faraz notes that some scholars have noted that Bitcoin is haram because of the high risk that entails investing in bitcoin.

However, he notes that risk in and of itself does not make a matter haram due to the fact that the very nature of investing encompasses some risk, and risk sharing is permissible in Islam.

Rather, risk due to gharar (ambiguity) is what is prohibited, but not risk in and of itself. Investing in bitcoin is not in and of itself gharar so long as the person is clear of the risks and what it all entails.

These 6 points and his extensive research on the matter make it clear that he does not see Bitcoin as haram. Still, though, he would like to shift the focus away from only looking at Bitcoin.

Mufti Faraz holds a similar belief to my own which is, this new area of cryptocurrency is bigger than Bitcoin. Bitcoin is one small part of cryptocurrency. There are other aspects of cryptocurrency that we as an ummah should be exploring.

Over the past few years, his research and interest have extended beyond Bitcoin and have expanded into other areas such as ICO’s (Initial Coin Offerings), Blockchain, tokens, and crypto coins examining their usefulness from an Islamic and sharia perspective.

He would like to explore how we can utilize this technology to benefit not only the ummah, but humankind as a whole and this is in complete harmony with the goals of the Islam and Bitcoin website.

Dr. Ziyaad Mahomed and Cryptocurrencies

Dr. Ziyaad Mahomed is currently the Associate Dean of E-Learning/Online Programs and Director of Executive Education at The Global University of Islamic Finance, Malaysia, and has over 20 years of experience in Islamic Finance with a specialty in banking and investments.

Dr. Ziyaad does not provide a fatwa on Bitcoin but mentions the overall ruling from other reputable scholars noting that some say that it is halal, some say haram, and some say use with caution. He notes that unfortunately, not as many scholars provide an opinion on cryptocurrencies as he would like.

When it comes to assessing the permissibility of Bitcoin, Dr. Ziyaad mentions that there are 3 things that one must examine as it relates to the shariah.

(1) Is it considered mal.
(2) Does it pass the test of permissibility according to the shariah, taqawwam.
(3) Does it meet the objectives of the shariah, Maqasid al-Shariah.

His overall assessment of Bitcoin is that ”there are no clear serious standards on cryptocurrency so therefore one will have to exercise caution in the beginning and one will have to be very brave in entering into cryptocurrency assuming that he understands the necessary shariah parameters behind it before entering into it.” In other words, he does not see it as haram, but one must proceed with caution.

Dr. Ziyaad would love to see a more standardized approach to cryptocurrencies from the scholars as he believes that the future of cryptocurrencies lies in implementing cooperative programs that utilize cryptocurrencies to develop sustainable halal projects that can be of benefit to humanity while also allowing investors to earn a halal income from it.

He has provided a wonderful talk on the topic of Bitcoin and cryptocurrencies which can be found here, Cryptocurrency in Islam: Halal or not Halal? – Ethis Webinar.

Mufti Muhammad Abu-Bakar and Bitcoin

Mufti Muhammad Abu-Bakar is a Shariah Scholar of Product Development and Shariah Structuring at Emaan Islamic Banking and a Shariah Advisor at Blossom Finance. He holds a Master of Science in Islamic Finance from INCEIF, The Global University of Islamic Finance, Malaysia, and is also a Certified Shariah Advisor and Auditor (CSAA) from Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Bahrain.

His area of specialty is Shariah, Islamic Banking and Finance, Takaful (Islamic Insurance), and Islamic Fintech.

Mufti Muhammad has not given a fatwa on Bitcoin, but he does hold the view that Bitcoin is halal and permissible to use and has written a research paper on Bitcoin that you can find here, Shariah Analysis of Bitcoin, Cryptocurrency, and Blockchain.

However, he does note that one of the objectives of the shariah is the protection of wealth and because of this, Mufti Muhammad believes that is it necessary to exercise caution and to be mindful of risks when using cryptocurrency.

He also does not advise buying cryptocurrency as an investment just as one would buy stock in a company, but rather, use cryptocurrency networks as a payment system particularly in areas where the benefits of utilizing cryptocurrency outweigh that of conventional payment methods.

Mufti Muhammad does note that Bitcoin,

(1) Meets the characteristics of mal
(2) Can be classified as money/currency
(3) Money/currency does not need to have intrinsic value

His argument is based on the ijtihad of prominent scholars in the field of Islamic jurisprudence such as Shaykh Zuhayli, Shaykh Khalid Saifullah Rahmani, Shaykh Taqi Usmani, Turki, Al-Mausuah, Al-Fiqhiyah, and Al-Kuwaitiyah.

Finally, he examines the arguments made by scholars who note that Bitcoin is haram because of the following reasons:

(1) Bitcoin is not a legal tender
(2) Bitcoin’s issuer is unknown and has no central authority or government backing
(3) Bitcoin is highly speculative and not stable
(4) Bitcoin can be easily used for money laundering and illegal purposes

To summarize Mufti Muhammad’s counterargument against these points he notes:

(1) Bitcoin is not a legal tender
“The main criteria for money in Shariah is its acceptability by people – whether it comes about by forcing it upon people through laws, or through widespread voluntary acceptance of people.” Page 17

(2) Bitcoin’s issuer is unknown and has no central authority or government backing
Mufti Muhammad argues that even though the inventor of Bitcoin is unknown, the framework of how Bitcoin works, “is a set of rules adopted by voluntary mutual acceptance by users of the currency, and that these rules are published and open for anyone to critique or suggest revision.” Page 17

And even though there is no central bank or government to back Bitcoin, he notes that the blockchain technology of Bitcoin has been, “more secure than any centralized system employed by a government or central bank.” Page 17

He also cites the case where $1 billion USD was stolen from the central bank of Bangladesh in 2016 to note that a centralized bank or government backing alone does not promise security of wealth.

(3) Bitcoin is highly speculative and not stable
Mufti Muhammad notes, “Bitcoin and cryptocurrency cannot be declared haram (impermissible) based on the fact that they experience speculation. In fact, if this principle was valid and applied, then trading in gold, silver, US Dollars, and Euros would all be ruled impermissible, since those assets also experience extreme levels of speculation.” Page 18

However, Mufti Muhammad does acknowledge that cryptocurrency prices in the market are more volatile than many cryptocurrencies and because of this he says, “it is not advisable to trade in cryptocurrency, especially for laypeople who lack professional experience and sophistication with regard to foreign exchange trading.” Page 18

(4) Bitcoin can be easily used for money laundering and illegal purposes
Mufti Muhammad makes the argument that Bitcoin or cryptocurrencies being used for illegal purposes is not an Islamic criterion of currency.

He makes the argument that utilizing something lawful for an unlawful purpose does not make the thing itself unlawful.

“An example from the Hadith can be found in that the Prophet Muhammad (peace be upon him) forbade the selling of grapes to a wine merchant, since making wine is haram (impermissible), but did not forbid the production or trading of grapes for lawful purposes.” Page 18

He also notes that fiat currencies are regularly used for illegal activities with the United States Dollar being the most widely used fiat currency for illegal activities.

Dr. Mohamed Ali El Gari

Dr. Mohamed Ali El Gari holds a Ph.D. in Economics and is a shariah scholar with a specialty in Islamic Finance. He serves on numerous Shariah advisory boards and is currently the Chairman of the Amanie Shariah Supervisory Board.

Dr. Mohamed believes that the advent of cryptocurrency is merely the natural evolution of money as we have already been utilizing digital currency for decades and sees cryptocurrency as the “grand finale” of money.

Dr. Mohamed notes that from the shariah perspective, there is nothing in the shariah that dictates exactly what medium of exchange Muslims must use. The decision is left to the community.

As for Bitcoin, through his research, Dr. Mohamed notes that Bitcoin does fulfill the shariah requirements to be considered mal and classifies Bitcoin as a currency, and states that the rules of riba al buyu apply. Dr. Mohamed also believes that Bitcoin does pass the test of permissibility to use according to the shariah, and it is in harmony with the objectives of the shariah.

Therefore, according to Dr. Mohamed, Bitcoin is considered permissible (halal) to own, buy, sell, use, keep, and invest in, and that cryptocurrency issued by a government is also halal.

He goes on to note that even though he considers Bitcoin and cryptocurrencies halal, he does mention that cryptocurrencies that are not issued by a central bank will have characteristics such as high speculation in the marketplace.

And cryptocurrencies that are not controlled or monitored by a government can end up being used for gambling, embezzling, to steal money from the weaker of those in society, and could also be prone to collapsing and this will end up casting doubt on using such cryptocurrencies as a measure of value or a store of value.

To hear his commentary on Bitcoin, please see here and also here.

Dr. Mohd Daud Bakar

Dr. Mohd Daud Bakar is a shariah scholar receiving his shariah degree from the University of Kuwait. He is also a serial entrepreneur whose professional career now lies within the world of Islamic Finance and is now the President and CEO of Baker Investment company (Financial Investment Company) and also the President and CEO of the International Institute of Islamic Finance (IIIF) Inc.

He is also the current Chairman of the Central Shariah Advisory Council of the Central Bank of Malaysia and a member of the Shariah Advisory Council of the Securities Commission of Malaysia.

Dr. Mohd Daud actively researches fintech applications such as Bitcoin and other cryptocurrencies to gain insight as to how these technologies fit into an Islamic paradigm and can be of benefit to the Muslim world and humanity at large.

Dr. Mohd Daud has worked with a group of scholars researching Bitcoin and cryptocurrency for two years and came to the conclusion that Bitcoin does meet the shariah requirements to be considered mal regardless of whether it is tangible or intangible and classifies Bitcoin and digital currencies in general as an asset and not as a currency.

Dr. Mohd Daud acknowledges that even though he classifies Bitcoin as an asset, he is well aware that people use it as a medium of exchange. However, even though Bitcoin is used as a medium of exchange in the market, he does not classify it as a currency because he believes Bitcoin falls short of fulfilling the requirements of a currency in two key areas:

(1) At this time, it falls short of serving as a unit of measurement
(2) At this time, it does not fulfill being a store of value as the market still pegs Bitcoin to fiat currency and not the other way around

He also notes that since Bitcoin can be classified as an asset, then the rules of riba al buyu do not apply. The only exception would be is if the cryptocurrency is backed by a commodity such as gold, silver, fiat currency, etc., then the rules of riba al buyu would apply. Please find Dr. Mohd Daud commentary on Bitcoin, here.

Sheikh Mustafa Umar and Cryptocurrency

Sheikh Mustafa Umar holds a B.A. in Islamic Studies from the European Institute of Islamic Sciences and an M.A. in Islamic Studies from the University of Gloucestershire, UK. He has also studied under scholars from as far as Nadwatul Ulama in India as well as at Al-Azhar and Darul Ulum in Egypt and is the founder and Director of California Islamic University.

I had a wonderful interview with Sheikh Mustafa where we discussed Bitcoin and its permissibility which can be found here, Is Bitcoin Halal or Haram? Sheikh Mustafa Umar Has the Answer.

To summarize, Sheikh Mustafa agrees with the opinion of Dr. Salah Al Sawy which is, at this time, we can say that Bitcoin might be permissible or it might be makruh (disliked), but we definitely cannot say that it is haram. He also notes that there are other scholars who hold the opinion that Bitcoin is halal and is also a currency and as such, Sheikh Mustafa says that if we are to say that Bitcoin is a currency, the rules of riba al buyu must apply.

Final thoughts

After reviewing the opinions of multiple scholars, I lean more towards the scholars who view Bitcoin as halal or even makruh as I find their ijtihad and arguments to be more sound than those who argue that it is haram.

I also find that the scholars who hold the opinion of Bitcoin being halal or makruh have a deeper understanding of the technology of cryptocurrencies as a whole.

I also want to correct myself. I had posted a blog article called, Is Bitcoin Trading Halal or Haram?, where I mentioned that since there is no consensus among scholars that Bitcoin is halal or haram, then there is no need to follow the rules of riba al buyu when dealing with crypto.

I have changed my position on this due to the understanding that there are scholars who make sound arguments that Bitcoin and certain cryptocurrencies can be categorized as a currency and as such, the rules of riba al buyu would most certainly apply.

And in the end, Allah knows best.

PLEASE KINDLY SHARE THIS ARTICLE IF YOU’VE FOUND BENEFIT IN IT

Today we talk with Sheikh Mustafa Umar, from California Islamic University, to gain insight into whether Bitcoin is halal or haram as well as discuss investing in bitcoin, fatwas on Bitcoin, bitcoin mining, and more.

But first things first, is Bitcoin halal or haram?

To summarize the words of Sheikh Mustafa Umar, at this time we can say that Bitcoin might be permissible or it might be makruh (disliked), but we definitely cannot say that it is haram.

To learn more about why we cannot say that Bitcoin is haram as well as how Muslims should approach this new technology, please watch the video below or simply read the video transcript of the interview below.

Sheikh Mustafa Umar’s websites to check out
California Islamic University
Video: “Bitcoin & Cryptocurrency” by Sh. Mustafa Umar on January 26, 2018
Mustafa Umar’s Blog
Sheikh Mustafa on Facebook
Twitter: @mustafaumar

Video Transcript

Hacking and Cryptocurrency

Andre Rishi: As-salamu alaykum wa rahmatullahi wa barakatuh! And I want to thank everybody out there for joining us for today’s episode here of the Islam and Bitcoin Podcast. Today, we have another special guest with us, Shaykh Mustafa Umar, from Cal Islamic University.

Our Shaykh, comes to us with a very established background, I would say. He does have a Bachelor’s and a Master’s in Islamic Studies as well as a bachelor’s in Information Systems and Computer Science. The brother just loves to study.

He is definitely – he’s also traveled the world and been able to study at the feet of scholars; something that many of us would love to do. And if that’s not enough, if he’s not busy enough, he actually is the author of several books and also the founder and director of California Islamic University. So, I wanted to welcome you Shaykh, to the Islam and Bitcoin Podcast.

Shaykh Mustafa Umar: Thank you very much for having me. It’s a pleasure to be here.

Andre Rishi: Hamdullah! Hamdullah! Now, just so the audience knows I actually met you at the Islamic Institute of Orange County back in January of this year. And you gave a wonderful talk on Bitcoin and cryptocurrencies.

So, just so the audience knows, I really believe you have a very solid understanding of cryptocurrency married to Islamic finance. Again, for the audience, I’m actually going to post a link to that talk that you gave in the show notes here of the podcast and I highly encourage everyone to go check it out.

It’s two hours long but that’s Ok, it’s two hours of excellent information, and I definitely highly recommend that people check that out. So, again, I think your background in cryptocurrency and Islamic finance is better than most of what I’ve seen with the scholars out there.

I mean I have been doing this podcast, this website for a while now probably two years, and I have yet to find scholars who can articulate cryptocurrency well in conjunction with Islam. So, I’m curious, how did you even get into studying cryptocurrency?

Shaykh Mustafa Umar: [Laughter] So, it’s a long story going back but I mean when I was in high school, I used to – like every other high school kid, I used to be motivated by the movies that I watch. So, one of the movies that really influenced me a lot was a movie called Hackers.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: And it kind of got me into this idea of computer security, network security, and things like that. So, that’s what kind of motivated actually to go and do a degree in computer science.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: So, I’ve always been into computers and I kind of got a little bit more into the idea of digital security, cybersecurity, those types of things. Call it a little bit of computer hacking but like not the really illegal type.

[Laughter]

Shaykh Mustafa Umar: I just want to throw that out there.

Andre Rishi: Just clarify, clarify a little bit.

Shaykh Mustafa Umar: We got to clarify that before I get so much showing up on my door.

Andre Rishi: I know right. I know right.

[Laughter]

Shaykh Mustafa Umar: So, I was kind of – I’ve been into that and you know ever since I was a kid and that interest never really went away. That’s even while I was abroad studying Islamic Studies and all of that stuff.

I used to come home in the summers and I’d still like open up my books and go on websites and I was really interested in cybersecurity and those types of things. So, that’s why I have been following things like Bitcoin and cryptocurrency, that’s something that kind of started out amongst a group of people who are into that stuff.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: They’re into like new technology, they’re into the idea of you know cryptography. And also, on top of that like when I was studying Islam, I started to understand you know what, you know, what is riba? What is interest in the Islamic model? It kind of, when you realize that riba kind of encompasses everything.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: It’s built into the economy then you find these ideas of, well you know what was the gold system of the past and does currency mean, what does money actually mean and how could you have an actual, “Islamic System”?

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: These two things kind of came together, interest in computers, interest in cryptography, interest in computer hacking mixed in with this interest in alternative financial systems or a potential system that could be riba free; that could be interest-free completely.

That’s really what got me interested and that’s why I kind of been following cryptocurrency along the way here and there as much as I can kind of keep up with the – what’s going on in the emerging technology.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: And then you know as soon as this boom started in like 2016…

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: …2017, that’s when I started getting questions, I’m like, “Oh, there’s actually Muslims in the community who actually know what Bitcoin is!” Like, I’m not the only one. And they’re not even…exactly…

Andre Rishi: Yeah.

Shaykh Mustafa Umar: And people started asking me these questions like, “What do you think about that?” And I’m like, “Oh…” and I’m like the only, you know, pretty much the only scholar at that time who could even explain what it is. Like, can even tell you something otherwise everyone is just like, “What are you talking about?”

Andre Rishi: Right. Right.

Early Fatwa on Bitcoin

Shaykh Mustafa Umar: So, that’s kind of what sparked my interest initially and then what really got me more motivated was when I saw some fatwas, or some like Islamic rulings, coming up about scholars commenting on Bitcoin. And I looked at it and I said, “You know I don’t really think you understood the technology very well.” So, that got me more kind of a little bit aggravated you could say.

Andre Rishi: Right. Right. Right.

Shaykh Mustafa Umar: So, that’s kind of what sparked my interest, kind of interest increased and increased over time.

Andre Rishi: Right. Right. Give me one second, I just want to make sure as we’re doing this, does my video look frozen to you?

Shaykh Mustafa Umar: Yeah, it does.

Andre Rishi: It does? All right, so hold on and see if I can pause. All right, so, I completely agree in what you’re saying in regards to when you have scholars out there who are giving fatwa and again like you said they are giving these fatwas saying that this is what you know, Allah subhanahu wa ta’ala and our messenger say, when I’m seeing some of the reasons why –

Well, first of all, even before I get into certain, some of the rulings, what has been the general consensus amongst the scholars as it relates to Bitcoin and cryptocurrency as a whole whether it is a halal or haram?

Shaykh Mustafa Umar: So, the majority of scholars who issued statements initially, I think they were a little bit politically motivated because they were more issued by like State agencies run like State of Egypt, the official – the Egyptian body from the State issuing the fatwa.

And so, they said it promotes terrorism and it makes it easy for money laundering and there’s a lot of danger to the State. Initial Turkish fatwa was something ever similar.

Andre Rishi: Hmm.

Shaykh Mustafa Umar: Many other independent fatwas coming out of Madinah University and others not necessarily representing the school but individual scholars saying that this cryptocurrency has no real existence. So you can’t – something that has no real existence is not valid in Sharia; it’s not considered to be something valid.

Other people talking about the danger of it you know talking about it’s a bubble, it’s going to burst and it’s going to become just nothing because it has no value because it’s not tangible. So, these are the kind of the most of the fatwas that were coming out.

I think it’s changing slightly so there are a few people now kind of saying we should be careful about it. It’s very volatile. People can lose a lot of money but at the same time, we can’t just say that it’s haram.

We can – we have to be a little bit more careful. That’s – things are changing slightly but those are the initial fatwas. Most of them were saying that it’s haram to use which we shouldn’t have anything to do with it.

Andre Rishi: Yeah. And even I’d have to say that I remember seeing or hearing some of the fatwas that didn’t make complete sense to me like there was a – it seemed like there was such a huge push between some of the shuyukh, the scholars, saying that well, it’s not backed by a central bank.

Shaykh Mustafa Umar: Mm-hmm.

Andre Rishi: And I remember thinking to myself saying, but during the time of the Messenger,  may peace be upon him, there was no such thing as a central bank back then and I– and granted I’ve never studied all the hadith that’s out there to see whether if banks are ever mentioned. But even in the Qur’an, you don’t hear anything about banks being mentioned and money or currency having to be backed by banks. So, that was something I thought was a little odd.

Also, the whole thing of anonymity. So, one thing that I saw a lot of the scholars mentioning too that “It’s anonymous”, “It’s anonymous”, “It’s anonymous”. And truth be told that anyone who studies Bitcoin, in particular, it’s not actually really fully anonymous.

There are some other altcoins out there like Monero, I think, is actually is more so anonymous. But even aside from that, I think modern-day currency – I always tell people that I think modern-day currency is it is a – cash is probably anonymous.

And even if you look back in the day of the Messenger of Allah, may peace be upon him. They use of gold and the transaction of gold back then between two people again, that can be anonymous.

You wouldn’t know – you can’t tie but you can’t link the gold back to the person who used it. So I didn’t – I was kind of curious that does the Sharia stipulate anything about currency having to be – it shouldn’t be anonymous or should be backed by a central bank or anything as such?

Money During the Umayyad Caliphate

Shaykh Mustafa Umar: Yeah. No, there’s nothing like that technically. The closest, closest thing that you could get is basically what happened was after the time of the Prophet, peace be upon him.

Andre Rishi: Sallallahu alaihi wasallam (may peace be upon him)

Shaykh Mustafa Umar: During the Umayyad Caliphate, the Khilafa, when Islam became a very powerful force, it was spreading to different regions. Muslims were at war with the Roman Empire at that time. And up until that point in time, the Muslims were using Roman stamped gold coins.

Basically, Roman produced gold coins. Because the gold coins have to have like a certain type of measurement so you know exactly what they are, the Dinar or the Silver Dirham that exists. So, they’re being minted basically by the Roman Empire.

So, Muslims were using these Roman coins and then what ended up happening about maybe 50 years or 60 years something after the Prophet, peace be upon him, they decide we need to stop using these Roman coins. We’re going to mint our own coins and we’re only going to accept taxes. We’re only going to accept Zakah for distribution from our own coins.

Andre Rishi: Hmm.

Shaykh Mustafa Umar: Right? So, that was kind of like a State-mandated thing. Now, you can imagine Muslim scholars at that time saying, “You know what? This is – this is a good thing. There’s nothing wrong with that. Let’s stop using the Roman coins that we’re going to use the Muslim empire coins.” Right?

So, that can become like a fatwa where it’s like you know you have to follow the points that are made by this specific group or by this government because that’s better for the stability of society rather than using some foreign coins where we’re at war with these people, we don’t want to support them, right?

So, that makes sense and there’s a sense of security in that. So, you know that if someone is coming to you with another coin that looks like a gold coin and I guess I don’t know you bite on it or something like that and you’re like yeah, it seems good but it may be a counterfeit, right?

So, it’s safer for you if you’re using a minted coin than if you were using a non-minted one because of a potential counterfeit, you might get harmed. You can understand like is fatwa something along the lines with support the government in having decentralized minting of coins for the protection of people, right? So, that’s the closest thing you can get.

Now, to make the argument and take that same argument say, “Ok, therefore we need to have a central bank.” It’s quite different because a central bank is setting the value of the coin itself and has the potential to manipulate the value of that currency. So, there are two different things, that’s the closest that someone can find historically to some type of Sharia presence.

Andre Rishi: Ok. Yeah. Yeah. And it’s not only that too, but like you said, the bank being able to set the value and now, they– especially with our currency not being backed by anything. They literally can just print as much currency as they want to flood the market with.

So, it seemed like there’s no limit to it. So, it seems like that would be – that in itself to me seems like it can be a form of like a silent theft. And I don’t know – I don’t know the exact ayah in the Qur’an, but just to summarize, audhubillah min al-shaytaan ir-rajeem (I seek refuge in Allah from shaytan the rejected), is that the ayah in the Qur’an, Allah says something along the lines that you should not usurp the wealth of others.

Shaykh Mustafa Umar: Mm-mm-mm.

Andre Rishi: You shouldn’t usurp the wealth of others.

Shaykh Mustafa Umar: Yes.

Andre Rishi: So, when you see banking systems develop an economic system as such from what I see, it is a silent theft because the more currency they print, the less value the currency that you currently hold has.

So, all your work and labor that you put into earning this currency, you don’t get the full value of it because a group of people or cartel or a centralized system has usurped that value from you.

So, I know sometimes when I see, you see scholars out there telling people, like funneling people back into a central banking system. To me sometimes it’s like you’re funneling them right back into a system that steals from them which is really, I find really interesting, very interesting. So, yeah. Yeah.

So, what about the average Muslim who’s looking at this and saying, ‘You know what? You know I hear these fatwas and some of those are from my favorite Shuyukh, but I think, they may be wrong and XYZ but at the same time, they want to definitely be a good Muslim. So, what is the ruling on fatwas in regards to the obligation of following fatwas?

The Obligation of Following Fatwas

Shaykh Mustafa Umar: Hmm, that’s a good question. So, you know the average person, who’s not a specialist, they should rely on fatwas because they shouldn’t just take the law unto their own hand and say, “Well, I’m going to interpret the Qur’an and the hadith however I think is right.”

There’s a less likelihood of them arriving at a correct answer. You know, it’s almost like you trust your doctors, you trust your lawyers, you trust your architect that you know if you’re going to build a house you want to get someone who understands architecture.

They know how to build, you know the engineer or someone knows how to build this house, you don’t just go and like grab some wood and then I’ll just hammer it into the ground and you know, I think I’ll be all right. You don’t want that, right?

So, there is a sense of reliance that you should have on scholars collectively. Now, what we’re talking about is a fatwa is usually a statement of one specific scholar. And again, it’s their interpretation of what they think the Sharia stands for, right? And they could be mistaken but usually you should not abandon a fatwa unless there’s another fatwa from an equally or a more competent scholar.

So, what people should realize is that look, when it comes to Bitcoin, when it comes to cryptocurrency as a whole, there’s not that many fatwas on them because it’s a new technology and it’s something that has not really been around for a long time.

It’s not been researched for a long time. It’s not hit the fatwa question sites for a long time where now they have six months, one year to kind of let it simmer in their minds, do some more research, get some funding to have a council go and do some research and then come up with some papers that are really high quality one research papers.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: But because that’s not happened yet, you have to take some of the fatwas that have come out with a grain of salt and say, “Ok, you know what? This issue has not been given enough time to really fully understand it, grasp its origins.” And that’s what’s going to happen in any type of new fatwa that comes out, you know.

The moment the first sheep was cloned for example, right? People are like, “Oh, give us a fatwa on you know what do we say about cloning?” Right? I mean you’re going to get some fatwas and they’re from qualified people. It’s not like the people are not qualified.

They’re qualified in the Islamic aspect of it but they are not qualified in Ok, what is – how does cloning work exactly, you know? What are the ramifications, scientific, political, ethical ramifications of cloning? That’s whole, that’s a large discussion. Right?

So, what happens is you have to have knowledge of both of these things, right? And at the same time, the scholars are getting questions like this which are very complex, they’re new and people need answers immediately. They’re like, “I’m going to buy this tonight. I need an answer. Now!”

And so they’re like, “Ok, we’re going to try and give you something of what we kind of think it is.” And most of the people who are actually giving fatwas on new issues they’re saying “Look, this is based on our preliminary research. This is based on our minimal research. This is what we see and the opinion may change in two years.

It may change in five years when a little bit more research is done, we understand the issue a little bit better and we have more people on the council of scholars who can help us to kind of think through this issue.”

So, that’s the way we should kind of perceive these fatwas that are coming out because they’re still new. Most people did not get questions about cryptocurrency until about 2017, maybe 2016, definitely not before 2014. It really wasn’t well-known. So, that’s still fairly new.

Andre Rishi: Mm-hmm. Mm-hmm.

Shaykh Mustafa Umar: So, it’s going to require simple processing there.

Andre Rishi: Mm-hmm. I know I probably started asking questions in 2015. Like I started reaching out to scholars back then and you know hamdullah, I got honest answers. Pretty much, they all was like, “I don’t know.”

Shaykh Mustafa Umar: Mm-hmm.

Andre Rishi: Simply said, I don’t know. That’s it. They have nothing else to say. I will say though that right now from what I see, it seems like the majority, even if it’s a few scholars, the majority of those – of that pool of scholars have ruled it to be haram.

And the reason being is because they simply say that is simply not a currency. And for me, when I look at that, I think to me it would serve the purpose more of they were a little more nuanced in how they come about the ruling.

So, one thing that I did want to ask from your understanding of cryptocurrency, do you see right now as a currency or as an asset or just a digital token?

Is Bitcoin a Currency According to Islamic Law?

Shaykh Mustafa Umar: Hmm. I mean again, we can get into the philosophy of what a currency means. But understanding the way currency functions today in terms of fiat currency and different currencies throughout the world I personally see it as a currency. Because the idea of – the idea of fiat currency meaning like this has been declared to be something of value by government, right? So, that’s fiat– that’s what fiat means.

So, that idea of fiat doesn’t necessarily have to come from a government, it can come from any group of people now in a – just international network. So, if people consider it to be something of value that they will use it as a currency, then the fiat part of it is done by people due to their trust and due to their wanting it to be used as something of value.

So, I see it personally as currency. And I think currency is something that can be – the way we understand currency today is something that could be introduced, it can be removed, it can become extinct.

So, that’s the way currency operates today. That’s the way most of the rest of our currency is. Now, whether it’s the – you know, how does it compare to gold currency and all that is a whole another discussion but I would rule that as a currency.

Andre Rishi: Ok. Hamdullah. Yeah. It’s funny because with one of the teachers I was studying with, he – one of the things that he did mention was – again, going back to government saying that government pretty much puts the stamp on saying what is and what is not a currency.

And my thought was when it comes to cryptocurrency, this is something that – again, going back to your studies on computer science and hackers, this is something that someone can sit down in their home and now the knowledge and the information is out there where they can program a currency and print out it for anyone to use. It’s that simple now.

And I do think that I think that we’re probably going to see down the road where again, if it’s not my children – I don’t have children yet, God willing, insha’Allah, but let’s just say, your children or grandchildren, it will get to the point where they will be able to program their own currency.

So, I’m curious is that at what point does Islam say, “Well look, as…” I think you’re definitely thinking more long-term in regards to with some of your thoughts that you’re sharing. But what will they say in regards to be the average small group of people just declaring a currency that they’ve come up with for themselves?

Shaykh Mustafa Umar: Right. So, I mean again, it’s hard to define in this day and age exactly what is – what is the quantity that you need for people to buy in and what their geographical distance should be. So, there are no clear-cut rules especially in this day and age where we’re all interconnected across the borders.

So, it’s very hard to make a claim and say this is how many people need to adopt it. So, yeah, there are some risk anyone can just make their own currency. But if that currency is being used by a significant number of people and they’re valuing it without defining what that significant number of people is then that should suffice it for being a currency. Because if you look at what currency was primitively, you look at small little village somewhere and…

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: And they have different currencies and all of a sudden they find some shells in the water and they’re like, “Oh, these shells are kind of rare and not – there’s not that many of them, Ok, let’s go ahead and use this as a bartering system. This becomes our currency where we’re going to have to trade all these products all the time, we use the shells as intermediaries and they represent some store value.”

As long as that’s recognized, you could make anything into a currency. You could take a shell to currency. You could take a random colored rock because that has a certain restricted number within a society and there’s like a – you can call it a social contract or something among those people that they’re saying, “We agree to transact and give certain type of value to this state that’s there.” Right? And that’s exactly what a self-program cryptocurrency would end up becoming.

Andre Rishi: Right. Right. Now, with that being said and I know you said you see it as a currency, one argument that I have definitely seen some scholars make in regards to ruling out Bitcoin in particular, not other altcoins but Bitcoin, in particular, is that trade cannot be instantaneous.

So, for instance, when you make a let’s say a transaction with bitcoin per se, it is at least a minimum of about 10-minute window of time for the transaction to truly be confirmed, even though you’ll see it pop-up on the ledger instantly. So, what are your thoughts on this?

Shaykh Mustafa Umar: Yes, I mean that is one of the issues with Bitcoin. So, it does take some time to process. But again, I think the – that’s due to the technology. So, again, the risks that’s actually involved of it not processing, like you said, it appears instantaneously, right?

So, even with processing at the same time, the appearance ends up being that you know this is something that has transferred over. There are many other types of transactions. I mean if you look at, even when you send money to someone else in a bank or something that used – you write me a check, I’ll deposit that check. It’s not going to come instantaneously.

But what is the ruling on ownership? The moment you handed me that check, and the moment I put it into the bank, that is technically considered to be my property even though it’s not really appeared, even from the Islamic perspective. You’ve handed the money over to me. That property is considered to have transferred over to me, right?

So, from that perspective, this is not a major issue because we already deal with that on a regular basis. What’s the most important thing in Islam is to understand who owns what at what particular period of time and what level of danger or risk is there that a transaction is somehow not going to process such that someone is going to think that they’re getting property transferred but they don’t get it transferred. Right?

I think risk is fairly low as far as my understanding goes, and that’s why it’s not a major issue. We’re like looking and look at this and nitpick on this detail because this stuff happens all the time.

Bitcoin and Riba al Buyu / Riba al Fadl

Andre Rishi: Right. Right. Right. And just hearing you say that definitely clarifies certain things to me and makes more sense. I mean I posted a blogpost some months back where I was talking about trade. And one of the things – again, I always tell people who come to my blog, I’m not a scholar.

I take information from scholars I’ve studied with and share that with them. I know one of the teachers I have had before clearly doesn’t see this as a currency and so because of that, when people had asked me in regards to my studies with Bitcoin and regards to trade I would always say, “Well, at this time, if I don’t see any consensus that people are calling it a currency, then my thought process was that the rules of riba al-buyu, also known as riba al fadl, wouldn’t apply to it simply because there was no consensus and they didn’t call it a currency.

However, from your viewpoint if you can see it, as a currency right now then it would be that the rules of riba al-buyu would apply, no?

Shaykh Mustafa Umar: Absolutely. In fact that’s why I’m very – I actually read a fatwa that said it’s a digital asset and they were making an argument about it being an asset but then the rules of riba don’t apply and that’s very – it’s very problematic because then you can just justify, if you can’t loan money to someone else, you can go ahead and do the whole riba business with cryptocurrency saying that we’re selling you an asset with the profit and there’s Murabaha and all of that and – I mean that’s not the way it functions.

So, I mean I think sometimes people will go down into the technical details and forget that you have to look at the substance and the spirit of what – of how this thing functions and what it’s supposed to do and what was it intended to be and what it generally is rather than trying to make some analogy based upon you know some pre-conceived definition that you have in a book of Islamic law or something like that. I think that’s where the issue arises.

Andre Rishi: Ok. Ok. So, then what are your thoughts when it comes to other aspects of a cryptocurrency such as mining? I’ve seen some scholars here that all of it is haram. All of it, whether you’re doing transactions, whether you’re mining, all of it is not in line with the Islam. What are your thoughts on mining?

Thoughts on Bitcoin Mining

Shaykh Mustafa Umar: So, I mean in terms of mining, there are two aspects. One of them is the electricity consumption, you know, so that’s obviously concerning. So, you know, I mean they say if it becomes so big and you know it takes up a lot of electricity. There’s no doubt about that. Obviously, there’s ways around that. I mean ways to overcome that shouldn’t be too difficult to think of other mechanisms and alternatives.

The idea of mining if you look at it again, what is the substance of mining? The whole point according to my understanding of mining was two things, I mean one, is that they wanted you know Satoshi, whoever that was, wanted to come up with this idea of gradually introducing more and more currency and then putting a cap on it. Right?

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: So, there is that cap when it comes to bitcoin and mining it, built-in. So, this is a problem that’s technically going to resolve itself. I mean the mining is going to be done after certain period of time. That’s the way he planned it to be. And I think that’s a genius way to think about it from that perspective.

One of the ways to restrict the harms from the current financial system that – one of the reasons why cryptocurrency was made in the first place was because you could just manipulate it anyway you want and it just – you can keep on printing more and more like you said, right?

So, once you put a cap, you’ve really – you’ve taken a really big step in preventing that type of abuse from taking place. So, I think the cap is very, very important. And obviously, he had a very good reason or they, whoever they are, they had a very good reason…

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: …for putting out this gradual thing in order to get more acceptance, in order to give an incentive to people who are not just going to do this for the purpose of verifying transactions because there’s not going to be that much money initially.

It seems like an ingenious idea to me. So, it makes sense, people have gone in and said “Well, where’s this money coming from intrinsically? And you know you’re somehow getting money for nothing.” I know it’s somewhat of a far analogy but the analogy is like you know you’re putting effort in to actually mine gold. Right?

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: That’s where the term mining came from. So, yeah, they say well gold has intrinsic value so that’s why you’re doing it. But I mean again that’s another argument whether it has intrinsic value or you know, declared value due to historical reasons and all that. So, I don’t have intrinsically an issue with mining because I understand the purpose of it and the substance of it and the spirit of it.

Once – and if there’s another way or a better way around that, I think it wouldn’t be necessary and I think because cryptocurrency has already become so popular perhaps the transaction cost or whatever technology to transact through it would suffice and people would make enough money just through that without having to do all of this mining. So, I mean my – I would say, I haven’t really thought too much about this issue but I would say that my initial thoughts are, even if mining was like stopped right now.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: It wouldn’t hurt cryptocurrency and people would still be able to charge certain amount of money for their services and it would still – the service would be valuable, the person would still make a profit like many companies are doing and people would be willing to pay that and they would still prefer that and the traditional methods of currency that we have today.

Investing in Bitcoin

Andre Rishi: Ok. Yeah. I agree. I do see that. I do see that. So then, what you’re saying in regards to people being involved in it in transactions and mining, obviously you have the people who are looking to invest and I do know, I do see people that come to my site who they – they do have some knowledge of cryptocurrency and they may not necessarily agree with some of the fatwas that they give and they still move ahead and look to invest.

So, I want to hear what your thoughts on investing.  And before I do that, I definitely want to preface this and say that none of us here financial advisors so please – we’re not here giving you financial advice and what to do or what not to do just speaking generally. Generally speaking for the average Muslim who does have some understanding how this works and is seeking to step in and get involved in this. What are your thoughts in those thinking about investing in it?

Shaykh Mustafa Umar: Right. So, here’s the thing, this is like investing in any other currency, Ok? For me, this is a currency. So, if you’re going to invest in any currency the Islamic definition or the Islamic idea of investing into a currency is not, is not really there, right?

Because currency is not supposed to – intrinsically, it’s not supposed to be fluctuating from an Islamic perspective. You got your gold coin, you got your silver coin, that’s what’s considered to have value. You don’t go like “Ok. I’m going to take my gold coins now and I’m going to buy a bunch sea shells from the village that uses sea shells for currency with the hopes that I can go ahead and sell this sea shells back to my other village for more money than I bought them for.” Right?

So, the idea of investing in currency as far as I understand it is not really something in Islam that’s there. All right. So, from that perspective you don’t like buy and sell currency that kind of comes in the idea of riba. Riba in the sense that you know you’re using currency, using money to make more money that’s not an asset that’s supposed to actually have a certain value that’s increased. That’s the fundamental part of it.

Then you got the practical part of it. Currencies are going to change, right? And they are being valued and devalued. So, the only time that it’s normally acceptable to purchase currency for the “purpose of investing” is when you have a strong reason to believe that either your currency that you have is going to be devalued or the other currency – it’s more about your currency being devalued relative to the other currency which means that that currency is going to be increased in value. To give you an example, Ok let’s – give you an example, let’s say, you live in Zimbabwe, Ok? And…

[Laughter]

Andre Rishi: Oh yes.

Shaykh Mustafa Umar: …before what happened…

Andre Rishi: May Allah helped them. Aameen.

Shaykh Mustafa Umar: Aameen.

Andre Rishi: Aameen.

Shaykh Mustafa Umar: So, let’s say you live in Zimbabwe 2005 and all you do is you transact in the Zimbabwe whether they’re dollars or whatever they were.

Andre Rishi: Their currency. Mm-hmm.

Shaykh Mustafa Umar: Their currency. And somehow you get information that this government is not doing very well and they don’t seem to be making good decisions and I think there’s a very significant risk that my currency in Zimbabwe is somehow going to devalue itself and I’m going to end up losing – a lot of people are going to end up losing a lot of money because this is an unstable currency and the government is going to make decisions and things are going to happen.

You say, “You know what? There’s a big risk in that and I have a very good insight that this is likely to happen. Let me go ahead and protect myself and take some of the money that I have even though I’m a Zimbabwean, I live in Zimbabwe, let me go and put my money in a safer place.

Let me go convert it into US dollars, for example, right?” And then hyperinflation happens and then you realize oh that guy got saved because he realized that his currency was going to be devalued.

So, the same principle applies. When we talk about investing into a currency, when we have an understanding that our currency relative to the other currency is somehow something is going to happen to it and we’re going to have a problem that’s kind of like a flip way of looking at “Ok, this other currency is going to be going up relative to my currency that I happen to hold all of my assets in.” Right?

So, when you lose trust in your own currency and you put your trust in another currency, what you’re doing is you’re switching from one currency to another because you’ve lost trust in it. Rather than looking at it from the financial transaction of “I’m going to buy $10,000 worth of cryptocurrency and I’m going to – the intention of selling it when it hits $30,000.” Right?

So, that’s kind of the way that it should be viewed from Islamic perspective because we don’t buy and sell currency as an asset because it’s not an asset.

Andre Rishi: Ok. All right. So, again, just to clarify, you’re saying that going in with the intention of like well, I’m going to purchase XYZ cryptocurrency because I believe that in three years, it will be worth $15,000 instead of $100 today that that intention is not allowed Islamically or shunned upon Islamically.

Shaykh Mustafa Umar: Yeah.

Andre Rishi: Yeah, Ok as opposed to just saying hey, I just think maybe the country I’m in like the US is just going to keep on inflating the money supply and it’s going to lose value. So, let me go and hedge by purchasing other currency.

Shaykh Mustafa Umar: Yeah.

The Philosophy of Bitcoin and How it Relates to Islam

Andre Rishi: Ok. All right, cool. So, with that being said, I think that’s a really good segue to talk about the philosophy behind Bitcoin and cryptocurrency as a whole. So, what are your thoughts on the philosophy behind this new technology and how does that, how does that work with Islam?

Shaykh Mustafa Umar: Ok. Where should I start?

Andre Rishi: Ok in – I know that my understanding is this whole thing really came about with – at least I don’t want to go too far back because cryptocurrency happened before Satoshi, it was already talked about. With Satoshi, in his white paper, it does seem to be a reference between a 2008 financial crash and wanting to have the philosophy behind having a decentralized system, a currency that’s set on a decentralized system that would be of benefit to everyone.

Shaykh Mustafa Umar: Right. Right. Right. So, you know the philosophy of it, it makes sense from two perspectives and it doesn’t make sense from one perspective. So, two perspectives which are in line with Islam is that governments – currency is not supposed to be something that can be easily be manipulated by government.

Because what that does is that puts people’s assets, it puts their money, it puts their property all at risk and at risk of a simple government decision. And that’s very, very dangerous and there’s something known as principles or the underlying objectives of the Sharia, it’s called maqasid al-Shariah.

Andre Rishi: Hmm.

Shaykh Mustafa Umar: And five principles – basically, it’s five principles that underlie every single rule in Islam. And one of those principles is the preservation of wealth. So, if you look at you know if you ask, well, why is stealing haram? Why is stealing prohibited in Islam?

Well, because God wanted to preserve the wealth of people. That’s why when you say, why is drinking alcohol forbidden in Islam? Because one of the second rules is the preservation of the intellect. God wanted society as a whole, everyone to preserve their intellect because that’s how they make rational, reasonable decisions and moral decisions.

So, you want to preserve certain things within society, one of them – one of the objectives, underlying or overlying objectives is the preservation of wealth. So, when you have a system where a government can somehow, anyone can become elected or become leader and then make a decision and somehow take people’s wealth.

I mean basically, you’re taking the wealth by devaluing whatever they own without even having to exert the physical military force to go and steal from them.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: That’s very dangerous. So, that goes against one of the principles of the Sharia, the underlying principles of Sharia. So, in that perspective, the idea of a decentralized currency makes a lot of sense and fits into the paradigm of Islam.

Andre Rishi: Right.

Shaykh Mustafa Umar: From the second perspective, you have a quick transfer of currency, transfer of money or transfer of goods with a very quick way of paying. So, this is a faster means of technology without exorbitant amounts being charged particularly to people who cannot afford such amounts like third world countries, you know the amount of money that gets sent from wealthy countries, “first world countries” to like to poor developing countries and their relatives back home, it’s in the billions. I mean it’s huge.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: There’s a lot of money that’s sent back and the amount that these people are going to have to pay because they don’t have, in their village, they don’t have a bank, branch or something like that setup, they have to pay a really large fine, or fee.

You could say a fine in a sense for not being developed or whatever, [maybe] war happened you know 40 years ago or something like that. So, that’s very sad. And this actually, this technology can and actually is being used to help a lot of poor people and that completely fits in line with the principles of Islam as well. So, these two things directly fit in line with the principles of Islam.

Andre Rishi: Hmm.

Shaykh Mustafa Umar: The only thing that where you can say there is some level of danger for decentralization is that Islam does recognize that you have to have a just government, put certain principles in place to prevent people from doing bad stuff.

So, sometimes may not be legitimately used, but sometimes government needs to crack down on people who are funding money launderers, drug dealers, terrorists, all of that stuff. That stuff happens and if they have a little bit more oversight that can be a thing if used correctly to prevent people from doing bad things. Again, now, the flip side of that is the government can be doing bad things about it.

Andre Rishi: Yeah, exactly.

Shaykh Mustafa Umar: So, that’s why you have to have this balance.  We have to weigh it out, right? So, that’s where it becomes a very difficult decision to make in terms of who do you trust more? Do you trust the government more or a government more or specific government more?

Or do you trust that the average person is not likely to engage in this type of activity that’s going to harm society? So, kind of comes back down to what is going to be better for society as a whole? And not every country, not every time, not every period, not every society you can give the exact same answer.

Some societies work better, some societies, it’s worse. So, you go into very corrupt country and you look at that country and you say, “Is it better that this currency is centralized or decentralized?” We could pretty easily say, “You know, this government is so corrupt, we definitely are better off with the decentralized currency.”

Andre Rishi: Right.

Shaykh Mustafa Umar: Whereas you could go to another one and you say, “Oh, these people aren’t so bad, but there are some really bad people within that society but they’re not in government. They could potentially do a lot more harm so maybe we should give government the benefit of the doubt here.” So, it’s not a clear-cut black or white answer all the time.

Andre Rishi: Right. Right. And I think that makes a lot of sense. Yeah, when I look at a lot of again, just the economic system that we have worldwide for me and not just me. I think I, a lot of people see that there’s just so much corruption and then I think that’s why you see so many, I can’t say so many people, but at least groups of people who are very open to and push for a sort of decentralized system where they figured, “All right, well, all of us say have an invested stake and we all want to protect our wealth.”

So, if we all sort of spread out trust, then you know they do see that as a more reputable, possibly more solid system.

But like you said, there are so many nuances to that which also leads me to what you believe the future is for cryptocurrency. One of the things I tell a lot of the viewers of the podcast, people come to the site, and this is one thing that sometimes I think, I’m not even sure if some of the scholars really understand right now. I always say that this is more than Bitcoin. Bitcoin could be gone tomorrow.

Shaykh Mustafa Umar: Yeah.

The Future of Bitcoin in the Muslim World

Andre Rishi: I think that the – I do think that the technology though, I’m just curious, what are your thoughts on the cryptocurrency and the future, how that relates to the Muslim world as a whole?

Shaykh Mustafa Umar: Yeah, I mean I think cryptocurrency is not going to be going away. It’s a concept. Like you said, I agree Bitcoin may disappear. It may disappear in a year. It may disappear in 20 years.

But the idea of a currency whether it’s through cryptography or through some other means, a decentralized currency, the idea is not likely going to go away because people believe in it. And as long as people believe in that idea, you can’t just take it away. It’s going to be very, very hard to take it away.

And in terms of what is the future, how is it going to look? How is it going to look in the Muslim world? It’s hard to speculate. I think time will tell. But I think it’s going to develop over time and I think we’re going to find more and more uses and different uses for things like this.

So, you find people already – people taking blockchain technology as one aspect of cryptocurrency, it’s not the decentralized aspect but they’re taking this like implementing it within their own system even within the banking system and all of that. The decentralized aspect of it is something that’s going to remain as a means of transfer or –  what do you call it? A money transfer.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: Money transfer that’s something that’s going to continue. It’s not likely to go away unless somehow massive competitions somehow keeps up and it doesn’t require it to be the case anymore.

So, if that was the case, then yeah, things are going to change. Like the postal service took a huge hit when emails started becoming international phenomenon and everyone has an email and send messages and how many people send letters?

Andre Rishi: Right.

Shaykh Mustafa Umar: It’s not that much. So, they’re obviously going to lose out. So, I think it’s going to be something like that in terms of people who like to transfer money or who are responsible for transferring money, making currency exchanges and all that. Cryptocurrency will become part and parcel of their system or those systems will go away and cryptocurrency will replace, for the most part, that type of transfer system.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: From there, what’s going to happen afterwards? I mean I think there are so many possibilities. It really depends on what Muslims do and how much freedom they have to actually develop something…

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: …across this new one that was coming up called OG OneGram.

Andre Rishi: OneGram, yes, yes.

Shaykh Mustafa Umar: Yeah, so it’s like a cryptocurrency that is somehow tied at minimum value to one gram of gold.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: persons look at that and they’re like, we need to go back to the gold standard. They said that Libya once tried the gold standard and look what happened to them?

Andre Rishi: Yes, God forbid God and I personally think there is some truth in that and I think there’s some truth in that.

Shaykh Mustafa Umar: Yeah, absolutely. I think so too. And Malaysia, they have been talking about it for a very long time. And I think a lot of the Muslims who kind of know they are very excited about this idea but it’s extremely difficult to somehow go back to a gold standard when – like a traditional gold standard when the entire world economy is taking a different turn and the way gold is being controlled and manipulated all of those things.

Now, this potentially could be that one thing that people are waiting for to overcome all those obstacles and somehow structure something where you can either get – you can get back to a standard that resembles the pros of a gold standard which is what Muslims have been really calling for and waiting for actually.

And that would cause a lot more stability within economies, a lot less speculation which is definitely in line with the principle of Islam, less riba-dominated all sorts of transactions and just the economy itself. Right? So, there’s I think where cryptocurrency can lead. How it will lead there exactly I can’t say.

Andre Rishi: Right.

Shaykh Mustafa Umar: I think this is one of the technologies that could potentially help us get us there if we’re doing the right things and we’re making the right decisions with regards to it and the leadership is going to give people the freedom to develop these things.

Andre Rishi: Yes.

Shaykh Mustafa Umar: And not put a ton of hurdles in their way to prevent this technology from actually getting there. It’s kind of like electric cars. I mean the technology has been there for a long time but the oil companies and stuff.

They have been preventing all of these. Solar technology, same thing. Now, it’s finally starting to take off, why? Because some of those hurdles have been overcome. So, as long as the hurdles don’t get in the way, I think it’s a lot of development then.

Andre Rishi: Yeah. And I think what you’re saying with hurdles is absolutely right. And again, it goes back to what I was saying earlier in regards to I really wish I would have – we would have seen more nuance from some of the scholars on their rulings because I would hate to see them, by simply painting a broad brush and saying that it’s all haram in some ways to kill the research and development that can go into this new technology.

Because I look at it as like Ok, well, cryptocurrency right now is not perfect. It’s in its beginning stages.

So, I would much rather them say something along the lines or say, “Ok, well, maybe this is makruh (disliked) or maybe this aspect of it doesn’t work but if you can fix it here or do X, Y, and Z here then we can take a second look at it.”

I would love it if we had scholars that would dimply encouraging Muslims to actually do research into this new technology and to find a way for it to be better for all of humanity as opposed to just striking the whole thing down and then just keeping quiet and not saying anything else.

Is Bitcoin Halal or Haram?

Shaykh Mustafa Umar: Yeah, well I got good news for you then. And probably this is the last thing I have to say before I have to get going.

Andre Rishi: Yes.Mm-hmm.

Shaykh Mustafa Umar: I was at a scholar’s conference recently. It’s called the AMJA, the Assembly of Muslim Jurists of America.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: And there was about you know 150 scholars and about another 200 students of knowledge And Bitcoin came up and there was a presentation given. And one of the head Shaykh, Shaykh Salah Al Sawy, he presented a paper on Bitcoin and cryptocurrency. And his initial paper seemed like he was going to come out saying that it’s forbidden, the draft of it.

And then finally, when he presented it, he actually said, “You know we cannot outright say that it’s prohibited and we can’t even say that it’s technically even makruh for sure. We can say that it’s somewhere, it might be makruh or it might be permissible, but we still need a little bit more research. But we definitely know we cannot outright say that it’s haram.”

So, after doing more research, he actually changed his view and his view was not – is not just a view of one person. He’s a very heavy-weight scholar so when he gives his view, you got probably the other 150 scholars in the room, most of them are agreeing with him.

So, that’s a good step in the right direction. I was very happy that came out. And that paper was written in Arabic. So, it has been translated yet. But I think that’s a good step in the right direction. That was just a few weeks ago.

Andre Rishi: Masha’Allah Hamdullah. I’ll be on the lookout for that and then I’ll probably touch base with you to see if that does come out in the English version so I can talk about it here. I don’t want to keep you too long because I know it’s already – we’ve been going at this for like a little over an hour now I believe or just about an hour.

What is California Islamic University?

But I did really – I would love for you to share with my audience what is California Islamic University? I mean here you are with years of study under your belt, a bachelor’s, a master’s degree, studying worldwide and now, you have founded this university, if you can share with us what is this all about and how can people get involved?

Shaykh Mustafa Umar: Sure. So, about five years ago, I was out of the country and I was thinking, am I just going to come back to the country and just be an Imam again or, how do I take people to the next level?

So, I came up with the idea, I said, you know we need an educational institution that teaches people, gives them a foundational knowledge of Islam that I wish I had. I mean, I’ve always had a lot of questions about Islam and that’s the reason why I went abroad to study. I traveled to different countries. I didn’t want to be an Imam. I never wanted to become a scholar or anything like that. I just wanted to learn my religion.

And I think there are a lot of people like me but not all of them have to quit their jobs. They don’t all alone to you know have to drop out of school and like travel to some random country and go through different living circumstances, culture shock and all of that stuff.

But I said, how can I make the knowledge that I’ve learned that you’d find in the average seminary, which is like in Islamic university, and take the stuff that is the most relevant to Muslims living in the west and sift out the stuff that’s the least relevant Muslims living in the west.

And that’s when I said, “You know what? Let me start a school. And what we’re going to do is we’re going to take the curriculum of Madinah University, Al-Azhar University just looked to all of them and start sifting, what’s the most relevant, what’s really not relevant to the average person unless they’re going to specialize and become like a scholar.”

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: And I started reconstructing a curriculum from scratch on what’s going to be the most important thing. So, we cover – basically, I made 22 courses.

Andre Rishi: Ok.

Shaykh Mustafa Umar: We covered everything from the life of the prophet, peace be upon him.

Shaykh Mustafa Umar: …from that Islamic law, the Sharia, the principles of making everything from wudu, to fasting, to zakah, to marriage, to divorce, the correct way to get divorced if that ever happens, economic transactions.

But every time you studied the subjects not looking at like camels and you know goat, stuff like and replaced it with modern-day examples of what we actually encounter you know.

Andre Rishi: Salla Allahu Alaihi wa Salaam.

So, taking the research that has been done and issues like cryptocurrency and zakah and 401(k) accounts and you know what are modern manifestations of interest in today’s transactions and stock market and options trading and future and you know all of that stuff selling short. Taking that and implementing into the core curriculum.

So, we go from there and we go, “Ok. There’s rules that we’ve got to learn. There’s recitation of the Qur’an that we’ve got to learn. There’s history of the Qur’an. How do you know the Qur’an has been preserved? How is the hadith… How do you know stuff is authentic? Where does all of these come from?” And then supplement that with a few classes like research methodology. How do you research a subject in Islam on your own; under some guidance maybe.

Andre Rishi: Mm-hmm.

Shaykh Mustafa Umar: Public speaking, once you got your knowledge down, how do you convey the message of Islam to other people? How do you give a khutbah (Islamic sermon) that people are not going to bring their pillow and fall asleep? Unfortunately, there’s a lot of khutbahs like that.

Andre Rishi: Yeah.

Shaykh Mustafa Umar: So, that’s what we’re trying to do. We have a two-year curriculum. You could do it part-time, you could take six years and do one class a quarter, that’s perfectly fine. And we have quite a few students, you know different parts. We have online students, you can be anywhere in the world. We have students randomly like Taiwan and South Africa.

Andre Rishi: Yeah.

Shaykh Mustafa Umar: …different countries. So, we use top-of-the-line technology and management system technology so that people can take classes at their convenience, according to their own schedule.

You know you don’t got to quit work, you just watch the video later and finish the exam, you get credit for that class. You don’t want to take all the exams, you don’t want to do all that stuff, just take the class as an audit student.

Andre Rishi: SubhanAllah. SubhanAllah.

Shaykh Mustafa Umar: You just get the – that’s it.

Andre Rishi: Ok. Ok. So, yes, you can study like, physically on – you have a physical campus.

Shaykh Mustafa Umar: Physical campus in Fullerton, California. You could do that or you can attend live so you can like actually chat with the teachers and ask questions live. Or, you can watch the videos afterwards. You can attend courses later on. You can learn your Arabic, you can learn your Qur’an, you get your tafsir, you get your hadith.

Andre Rishi: Masha’Allah.

Shaykh Mustafa Umar: And do it at your own pace as well.

Andre Rishi: Masha’Allah. Ok so, ok so once they finish this then they should have a basic understanding then, a foundation of Islam that they can go and to the community maybe be, maybe an Imam…

Shaykh Mustafa Umar: Probably an assistant Imam.

Andre Rishi: Assistant imam. Ok.

Shaykh Mustafa Umar: Yeah.

Andre Rishi: Ok. Very good. Very good. But what I’m going to do I’m going to leave the link for that website down below so people can check that out as well. I highly encourage people to check it out. I mean I myself am a student of knowledge myself, I’ve studied with like SeekersHub, Qibla for Islamic Science, so I’m definitely taking a look at this for sure since it’s right down the block from me.

I really wanted to thank you for your time today for joining us here on this Islam and Bitcoin Podcast, you shared a lot of information, a wealth of knowledge that I think is highly beneficial to the community and it’s really good to see someone have a very balanced understanding of cryptocurrency as a relates to the world of Islam.

So, we lost our Shaykh. I just heard from him and he said that the battery on his laptop went dead. Alhumdulilah, no worries. It was wonderful having and a beautiful conversation with our dear Shaykh and I wanted to thank Shaykh Mustafa Umar again. Thank him for coming on the, appearing on the Islam and Bitcoin Podcast and having a great conversation with us.

Please do share your thoughts. Leave comments down below and let us know what you think about the conversation we just had. And as always, we say sharing is caring so please do share this podcast far and wide with those who think may benefit from it

And as always, I leave you in the way that I greeted you assalaam alaikum wa rahmatulahi wa barikahtu, Ma’salama. 

PLEASE KINDLY SHARE THIS ARTICLE IF YOU’VE FOUND BENEFIT IN IT

Assalaamu Aleikum everyone. As of late, we’ve seen a lot of shakeup and talk in the Muslim world as it relates to Bitcoin and cryptocurrency as a whole as we’ve seen some prominent scholars say that Bitcoin is haram.

Today we will take a look at Sheikh Assim Al Hakeem’s Bitcoin fatwa (legal opinion based on Islamic law) and see how we should best understand his point of view.

So, here are the 10 reasons why Sheikh Assim Al Hakeem believes that Bitcoin is haram.

Is our Sheikh correct in his opinion? Please watch the video below. You can skip through sections of the video or you can read the video transcript below as I take a closer look and provide commentary on where I believe our Sheikh has some misunderstandings and slight errors about Bitcoin and hopefully this will also help you have an even better understanding of Bitcoin as well.

Video Transcript

Andre Rishi: As-salamu alaykum! And thank you for checking out today’s latest blog post over here on the Islam and Bitcoin Project. Today, we are going to take a look at the fatwa given by Sheikh Assim al-Hakeem, his fatwa on Bitcoin.

Now, I remember when I started this website about two years ago. I wasn’t able to find any scholar that I can talk to and engage in dialogue about Bitcoin, never mind give a fatwa. But in 2017, things are changing and I think that is a really, really good thing.

We now have scholars out there writing research papers on Bitcoin, who are discussing Bitcoin and now, giving fatwa. And that is what brings us here today with our latest blog post, the fatwa of our brother Sheikh Assim al-Hakeem.

So, my intention today is to play out the video of his fatwa and to offer commentary on his fatwa. Now, I’m going to do so coming from the point of view as a student of knowledge. I am not a mufti. I am not a Sheikh (respected scholar).

I am simply a student of knowledge and that is going to be my approach as we discuss, as I discuss his fatwa here today. My intention is to ask questions in areas that I do not fully comprehend, where I do not fully comprehend his opinion and to also offer information in areas where I see that our dear scholar has sincerely made a mistake or has maybe a sincere misunderstanding of the topic at hand.

Now, let me just say that whether we agree or disagree with the opinions with the fatwas that our Shuyukh (scholars) share with us. It is for us to make sure that we engage with our scholars in a positive, healthy, constructive way and to observe proper adab (etiquette).

It is not for us to badmouth our Sheikh or to talk negatively of our Shuyukh. But rather to engage with them in a way that is healthy. I see too much negativity out there when it comes to how we engage with our scholars and I think that that is just absolutely terrible.

Here at the Islam and Bitcoin Project, the whole purpose of setting up this website was to have students of knowledge, the average and layman and scholars to offer a place where we can have a dialog in a healthy positive way and that is my intention today in offering this commentary.

I would actually love to have Sheikh Assim on the Islam and Bitcoin podcast as a guest. So, if any of you out there know him personally, please share with him this website and let him know that I am extending a warm invitation to have him up here on the podcast as a guest. I think that would awesome. I think it would be great. I think his insight would be very, very helpful.

So, without further delay, let us go ahead and take a look at this video and discuss his fatwa. I will go ahead and include a link to his original video of his fatwa. I will include the link below in the blogpost. Now, let’s start off by saying that the opinion, the fatwa of Sheikh Assim al-Hakeem is that Bitcoin is haram. His fatwa, his opinion, is that Bitcoin is haram and we are going to take a look at that and offer commentary on that right now.

Bitcoin’s Origin, Sustainability and Security

Sheikh Assim al-Hakeem: Brother Lebron says, “I’d like to know the details how Bitcoin tends to be haram according to a point of view despite the fact that cryptocurrency might probably be accepted as a legal tender and a medium of exchange.”

The issue of Bitcoin is a recent one which means that it is not found or discussed by scholars in the past. And, unfortunately with such new events evolving some of them are to some crystal clear and some, to others may require the collaboration of scholars, economists and people involved in such issues to deliberate and to come up with a conclusion.

Basically speaking, Bitcoin is something that is recent and new. And there are a lot of serious concerns when it comes to dealing with it. Whether it is from the origin, where it came from, whether from the aspect of sustainability and security.

Andre Rishi: All right. So, let’s talk about these three points that our Sheikh has mentioned. So, the three points he mentioned were the origin, sustainability and security. And these three concerns, these serious concerns as he has mentioned, they play a part into why he believes that Bitcoin is haram.

So, let’s look at origin. So, his current– his concern about the origin of Bitcoin is that he doesn’t know who is the developer of this currency. So, the question that I would like to ask out Sheikh and also other scholars out there in Islamic Finance is does the sharia stipulate that when it comes to using an object as a medium of exchange that we must know who the creator of that object is?

Or even more specific with Bitcoin, does the sharia stipulate that in using this digital token that we must know who the software engineer, who originated the Bitcoin code, is? Is it mandatory? Is it obligatory to know who the originator of the code is?

And the reason why I believe that this is a legitimate question is because even though we do not know who the software engineer is who developed this code. The code itself is open source. Meaning the entire world has access to see this code.

This also means that the multitude of software engineers that are out there in the world can also look at this code and they will be able to determine whether this code is a virus, whether it is malware, whether it is just bad code or whether it can actually do what this engineer says it can do. And these engineers can validate that.

So, that is why I asked the question of, does the sharia stipulate that it’s mandatory to know who the creator or the designer of this code is in order for it to be halal? I think that is something that it would be nice to know.

The second thing our Sheikh touches on is sustainability and I think he has a legitimate concern in regards to sustainability. We do know that Bitcoin and the network consumes a lot of energy, a lot of electricity is used to mine on the network, to maintain the blockchain, to process the transactions.

We do know that a lot of energy is used. So, as, as the blockchain grows, as it collects all this data, all the transactions on– in its ledger. We don’t know how much energy will be consumed in– for this blockchain, 1 year, 3, 5, 10, 20 years down the road.

Now, yes, it’s very possible that maybe at that time, there will be a new technology available that will allow us to capture and disseminate energy in a more efficient form. But as of right now, we don’t know. So, I think the concern of sustainability is a legitimate concern by our Sheikh.

Now, let’s look at the last concern, security. Now, here, is where I would need to ask our Sheikh, what is exactly about security is his concern? And the reason I asked that is because there’s certain attributes of Bitcoin that users see as a form of security.

One is the fact that it is decentralized, meaning that the blockchain, the ledger, is held on multiples nodes, multiples nodes throughout the world. So, this means the data gets protected. The data, the integrity of the data is protected by a multitude of nodes and verified across the network to make sure that everything is accurate. So, this in and of itself is security feature that many people like. So, my question would be what exactly is the concern of safety when it comes to Bitcoin?

Now, we do know that because it is open source that of course, you are going to have a lot of hackers out there that will try to break the code. As of now though, Alhamdulillah, its proven to be– its proven to be sustainable so that speaks volumes for the people working on the code and protecting it.

So, those are the three issues that our Sheikh brings up and that’s my commentary on that. So, let’s move forward from here.

Price Fluctuation

Sheikh Assim al-Hakeem: It is known that it was founded in 2007, 2008 by someone that is unknown. And they say that his name is Satoshi Nakamoto and this person later on who was supposed to be Japanese, the person with that name denied having anything to do with it. Then another person came from Australia or Canada claiming to be the one who founded it. But generally speaking, no one knows where originally it came from.

Not only that, when it started, I think it was like 0.1 cent of a dollar. So, one bitcoin was equal to 0.1 cent, something that is negligible. In a couple of years, it jumped to $35. As of today, if I’m not mistaken, one bitcoin that was 0.1 cent, now is equivalent to $11,000 plus. And this is ridiculous.

Andre Rishi: Ok. So, now, our Sheikh, he is commenting on the price of bitcoin and the price being $11,000 American dollars at that time of him publishing or sharing his fatwa. So, it seems like he is– there is a correlation that he has with the price of bitcoin being US $11,000 to– there’s a correlation between the price and him forming his opinion as to why it is haram. So, he is saying that he believes that the price of $11,000 is ridiculous.

Now, the comment that I would like to make or the dialog that I would love to have with our Sheikh is I think that using, saying that the price being $11,000, using the word ridiculous, I sincerely believe that that is the incorrect word to use.

I think it’s misplaced to use that word. The reason being is because we know why the price of the coin is $11,000. It’s because the users, the investors in this technology, they see certain attributes of this currency or I should say of this technology rather that they actually like.

So, one thing that users of this cryptocurrency like is the fact that it is limited to 21 million bitcoins. The supply of bitcoin is limited. So, this is a feature that people like.

The second feature that people like is that there is a blockchain, or a ledger, a public ledger. Now, yes, there are pros and cons to having a public ledger. There is good and bad to that but people like the fact that there is a public ledger that holds everyone accountable for transactions that are made within the network.

People also like the fact that this public ledger is decentralized and the ledger is maintained by a multitude of nodes all across the world. This is another feature that people absolutely love about this cryptocurrency.

A third aspect or third feature that people like is that they see real world application when it comes to this cryptocurrency being used as a medium of exchange. Now, years ago, when this owner of bitcoin paid someone 10,000 bitcoin to purchase two pizza pies, this– I would say this is probably the moment where the price really began to go up because someone finally was able to find a way to take this digital currency and to use it in the real world to get something tangible, food, pizza.

And when people saw this, I believe this is where the price started going up because this idea of this cryptocurrency actually being used as money became a reality.

So, the reason why that the bitcoin is now priced at $11,000 at that time when he shared his fatwa was because that is what the market was willing to pay for the bitcoin. And they were willing to pay for the bitcoin at this market rate because of all the other attributes that I mentioned.

Now, yes, there is a lot of speculation in the marketplace right now. And the speculation is based upon the many people believing that this cryptocurrency has a future. There’s most definitely some improvements that need to be made to Bitcoin, but nonetheless, there are many people who have invested heavily into the infrastructure of cryptocurrency, particularly Bitcoin because they believe there is a future for this.

This is where we are seeing the price of bitcoin comes from. So, to say that the price of bitcoin being at $11,000 is ridiculous, I think that using the word ridiculous, that is a misplaced word. And that’s just my thought on that. Now, let’s move forward.

Bitcoin is Not Tangible

Sheikh Assim al-Hakeem: What is this? This is not something that is physical you can touch. It’s now the coin. It’s not a bank note.

Andre Rishi: All right. So, now our Sheikh is saying that bitcoin is not something that you can physically touch and hold in your hand. So, the next question that we have to ask our Sheikh as well as the scholars of Islamic finance is, does the sharia stipulate that an object that is being used as a medium of exchange, currency, does this object have to be physical?

Meaning, does it have to be an object that you can hold in your hand and touch? So, this is a question that I think we need to ask the Sheikh and other scholars in Islamic finance. Let’s move forward.

Sheikh Assim al-Hakeem:  It’s not a deed, it’s not a certificate. It is something that is virtual. It all is dependent on the peer-to-peer, the blockchain and the logarithms that government which is known to only a handful of people who control it and who are anonymous and no one knows who they are.

Andre Rishi: All right. So, our Sheikh was saying there that when it comes to Bitcoin and as he says those who control that he says that these people are anonymous and no one knows who they are. I think here, our scholar just simply made just a mistake that’s all it is, it’s a simple mistake. That’s actually not correct.

Ok. So, here we are taking a look at the BitcoinCore.org website. And you can see right here. Now, what I have done here is I have gone to the page that says, Team. So, this is going to be the page that lets you see who the developers are, that are currently working on the Bitcoin code so here we see we have I believe he pronounces his name Wladimir.

Wladimir, we have Jonas, we have Marco, Peter, Cory, Luke, Gregory and so on down the list we go. But this page actually shows you all the people that are working on the Bitcoin software, the Bitcoin code. So, it’s not anonymous. It’s not like we don’t know who they are.

And if you actually want to see the code, let me hop on over to this website. If any of you are developers out there, software engineers, I’m pretty sure that you are well aware of a site called Github. So, Github is a– it’s a website where software engineers can work on software code together.

It’s– think of it as like it’s like a hub where they all come together and they’re able to work and develop software together no matter where they are in the world. So, this right here, this page I’m on is the Bitcoin page on Github.

Let me see if I click this folder here. Let’s click on this folder and see if I can find some of the developers here working on it. Let me go, let me find Bitcoins go with– let’s try this one here. All right. Ok. So, let me close this out up here.

Ok. Now, right here in Github- Like I said, Github is where you have the source code for Bitcoin. There are multiple aspects of code for Bitcoin that developers can work on. But, if you look right here where it says 24 contributors, here are the, all the people who are working on Bitcoin at the moment.

Now, let me go back over to the Bitcoin Core Team. This is the page that shows you the team. If you see Wladimir, this is his icon that he’s using. If you go back over to Github, we can see the icon here and we can see laanwj that looks like that is the name that he’s using for this icon or his name on Github. So, if we click here, Github.

It’s a way to contact them. Let’s click on that. It opens up another page. See here, we can see this is his Github name. If we go back over to Github and we look at who’s working on the core, what– there are some of the code on Bitcoin. We see his name is right there.

Let’s go back over to the page here and let’s see if we can find Jonas. So, Jonas we should be looking for an icon with a man holding or throwing something. So, I’m going to close this out. Let’s go back over and right here, Jonas. So, we could see Jonas.

He is someone working on the code for Bitcoin. Let’s take a look at let’s say one more. Let’s say, Luke. Let’s look for Luke. Well, so how about Michael– I don’t know, Michael, maybe not. Let’s look for Luke. Let’s look for Luke.

So, go back up here. I don’t see Luke but I do see Michael. There’s Michael. I think Michael goes by fanquake, fanquake. So, let me go back over here and let’s go down here and Michael. Let’s click ion Github so we can see what he goes by, what his name is. Yes, fanquake. So, we found him. Let’s now go see if we can find, is it Luke? Oh, there he is. Luke. Ok, so Luke is right there.

So, in a nutshell, Bitcoin, the code, you know here is you know what they’re working on. You can actually see it right here. It’s for the whole world to see just if you have a Github account, you can sign up and go head over to the website and you can see who’s working on the code right there.

For those of you who don’t know what Github is, here is a video. I’m going to include this link here. It tells you what Github is. And down here, there are a lot of different tutorials as to how to work in Github. I’ll leave that as a link for you in the blogpost.

But needless to say to– for our Sheikh, this is just my way of correcting him on that simple mistake letting him know that we do know who is working on it. And the information of the team working on it is public and you can find that over at Bitcoin Core.

Bitcoin is a Ponzi Scheme

Sheikh Assim al-Hakeem:  You cannot complain about it. You cannot pretend that there is justice or injustice. There’s no one to talk to. So, it is as if you are throwing your money in a vacuum not knowing whether it will increase or decrease but most people don’t care because all that they’re looking for is quick profit and gain.

You remember the pyramid schemes and the networking schemes that have been in the past and still ongoing today selling you a commodity that costs in the market a single Euro, they sell it to you for 200 Euros claiming that there is only 5000 pieces in the world of it.

And then, after you pay that huge amount of money, you qualify to market it to others and you will get a percentage whenever someone enlists in the same Ponzi scheme. It is all bogus. It is all a hoax and they consume people’s money through that. Man by nature likes quick profit.

Andre Rishi: Ok. So, here our Sheikh is comparing Bitcoin to a Ponzi scheme as well as comparing it to a multilevel marketing scheme. And I think this comparison is actually not accurate. Bitcoin– the way Bitcoin works is you cannot purchase like a membership of Bitcoin.

There is no such thing that you purchase a certain amount of bitcoin and you have to hold on to that amount and you have to invite somebody else to purchase bitcoin and then they purchase a membership of Bitcoin and you get a kickback from Bitcoin for inviting somebody else. It doesn’t work that way. There is nothing in the source code of Bitcoin that works that way.

There is no minimum amount to purchase. There is no length of time that you have to hold the currency. You are not required to have anyone else become a member or purchase it. It just simply does not work that way.

You could purchase $10,000 worth of bitcoin or $10 worth of bitcoin or $5 worth of bitcoin. You can purchase $5 today and get rid of it tomorrow. Completely up to you. There is no one that is going to police you and say, “Hey, you purchased that yesterday, you can’t just sell it. You have to hold it or you can only sell half of it.” No one is going to police you in regards to what you do with the bitcoin that you have.

So, to say that it is a multilevel marketing scheme is incorrect. You do not purchase bitcoin and sit back and then all of a sudden someone just gives you bitcoin out of thin air or just for nothing just because you bought some bitcoin. It just does not work that way.

Now, what we can say is, is that because of Bitcoin, there are other systems in the ecosystem of Bitcoin that can be Ponzi schemes. I do think that there are companies out there that are interacting in the ecosystem of Bitcoin and they are scams.

I’ve already made a blogpost on cloud mining. I do think that cloud mining is more or less a Ponzi scheme. I don’t have a way to prove that 100% but it is highly likely that cloud mining is a Ponzi scheme where you give them your money and they will mine bitcoin for you and you get a little bit of bitcoin back.

For all you know, you could be getting back the same amount of money you put in and it’s just a smaller percentage. They don’t give you the whole thing back. Allahu Alam, Allah knows best. But to say that Bitcoin in and of itself is a Ponzi scheme, that in and of itself is not accurate.

Now, I will say, I will say because it sounds like what the Sheikh is very concerned about is people losing their money. So, what I will say is it is very possible that those people who have held their bitcoin for a long time and seeing the price go up to $11,000, $12,000, $15,000 it is very possible that those people dump all the bitcoin on the market and sell it all thus crashing the price.

That is something that absolutely beyond the shadow of a doubt can happen. It can happen. But even if it did it will still not change the fact that there are 21 million bitcoin that will be mined. It will not change the fact that they will still be a blockchain that will be recording the transactions in the blockchain on the ledger.

It will not change the fact that there will be a multitude of nodes out there maintaining the integrity of the ledger on the blockchain. It still will not change the fact that it is now already been proven that bitcoin can be used as a medium of exchange no matter how difficult that may be.

So, even if you have a massive amount of people dump all their bitcoins, those bitcoins will still exist on the network. And if the price went from $11,000 of bitcoin and it went down to $100 worth of bitcoin, I am pretty sure that you will still see people out there who will purchase bitcoin and continue the project from there. Allah knows best. But this is what I do see happening.

Making Fast Money with Bitcoin

Sheikh Assim al-Hakeem:  If someone with a long beard comes to me and says “Sheikh, give me money and I invest it for you and I’ll give you revenue that is beyond imagination and you will sustain a happy life.” I will trust him. Not because of his beard but because of the gain and the quick profit that I may make out of it. Bitcoin is something like this.

And there are I think a lot of similar virtual currencies. They are virtual. You cannot touch them. And Ethereum and so many 60, some make them up to 100 and they are on the rise. And it’s not logical, the fluctuation of the price.

Andre Rishi: Ok. So, I’ll go ahead and stop it right there. So, I think one thing that the Sheikh is really trying to drive home and I think he does make a good point is that there are people out there investing in bitcoin simply again to make a quick buck.

And they’re not taking their time to do their homework. And as I mentioned before, this is not what Islam teaches. We should investigate and do our homework and research before we invest in a thing.

So, moving on from there, he now talks about Altcoins or what we call alternative cryptocurrencies saying that there are a lot of these on the rise and the price of these cryptocurrencies, the price, the fluctuation of the price is illogical.

Again, when it goes back to the pricing, again, it really has to do with what the market is willing to pay for these cryptocurrencies, for these Altcoins or these alternative cryptocurrencies.

Now, with that being said, yes, there are some people out there who are developing Altcoins for the purpose of scamming people, scamming people. But again, this is why, as Muslims, we are supposed to do our homework and investigate before we invest in any particular cryptocurrency that is out there.

With that being said there are also other cryptocurrencies out there, other Altcoins, that actually are legitimate. And the reason why people are willing to pay the price that they do for some of these alternative cryptocurrencies is because after doing their homework they see the value in these currencies.

Now, these currencies are mostly just a spin-off of Bitcoin really but they– what they do is these cryptocurrencies or some of them, the Altcoins have certain features built-in where they are improving upon Bitcoin.

So, they may see that Bitcoin has some areas that need improvement and it does. So, some of these cryptocurrencies say, “Well, I’m going to build in this feature that improves upon Bitcoin.” So, if you look at Litecoin, Litecoin says, “Well, if Bitcoin takes 10 minutes to confirm a transaction, I’m going to do it in two-and-a-half minutes.”

If you look at Dash, Dash will say, “Well, the Bitcoin network only pays the miners, once a coin is mined, and we’re going to change that up. So, instead of just paying the miners, we’re going to make sure that the payout from mining the coin goes partially to the miners, partially to those who maintain the network, those who maintain a node. And also, partially, this will fund the treasury so that we do not have to seek outside donations and I think this is good.” So, this is what Dash does.

So, the pricing again of what people are willing to pay that the fluctuation of the price of Altcoins is again based on the market and what people are willing to pay. So, I think to simply take a broad brush and to completely paint over all Altcoins and saying that they are no good, and in essence I’m interpreting or understanding that he means that these other Altcoins are no good as well, meaning they just like Bitcoin, they’re no good.

When I believe that this is actually not accurate and we can’t take a broad brush and paint over the whole lot. What we must do is examine each individual Altcoin, alternative cryptocurrency to verify or validate the currency.

Bitcoin is Not Backed by a Central Bank

Sheikh Assim al-Hakeem:  Now, is it a currency or a commodity? This is something we still have to look into because it is not a currency. It’s not backed by people. It’s not backed by government. It’s not backed by central banks or normal banks. So, you cannot say it’s a currency because no one deals with it except a handful of people.

Andre Rishi: Ok. So, now, let’s discuss this section here. So, the Sheikh, what he is saying in his formulation, his opinion as to why Bitcoin is haram is because it is not backed by a government. It is not backed by a bank, a central bank, a normal bank. And it is not backed by people. So, let’s explore this.

Now, one thing that I have learned with my studies in Islamic finance is that the scholars do consider a currency legitimate if it is backed by a government. So, I most certainly have learned that. And I believe the reason why scholars are looking for a currency to be backed by a government is because there is the assumption that if something goes wrong, whatever that is, then the government will be able to protect the currency holder.

I’m going to assume that our Sheikh when he mentions that bitcoin is not backed by a central bank or a regular bank that he is also implying the same assumption that if bitcoin was backed by a bank then there is the assumption that if something went wrong, the bank will protect the bitcoin holder.

So, for example, in the United States, if you have your money in a bank, if someone comes into the bank and steals money from the bank, the bank does ensure or does protect the money holder, the person who put money in the bank up to a certain amount.

So, I believe that the fuqaha, our scholars, are looking for some type of protection and this is why they are looking for a currency to be backed by a government or a bank.

Now, one question that I think that arises, that I would like to ask our Sheikh as well as the other scholars of Islamic Finance is, does the sharia stipulate that in order for a currency to be considered legitimate, to be considered halal, that currency must be backed by a central bank or a regular bank? So, this is a question that I think we– this is a question that should be asked to see if this is what the sharia stipulates.

Now, let’s talk about governments and central banks. Part of the reason why Bitcoin came to fruition is because people wanted to find a way to have a currency that the everyday person can use that was not interfered with by a government or a bank.

Because the originators of many of these cryptocurrencies or many people worldwide saw that certain governments were corrupt. Or that the banking system is corrupt. So, we now have real world scenarios where governments are shutting down banks and preventing its citizens from withdrawing their full deposit from the bank.

We also have it where other countries are not only shutting down their banks but they are stealing the deposit money, stealing money from its citizens.  We also see laws are being created that would now make it legal for banks to steal the money from its citizens. So, the real question now becomes, “How safe is your money in the bank?”

Same thing in the United States, our Federal Reserve Bank as it prints currency even though this currency is you can argue to some degree backed by banks in the United States. The printing of the currency where there is no limit to printing the currency is a form of theft because the holder of the currency loses purchasing power, the dollar that the person holds loses– they lose the purchasing power of that dollar when that bank continuously inflates the money supplied.

There is no limit to the money supply. So, this is a form of theft. This is in part reason why the creators or the developers of Bitcoin wanted to move away from having a currency linked to a government or linked to a central bank.

You look at countries like Venezuela. So, Venezuela has gone through massive inflation with their currency so much so where again, it has devastated the purchasing power of their currency so much so where the people of Venezuela were using cryptocurrency, I believe actually Dash. Dash was being used as a way for the people to hold on to some type of value, some type of purchasing power with a currency that would be considered legitimate and they turn to Dash.

So, I think these are some concerns and some– these are topics that must now I believe enter the realm of discussion with our scholars in regards to seeing whether or not the legitimacy of a currency is dependent upon it being backed by a government or being backed by a bank.

Now, let’s talk about cryptocurrency not being backed by people or Bitcoin not being backed by people. Our Sheikh mentioned this that, “Hey, look, this bitcoin is not backed by anyone.” This is actually not correct. It’s actually not accurate.

The cryptocurrency right now, bitcoin is backed by people who run nodes. These people who actually run nodes and they are able to– they are able to run nodes which maintain the ledger. They maintain the integrity of the ledger so bitcoin is being backed by people who run nodes.

So, the question that we now– a new question that I think with this new virtual currency that now must be asked of our scholars is at what point do we consider people in a decentralized manner, with a multitude of nodes across the world being able to maintain a ledger, at what point do we consider this a legitimate form of backing a currency?

So, this is a new question that must be asked of our scholars. Now, yes, the concern will still be that if a person– because the currency is backed in a decentralized manner, it’s not backed by a government, it’s not backed by a central bank, again the reason being is that the bitcoin is a currency that wants to move away from central banks, move away from governments per se.

Now, with that being said, it means that the responsibility of protecting one’s currency falls upon the holder or the owner of the currency. So, someone steals your wallet, you can’t go to any government to you know get your bitcoin back.

If you lose your hard drive that has all your cryptocurrency or maybe you keep it on a flash drive. If you lose that, there’s no recourse for you. It is simply gone. If you forget the seed, the seed to your wallet and you don’t remember that you’ve lost your wallet and guess what? All your bitcoin is gone. So, these are some risks that are definitely prevalent with Bitcoin. And right the fuqaha are concerned and rightly so.

But I do think that these questions, these are new questions that now arise and I think our scholars now must consider as we move towards digital currency, digital tokens, virtual currencies, cryptocurrencies because I believe that cryptocurrencies are here to stay.

Now, whether Bitcoin will be here in another 20 years, Allahu Alam, Allahu Alam, Allah knows best. But I do think that cryptocurrency is pretty much here to stay so long as we have the internet and some form of power that powers an internet then cryptocurrency is pretty much here to stay and I think these are questions that now we must ask our scholars.

Now, one other thing that I want to touch on is that at the end he mentions that this currency is only being used by a handful of people therefore we can’t really say that this is a legitimate currency. The question that I would post to our scholars again, with this new form of technology is, at what point do we say that when a group of people all over the world are using a particular currency within the marketplace to buy goods and services and yes there are some people who use it for haram.

But by and large, there are people out there who are getting paid their salary in bitcoin. They are purchasing groceries in bitcoin. They are paying the utility bills in bitcoin. They are paying their travel expenses in bitcoin. They are using bitcoin for a numerous amount of activities in the marketplace that are considered halal.

So, the question that we now have to ask our scholars at what do we point do we say that this community of people that the currency is considered legitimate because a community of people all over the world are using it regardless of whether the currency is recognized by a government or backed by a central bank.

At what point does the sharia stipulates or say that this currency is actually considered halal? So, this is a legitimate question that our scholars I think must now look at because of this technology that is upon us.

Bitcoin Price Bubble

Sheikh Assim al-Hakeem:  Country-wise, only I think Germany, Japan maybe Austria allow it because there is benefit to them from it. Taxations, monitoring, etcetera. And the biggest loophole in it that the price goes way up and can also come way down. So, it’s like a bubble waiting to be inflated.

Andre Rishi: Ok. So, in regards to the price and it being a bubble. I do think that he has a legitimate point in regards to, again there’s a lot of speculation in the marketplace and I think we will see, bitcoin at one point it hit about– I think it just might have hit about $20,000 for one bitcoin on some trading platforms.

I do think that it’s going to correct itself at the time of making this blog post. The Futures Trading has just been introduced so I am going to– I’m going to assume that that will inflate the price of bitcoin and then it will sort of re-adjust and re-correct itself and come back down.

That’s what I’m thinking it’ll do. So, he is right in regards to there being calling it a bubble of some sort. I do think because of the speculation the price is inflated, that’s a little bit higher than the market, than it really– than the market really wants to pay for it.

In regards to countries, I have already discussed the countries that accept Bitcoin and it’s more than just the three that he mentioned. So, here is the article that I spoke of written by our sister Palwasha, These Are the top countries Where Bitcoin Is Legal & Illegal written back in March of 2017.

It’s a great read, great article. It might need an update since it was written back in March but still great information in it as you see here, she has listed countries where Bitcoin is banned, countries where Bitcoin is legal and officially accepted as well as countries where Bitcoin is legal but officially not accepted. So again, it’s a good read. I will go ahead and include a link to this article in this blog post as well.

Only 21 Million Bitcoins

Sheikh Assim al-Hakeem: And can also come way down. So, it’s like a bubble waiting to be inflated. And this is what will happen soon. Now, we all know that there is only a limit for the bitcoins- that is 21 million of it and once they reach the 21 million what will happen?

Andre Rishi: All right. So, let’s talk about this what will happen once we reach 21 million bitcoins being mined? Here’s an article that touches on that, 80% of all Bitcoins Will Have Been Mined In a year From Now . This article was written in February of 2017.

So, in February of 2018, 80% of all bitcoins will be mined. So, when will that happen? When will all 21 million bitcoins be mined? If you scroll down your article here, we will see that, let’s see– let’s see 21 million BTC bitcoin are to be generated by 2140, so in the year 2140 is when all 21 million bitcoins should be mined and that in case you, you’re bad at math, that will be in about approximately 122 years from now. So, we still have a little bit of time before that happens.

But what will happen once all 21 million bitcoins will be mined? Well, what will happen is the bitcoin will be in circulation and the miners who no longer will be mining bitcoin will simply earn fees by maintaining the blockchain, by maintaining the ledger.

So, so far this is what will happen once all 21 million bitcoins will be mined but keep in mind that is 122 years away so things can change. But as it stands right now, the miners will simply earn fees off of maintaining the blockchain.

Bitcoin Used for Criminal Activity

Sheikh Assim al-Hakeem: Also, we also know that it remains anonymous when you deal with it so it’s only a code that you’re given. No one can trace it which means that it’s an open gate for money laundering, drug money, haram money, you can just put it there and no one can trace you.

And this is Subhan Allah probably why all hackers when they do cybercrimes and they demand a ransom, the ransom has to be paid in bitcoin. So, the Pirate of the Caribbean, the Disney movie that was hacked and they demanded ransom for it in bitcoin.

Also, any cyber attack, any virus attack or threat can threaten your wealth and can take this currency, so called currency, down to the ground.

Andre Rishi: All right. So, another concern that our Sheikh has is that he says the Bitcoin is anonymous and because it’s anonymous, it is therefore used for a multitude of criminal activity such as money laundering, purchasing drugs and other criminal activities that are haram. And because of this and saying that a bitcoin is untraceable, it is anonymous. This is another reason why he leans toward the opinion that Bitcoin is haram.

Well, we must understand and this is where I respectfully will correct our Sheikh, I’ll let him know that Bitcoin is actually not anonymous. The transactions are not anonymous. If someone is able to have the bitcoin address and they’re able to trace that to an item that was purchased, you can therefore trace a whole series of transactions that that person has had all by linking it to that one bitcoin address.

And here we have an article that was written in March of 2016. The title of the article, Why criminals can’t hide behind Bitcoin. And we see here that the Federal Bureau of Investigation, the FBI that is based here in the United States was able to successfully– successfully capture or successfully arrest Ross Ulbricht and that is the 31-year-old American who created the haram website called Silk Road.

But again, the FBI, law enforcement, were able to trace bitcoin on the block chain using the address that was used for those transactions.

If we look at another article, we can see here Denmark Traces Bitcoin Transactions to Convict Drug Dealers. Again, law enforcement showing us that they are using the blockchain, using the addresses on the blockchain to trace criminal activities. So, bitcoin, in and of itself is actually not anonymous. This article was written in 2017. I will go ahead and put the link in the blogpost for this article as well.

Now, let’s take– let’s expand this out because if what we’re saying is that a currency, if a currency that is being used is able to successfully be used for money laundering, purchasing drugs and criminal activity, this is a reason to mark or to say that this currency is haram, well then we now have to look at banks, central banks.

Here is an article written in December of 2012: HSBC to pay US$1.9 Billion– $1.9 Billion fine in money-laundering case. And what was HSBC laundering? It says here, the money was used to launder a river of drug money flowing out of Mexico, out of Mexico, right?

So, HSBC, this is a major bank on the world stage. I remember when this came out and I was shocked when I heard this. $1.9 Billion fine from money laundering.

Now, here is another article written in November of 2017 and who do we have again, HSBC. HSBC ‘ignored money laundering warning’ in [this time] South Africa. So, we see that this bank is repetitive in money laundering activities and this is just one bank of many banks throughout the world, throughout the world.

So again, if we’re going to say that a currency that can be used anonymously for money laundering, for criminal activities that this deems the currency as haram, well, now we have to look at central banks, major banks throughout the world.

And we also have to look at fiat currency. The truth being told is, if someone really wanted to launder money and I’m not saying that you should, it is haram, don’t do it. But if you really wanted to launder money, what you would use in all honesty, it would be fiat currency.

So, here in the United States if I’m holding a $1 bill, a $5 bill, a $10 bill and I spend that at a store to purchase milk, bread, there’s no way to trace that currency. There’s no way to trace it. It’s not recorded in any public ledger. It’s not recorded in any blockchain.

So, you can argue that the best money to use is fiat currency, paper dollars using what we call in the United States, cash. Cash. All right? But again, I’m not saying that you should money launder. I’m not saying that at all.

Now, another concern that our Sheikh had was in regards to cyber attacks. And I think he has a very legitimate concern. Cyber attacks can most certainly rob you of your cryptocurrency wealth. They most certainly can.

Here we see that at this article, it says here that Bitcoin exchange collapses after second cyber attack in a year. This article is written in December of 2017. This happened to a South Korean digital currency exchange. They had to close down because of cyber attack.

So, our Sheikh is correct in saying that cyber attacks are a concern. But I will take it one step further and say, cyber attacks are not something that is unique only to Bitcoin. If we take a look at an article here, this one written in April 2017, One in three cyber attacks in banks are successful . One in three, that’s one-third. That sets pretty darn high. So, we see here that banks are under cyber attacks.

Let’s take a look at another article. And this one in February of 2015, Hackers hit 100 banks in ‘unprecedented’ $1 Billion Cyber Heist. That is a lot of money. If you scroll down here, I have it highlighted, the banks that were mainly hit were in Russia but it also took place– those cyber attacks happen to banks in Japan, the Netherlands, Switzerland, the United States and other countries it says, other countries.

If we take a look at another article this one written in September of 2012, Major Banks hit with biggest cyberattacks in history. Let’s take a look at another article, this one in January of 2017. Cyber Attacks and Bank Failures: Risks You Should Know.

The opening paragraph, let me just read the first sentence here. “Fears of a major cyber-attack on banks have been rising since hackers successfully stole nearly $100 million form Bangladesh’s central bank.” So, we can see here that cyber-attacks happening, they happen across the board in the financial industry regardless of whether it’s a cryptocurrency such as bitcoin or Altcoins or fiat currency, central bank’s private banks, cyber-attacks happen all the time.

So, if we are going to say that one of the reasons why we should deem Bitcoin as haram because of cyber-attacks being successfully launched against it then that means we also have to take a look at fiat currencies and central banks and regular banks that are out there as well.

Gharar, Ambiguity

Sheikh Assim al-Hakeem: So, there is a lot of ambiguity. If I have dollars and you have Euros, we would like to exchange, this is permissible in Islam with one condition and that is that it has to be hand to hand. It has to be physical.

I cannot say, “Ok, I accept this transaction. I’ll give you the money after half an hour.” This is haram. The transaction is void. It has to be simultaneous, give and take. In virtual currencies, you don’t have this. The transfer is not simultaneous. And you don’t have anything physical to hold on to.

So, this kind of ambiguity makes Bitcoin haram in my opinion. And Muslims should not get involved in such dubious transactions simply to make a quick buck, to make a quick profit. This is not an Islamic concept.

And one of the reasons of a lot of transactions being prohibited in Islam is the concept of gharar, ambiguity. That there might be some sort of deceit or ambiguity in knowing the end result of this transaction Allah Azawajal knows best.

Andre Rishi: Ok. So, the final argument of our Sheikh is that of ambiguity and I think he has a very legitimate point that he’s making. So, when it comes to trade, when we are trading currencies, trade should be done hand to hand.

Spot trading is what it’s called. And that can be difficult to do with bitcoin in particular because even though when you initiate the trade, you can initiate sending of the coins, right? The sending of your bitcoin with the transaction but the transaction is not confirmed for a rock bottom minimum of 10 minutes.

So, you have to wait 10 minutes before you can confirm that the transaction has truly taken place. So, this is an area of uncertainty if it comes to trading cryptocurrencies. But let’s take a look at some of the developments that are being used that tackle this issue.

Now, let’s take a look at the lightning network. One of the things that our Sheikh was mentioning is that when it comes to currency trade. Currency trade needs to be hand to hand trading or what we call spot trading taking place in the moment between two people.

The issue that we have with Bitcoin is that when you initiate a transaction with Bitcoin it takes up to a minimum of 10 minutes, I should say not up to but at least a minimum of 10 minutes before the transaction is confirmed on the blockchain and this can cause an issue when it comes to trade.

So, what the developers of Bitcoin are working on now is a new technology, a new addition to the code called the Lightning Network that in essence will allow instantaneous Bitcoin transactions. So, this would allow for a spot trading.

I’m going to include a link to this article, What is the Bitcoin “Lightning Network?” This article is found on Investopedia. I will include the link here for you to review this article and I will also include a link to the Lightning Network website. We can also learn about this new addition, this new update that is looking to be featured on Bitcoin sometime, hopefully in the near future.

Here is even a video that you can look at when it comes to learning about the Lightning Network. But this is an answer to all those people who have issues with transactions not taking place instantaneously on the Bitcoin network.

So, this in the future will answer that question in regards to the legitimacy of bitcoin being used for spot trading. And now, what we will do is we will see if other, we will see if other Altcoins will also follow suit and incorporate something of– that you would also call the Lightning Network on their cryptocurrency, on their platform.

And that is going to do it for my commentary on Sheikh Assim al-Hakeem’s fatwa on Bitcoin. I do want to commend our sheikh and all the shuyukh out there who are beginning to now have dialogue on Bitcoin.

I hope I was able to be of benefit to all of you out there checking out the blog post as well as to our sheikh. And I hope I was able to correct him in areas where I see that he had either a simple misunderstanding or a simple mistake. We all make mistakes, humdulilah. 

Let’s continue the dialogue and the discussion. I would love to hear from you; your thoughts on his fatwa and that of the other scholars out there. Please do leave your comments down below. And remember this is a fatwa.

Fatwas are not legally binding in the sharia. They are legal opinions so you can choose to either follow the fatwa or not.

Again, please do leave your comments down below I would love to hear from you. 

Assalaamu Aleikum. Welcome to part 4 in our Is Bitcoin Halal Series. Have you wondered whether investing in Bitcoin is halal or haram? Are you looking at certain websites wondering whether or not these websites are legitimate or worth investing in? Well, if these are your questions, then you’ve come to the right place. ​

But let’s answer the most important question you are asking. Is investing in Bitcoin halal or haram?

The simple answer is, yes. It is halal to invest in Bitcoin. Some scholars see Bitcoin as a currency while other scholars see it as an asset. There are scholars who also say that if you are buying bitcoin as a store of value in order to protect your wealth, then this is permissible but activities such as margin trading are considered haram.

Keep in mind that this answer is based on scholars whose opinion is that bitcoin is not haram.

Please watch the video below or read the video transcript below to delve deeper into this topic as we review the following websites and cryptocurrency, StartMiner, BTCProMiner, BitMiner, OneGram, Binance, Poloniex, ShapeShift and Bitconnect.

Video Transcript

As-salamu alaykum! And thank you for joining me for today’s blogpost here on the Islam and Bitcoin website, the Islam and Bitcoin project. Today is going to be blogpost number four in our four-part series. I know it has been a while but we are finally here, we have arrived, part four.

And part four, today, we’re going to talk about investing. Is investing in bitcoin halal or haram? So, that’s what we’re going to cover today.

Now, as I always say when I make these blogposts, we always want to– I always want to make it clear that this is not meant to be a fatwa (non-binding legal opinion on Islamic law). I’m not giving a fatwa. This isn’t meant to be a fatwa series.

I’m not a sheikh. I’m not a big time alim (person of knowledge. I’m not some big-time scholar. I’m simply a student of knowledge, sharing with you what I have learned with the hopes of benefiting myself first and foremost and all of us Alhamdulillah.

And also, even though I share with you this information, there may be others– you may find that there are other opinions out there from other scholars. So, again, these scholars who I take my knowledge from, they may have one line of thinking, one way of thinking in regards to Bitcoin, and other scholars may have another.

And differences amongst the ulama, the fuqaha, is totally acceptable and totally fine. So, we’re going to roll with that. So, let’s hop right into it today talking about investing in bitcoin.

Bitcoin is Speculation 

All right. So, let’s talk about investing in bitcoin. Now, some people would say, “Oh, don’t invest in bitcoin. It’s nothing but speculation and speculation is haram.”  Well, the truth of the matter is, is bitcoin highly speculative? The answer is yes.

But can we say that speculation in and of itself is haram? The answer is no, we cannot, at least according to my teacher who I’ve studied with. And he has said that speculation is actually a normal part of investing, meaning that there is some percentage of the unknown when someone invests.

So, for example, if you were to own a restaurant, a taxi service, you cannot say with 100% certainty that you will always have clientele that will use your taxi service, that will eat at your restaurant to guarantee that you make a profit. You don’t know. It’s unknown.

It’s the same as if you were to purchase a number of homes and you wanted to use them as apartment rentals. You cannot say with certainty that you will always have tenants that you will have inside your apartment so you will always make a profit.

Again, that is unknown. There is some form of speculation, right? So, speculation, in and of itself is not haram.

Now, what my teacher said is disliked is when someone does not take the time to do the proper research to what it is they are investing in. So, we see there’s a lot of people will hop into bitcoin, they just see the price going up and up and up and they think, “I got to get in there and make some quick money before it gets to $10,000 per bitcoin.” And they do no research whatsoever in regards to bitcoin, in regards to what they’re investing in.

This is disliked. So, my teacher is like, you know, when you invest in something, you should do your research and then tie your camel, meaning you do your part and then put your tawakkul, tawakkul meaning trust in Allah.

Questions to Ask Before Investing in Bitcoin

So, some questions that you may want to ask, you know, I wrote some down here. You want to ask yourself, when you’re looking to invest in bitcoin, who is working on the project? Who is the core development team of that project?

We know that Bitcoin has already gone through a fork and split. So, now there are two different bitcoin cryptocurrencies out there and obviously there is a number of other alt currencies as well.

So, you want to ask yourself, who is the core development team and what is the vision or the path they are taking this cryptocurrency on? What’s the path it’s going down? Is this something that you’re in agreement with?

Do you think that this is something that is sustainable? It’s going to work? Questions you want to ask yourself.

Another question you want to ask yourself is what are the pros and cons of holding on to this digital currency? What are the pros and cons of Bitcoin? What do you think they are?

Do some research, Go out there and Google- What are the pros and cons of holding on to bitcoin? What is the future? What do we think that the future of Bitcoin may be? Again, questions that you want to ask yourself before you invest.

Some other questions that you want to look into are– is or I should say rather, what are the laws of the land as it relates to Bitcoin where I live? Is it legal? Is it illegal? These are things that you should ask yourself.

Another question you should ask yourself is, am I putting myself in harm, in harm’s way financially by investing in bitcoin? You have some people out there who will take their family savings and invest it in bitcoin. Is that a smart thing to do? Only you and– you and your family can come up with an answer to that.

But you want to be mindful of that. There are some people who, “I’m going all in. I’m taking my life savings, my family’s savings, and I’m putting it into bitcoin.” That might not be the wisest thing to do. Might not be the wisest thing to do.

You may also want to ask yourself, am I investing in something that is a scam? And what I mean by that is there are certain websites that some of my brothers and sisters out there that you’re investing in, these websites that are related to Bitcoin and you’re asking me questions, “brother, is this website halal or haram?” Right?

So, you want to make sure that you are doing research to make sure that you’re not investing in something that is a scam and that leads us to the next, the segment of this blogpost, this video.

I want to go ahead and take a look at some websites that some of you are sending me to talk about whether or not these websites are legitimate or not to put your money in.

But just as a quick summarization, to summarize really quickly, speculation in and of itself, it’s not haram. It’s a normal part of investing. And when it comes to investing, from what my teacher says, you– what is disliked is when you invest with no knowledge. So, you want to ask yourself questions. You ask yourself questions. You do the proper research.

And again, once you’ve done that, you tie your camel, that is your research part, and then you put your tawakkul, tawakkul meaning trust. You put your tawakkul in Allah and you let things play out as they may. So, that’s what it is.

Study Islamic Finance

Now, like I said, let’s take a look at some websites and I’m going to talk about some of these websites. I can’t, I can’t cover every single website that’s out there. I highly recommend all of you to do some basic studies in Islamic Finance.

If you understand the principles of Islamic Finance, the basics of what is halal or haram, and on top of that, if you understand riba al-buyu (usury in trade) then you should put yourself, you will then position yourself in a very good way to be able to understand what it is that you are getting into when it relates to what it is you’re investing in even as it relates to Bitcoin.

Too many times I have brother and sisters out there asked me, “Brother, is this halal or haram? I just want a yes or no answer. Is that halal or haram? I don’t care to learn all that stuff. I mean that’s what you’re there for. You do all the learning and stuff and I’ll just come to you and I’ll ask you what’s halal or haram.” I think this is not a good way to approach this.

The reason being is because if you position yourself, if you put yourself in a position where you always have to go to someone to give you an answer, then you run the risk of putting yourself in a position where somebody out there with evil intentions can mislead you and that’s not good.

So, I encourage you to study. Not only that but I simply don’t have the time to go through every single website and answer every single question about every single website about what’s halal and haram. I simply don’t.

So, I encourage you to do your homework, to take some studies in Islamic Finance, insha’Allah you’re going to find great benefit in it. So, enough of that. Let’s take a look at some websites. And let’s just see, what is my take on the legitimacy of these websites. Let’s do that right now.

StartMiner, BTCProMiner and BitMiner

Ok. So, let’s take a look at some of the websites that some of you have been asking me to take a look at. So, we’re going to start off with three websites. We’re going to take a look at StartMiner, BTCProMiner and BitMiner.

So, these three websites, from what I can see, it looks like they are the same company. And the reason I say that is because, take a look at here at the tagline here. Here it says, “Welcome to leading bitcoin mining pool!” You see that for BitMiner, BTCProMiner, same thing, “Welcome to a leading bitcoin mining pool!” Same thing with StartMiner, “Welcome to leading bitcoin mining pool!” Even the same bad grammar, it really should read, “Welcome to THE leading bitcoin mining pool!”

So, a mining pool off the bat tells me that it should be where if you have your own mining rig, you should be able to join a mining pool and share the responsibilities of mining bitcoin with other miners and therefore you share in the profits.

But when I looked through the website of StartMiner, I don’t see anything here. Even if I go to the Frequently Asked Questions page, nothing here says anything about owning your own mining rig and you’ll be able to mine in their mining pool.

If I go to BTCProMiner, and click on the Frequently Asked Questions page, same thing, nothing here talks about you being able to use your own mining rig at home to do the same thing. I go to the Frequently Asked Questions, same thing with BitMiner, nothing at all indicating that you can have your own mining rig at home and use that to share in the responsibilities of mining.

So, this to me tells me that this is really– let me go back to the home page with StartMiner. This is really cloud mining. And we already know what I think about cloud mining. I don’t think it’s a good idea to do that. Down here, you can see that they have contracts that you can buy, the website looks a little messed up. They have to fix the graphics here, it’s overlapping.

Let me go over to BTCProMiner site. Let me go back to their homepage. And you will see if you scroll down, you see here that they have contracts, right? Contracts. I’m going to go over to BitMiner and you’re going to see the same thing. So, here’s BitMiner. Let’s go back to their homepage. And you’ll see here that they have contracts that you can purchase to essentially cloud mine.

And when you do that you see here where it tells you your daily payout if you purchase one of these contracts. This one the Version 1.1 you’ll get 0.0012BTC per day. Version 1.2 goes to 0.015, Version 1.3, 0.15, Version 1.4 you get 1 BTC, 1 bitcoin per day. I don’t know how they do it and that’s a lot. But that’s the daily payout.

Now, what– let’s see, if I go on to BTCProMiner, your contract, so the same thing. This one is going to give you Version 1.5, here you see that. It’s going to give you 2 BTC per day. Version 1.4, 1.3 and 1.2 decreasing amounts in the BTC payout, your bitcoin payout. Nonetheless, this is really getting into cloud mining and purchasing a contract for cloud mining.

Now, what I don’t like about this is the following. Let me scroll back down here. And this is BTCProMiner. What I don’t like is how they say you will get 2 BTC or 2 bitcoin per day, half of bitcoin, 0.5, 0.15, 0.015 and so forth. I do not think that you can guarantee. I don’t know how you’re able to guarantee that someone is going to get a guaranteed profit per day, a guaranteed payout of that amount.

Let me go to BitMiner. BitMiner, again, same thing. See here, they’re guaranteeing you a daily payout. I don’t see how that is possible because once you invest, it’s an unknown. You don’t know the difficulty on the Bitcoin network, whether that drops, it goes higher, it goes lower. So, how you’re able to guarantee a fixed amount of payout is unknown to me.

If I go over to StartMiner, you see here even though their visuals are messed up on the page, overlapping images. You can still see here where it talks about the daily payout. And that right there to me shows, again that as– it shows me that I need to be– to take precaution when it comes to this website because I don’t know how they are able to guarantee you a fixed amount per day when the– the Bitcoin network is unknown. It’s just unknown. So, you’re talking about an unknown factor.

Now, many people will say, “Hey, look but if I start off with the 1.0 Version, then you see here, it’s free. I don’t pay anything. And my daily payout, they’re going to give me 0.0002 bitcoin per day.”

If I go over to the BTCProMiner, look same thing, their Version 1.0, free to sign up and they give you 0.0006 bitcoin per day. Let’s take a look at BitMiner. BitMiner, same thing, Version 1.0, free, don’t pay for it. And you get the 0.0006 bitcoin per day.

Now, some people may say, “Well, I think it’s really good so I’m just going to sign up and I’ll just get the free bitcoin and I won’t sign up for any of these contacts. I won’t sign up for these. I’ll just stick to the free.” The problem is, is that they use this here to bait you in.

If they get you getting a little bit of bitcoin per day, you’re going to get a little bit greedy and want more. Not even greedy. The word about– it’s not even about greed. It’s just that you’re going to want more. It has nothing to do with greed. You’re going to want more.

So, when you look at BTCProMiner, again, they’re using this to tantalize you. They’re using the free payouts to get you to pony up and purchase a contract because that’s what they want to do. They want to get your money. So, I personally would stay away from this. I wouldn’t even signup for the free version.

StartMiner. Again, same thing, they’re using the free to get you to hopefully hop on board, get used to getting a little bit of bitcoin, getting your appetite wet, getting a little taste of it then they’re going to sucker you in and you’re going to eventually fall for buying some of these contracts here.

And if that’s not enough incentive for you, they even thrown out an Affiliate Program. So, let’s check out the Affiliate Program on StartMiner. So, they’re Affiliate Program is 20%. 20%. It says here that if you invite your friends, you get 20% each time they upgrade StartMiner.

Let’s go to BTCProMiner and see what they say with their Affiliate Program. This one same thing, its Affiliate program is at 10%, 10% payout. Invite your friends and get 10% each time they upgrade their BTCProMiner account.

Let’s look at BitMiner. So, BitMiner, let’s scroll up here. Let’s go to their Affiliate Program and see what that payout is. Here you go again, another 20% payout, right? 20%. Invite your friends, get 20% each time they upgrade their bitcoin miner [correction: BitMiner not bitcoin miner].

So, let’s go back to the homepage again, so that means if you talk to a friend and say, “Hey, don’t just use this free version, go ahead and sign up for one of these contracts.” And when they do, BitMiner says they’re going to give you, I think they said it 20%? Yeah, they said a 20% kickback.

Now, here’s the problem I have with this. Let’s just say you paid $100 for your contract. You pay $100 and BitMiner says they’re going to give you 20% kickback for that.

All that they are really doing is taking that $100, taking $20 out of that $100 and giving it to you. So, they’re giving you your friend’s money that means that they don’t lose anything. They don’t come out of pocket for anything.

They simply took your friend’s money, took 20% of your friend’s money and gave it to you, and gave it to you. They don’t lose anything. To me, this seems like a Ponzi scheme. This seems like a Ponzi scheme. This affiliate program 10% again, your friend puts in a $100, they give you 10% back.

Really, they’re giving you $10 of your friend’s money back. They don’t lose for anything. They don’t come out of pocket for anything.

So, StartMiner is the same thing with their Affiliate Program. So, when it comes to StartMiner and BTCProMiner and BitMiner, I would stay away. I would say it’s no good. It’s a cloud mining service. I already made a post on cloud mining and why I do not think cloud mining is a good idea.

I would stay away from this. It smells like a scam to me, like a Ponzi scheme. You– there is no way to prove that they’re actually doing any cloud mining.

And on top of that, if I click back over to the main page like I said before, I don’t see how you are able to guarantee a fixed rate in payouts per day when the market is supposedly unknown. Don’t know how you’re doing that. So, stay away from it.

One Gram Cryptocurrency

Now, let’s take a look at another website. This website is a company called OneGram. Now, this one has gotten a lot of attention. OneGram. in case you don’t know, let me hop over here. So, OneGram, here’s a YouTube video on it. I’m actually going to put this in the show notes so– oops, let me do this here. All right. So, OneGram – A digital token backed by physical gold.

So, this was created by Muslims, by Muslims. It’s supposed to be Sharia compliant. It’s supposed to be mindful of– for the Muslim investor. If we scroll down the page here, we can see here is their team.

I would love to see if I can get one of them on the Islam and Bitcoin Podcast just to learn a little bit more about OneGram. Here are their advisors that they work with, right? So, we see they have an advisory team and the core team and the advisory team. So, you know hamdullah, looks– hamdullah, looks good.

So, OneGram, like I said, it’s where you get to the digital currency is backed by gold. Let me– let’s take a look at their Whitepaper.

Here’s the Whitepaper, you can go on here and take a look at their Whitepaper. Now, I’m going to scroll down the page because there’s something I want to show you here. Now, here is a section called Money According to the Sharia.

Now, some of you may recall that the first blogpost that I made in the Is Bitcoin Halal Series, talked about currency, talked about money and how the Sharia, how the Fuqaha or the scholars, how they defined money.

And one of the things I always say in my posts is that you will find that scholars, you will find differences of opinion amongst the scholars. So, if you look here, it looks like they are taking their understanding of currency from Sheikh Imran Hosein.

I love this brother. Sheikh Imran Hosein who is from Trinidad and Tobago, who currently lives in Malaysia. He’s from my home country. My family is from Trinidad and Tobago, big ups to T and T! Trinibago! So, he’s from there, big sheikh.

And here is something that he points out that I think is very fascinating. He says that out of these six principles, these six key properties here. He explains that the six key properties of what money is in Islam. He says that in point number four, money has intrinsic value.

Now, I have– the teacher who I’ve studied with and other scholars out there, other people in Islamic Finance have a different opinion. And they say that money does not have to have intrinsic value. So, I’m not saying that Imran Hosein is wrong. I’m not saying he’s wrong. I’m just saying there are differences of opinion and just to be aware of that.

Nonetheless, here is their Whitepaper, you should check it out. You should read it. Good information on there. One thing that you should keep in mind and– actually let me go back to the main page and scroll down. Something to keep in mind is that this is not a coin that you can mine.

So, you cannot mine this coin. I’m going to scroll down and, ok here. All right. So, here, it tells you the phases it went through, March 1st, May 27, September 4th then January 15, the coming of January of next year. Here is the schedule of what they are releasing, what they are doing with OneGram.

If we look at May 27th of this year 2017, it says that OneGram initial coin offering. It means that all of these coins were pre-mined. They were pre-mined. You cannot mine the coins. So, if you want them you have to go directly and purchase the coins and those coins, it seems like each coins is backed by 1 ounce of gold, 1 ounce of gold.

So, hamdullah, it sounds good. The only thing that I would question is how is one able to verify that the coins are actually backed by gold. Is it something that you get to see, I mean how do you get to verify this? I don’t know.

Like I said, I would love to go ahead and interview someone on the team, see if I can get them on the podcast. But this is a site I’m going to put this in the show notes. It’s– I do have brothers and sisters asking me about this. Here is the brief intro on YouTube. I’ll post that as well.

So, my take on OneGram is it’s still a little bit of investigation needs to be done. Reading the Whitepaper, finding out how you’re able to verify the gold. Those are some questions that I would have and some things that I would need to research further to feel 100% confident about that.

Is Bitconnect a Scam?

Now, let’s take a look at Bitconnect. [website no longer exists] Now, Bitconnect is really, really popular. And I get asked about Bitconnect a lot. So, what exactly is Bitconnect? Bitconnect is a new cryptocurrency, a new cryptocurrency that goes by BCC.

That’s what Bitconnect- it goes by BCC. So, how Bitconnect works is you take your bitcoin and you purchase the tokens, the Bitconnect tokens. You then take your tokens, you take your tokens and you go ahead and lend it to Bitconnect.

You lend it to the trading bot. The trading bot will go out and start trading those Bitconnect tokens for bitcoin, for bitcoin. And what it will do is they will give you a daily payout. They’re going to give you a daily payout. Let me scroll back up the top. They’re going to give you daily payout. And that’s going to be a kickback for your investment.

So, let’s just say you give $100. You will go ahead and purchase, you take your bitcoin, $100 worth, you purchase your Bitconnect tokens. The Bitconnect tokens are used by the Bitconnect bots to trade bitcoins, you know and it does its best to make sure that it obviously buys low, sells high. And when it does that, you get your $100 back over the course of time. You get your $100 back plus interest, plus interest.

Here is a great video. I’m pretty sure some of you, you may have seen this, maybe not. If not, check out this video called Bitconnect Full Tutorial. Bitconnect Full Tutorial, I highly suggest that you check it out .

This brother right here, Trevon James, this young man. Trevon James does a very good job of explaining this so check out this video. So, yeah, so check out this tutorial it’s a 14-minute tutorial, really goes over how the whole system works.

Here is another video (Bitconnect scam alert! Is this 800 million dollar crytocurrency a ponzi scheme?) that you want to check out. This one is by a gentleman, a brother by the name of David Hay. So, he believes that Bitconnect is a scam and a possible Ponzi scheme.

That’s what he believes. So, I am going to post both of these videos, the link for these videos in the show notes– I shouldn’t say show notes, the blog notes, the blog notes so you can refer to these and listen to both of these videos. I highly suggest that you listen to both of them; especially this video right here by David.

So, my take on Bitconnect, my take on it is that I would stay away from in. Now why is that? I would stay away from it because at the end of the day, one thing is you cannot there’s even– you can’t verify that the bot, that there is a bot that is actually trading your Bitconnect tokens for bitcoin.

I cannot find a way to verify this. If some of you out there can, please leave comments in the Comments Section and tell me how you’re able to do that because I’m not. I don’t know. I can’t find a way how to verify that there was a bot due in that training– that trading.

On top of that, what you’re doing when you lend, you’re investing money essentially when you lend your $100 worth of bitcoin, they don’t give you back bitcoin, I believe they give you back money, your $100. And they give you back an interest on top of that. So, that to me seems like usury.

That’s– if you want to say riba al-buyu, you can, that’s a riba. It’s a riba. So, you’re swapping out your bitcoin for actual money, right? And now you’re getting back more money than you put in because of a loan. And this is riba. So, that’s another reason why I would stay away from this.

Now, some people may argue, “Well yeah, but you might be getting my extra money.” But what you gave in the beginning was really bitcoin, digital currency. And digital currency, as we know right now according to the fuqaha, they haven’t classified it as money.

So, if I give that but then get back money in exchange, is that really haram? Well, the truth to that and the answer to that question is, I don’t know, to be honest, I really don’t know. But I do know that when you put in $100, you’re getting more than 100 back for the loan, the $100 loan that you gave them. You are getting more money back.

And they’ve given it to you back because- more money back as interest. So, that to me is usually- I personally would stay away from it. I don’t think Bitconnect is a good deal. I think you should stay away from it.

Binance and Poloniex

Let’s take a look at another website. Now, we’re looking at Binance. Binance is simply a website that allows you to trade currencies, Ether for Bitcoin, Litecoin for Bitcoin, what else we have here? Dash for Bitcoin. So, we’re able to trade currencies on this website. Seems pretty straightforward.

Another website that people have asked me to talk about was Poloniex. I hope I’m saying that right. Poloniex. This is another website where you actually will get to trade currencies. So, we’re seeing what– how people use this website.

It’s going to give you the market rates where the trading for here all these different coins, Bitcoin Cash, Ethereum, Dash, Monero, Doge, so you can see all these coins here.

Now, if you’re just using this website Poloniex and Binance, if you’re just using this website to swap out, to trade for another digital token, another digital currency, Dash for Bitcoin, Bitcoin for Doge, then I think that is fine and there’s nothing wrong with that.

Where it starts getting tricky is let’s say, let’s go back to Poloniex. Where it gets tricky is when you start doing things like margin trading. Margin trading is haram in Islam. Basically, you’re borrowing money so you can trade. And a lot of times, you have to pay interest on that money that you borrowed.

Now again some people will say, “Yeah, but I’m borrowing money to purchase digital currency and I’m trading the digital currency. And when I cash out, I’m getting money back. Is that really haram?” Because you’re going in between a currency and something that is not, it’s not considered, technically considered money according to the scholars right now.

The truth is I really don’t know because it’s such a gray area, I don’t know. I personally would stay away from it. I would just stay away from it. Margin trading I would stay away from it. So, that’s my take on it.

But if you’re using the website, like I said just to, you want to trade some Doge for maybe is this Zcash? I think Zcash. You want to trade Dash for Monero, Litecoin for BTC Cash [correction: it should read Bitcoin Cash], go ahead and do it, nothing wrong with that. Nothing wrong with that.

Once you start getting into margin trading and short selling, day trading that could potentially be an issue and we know those things are haram in Islam.

Is ShapeShift Legit?

Now, let me also finally show you one website that I use for trading. I use a website– if this even loads up. Here you go. I use ShapeShift. So, ShapeShift is a website that all it does, it allows you– let me scroll down here. It allows you to simply exchange one cryptocurrency for another.

We can see here Bitcoin for Dash, Bitcoin for Ethereum, Ethereum for Bitcoin, Doge for I don’t know, is this Bitcoin Cash? Yeah, Bitcoin Cash. So, this website does not deal with fiat currency such as the Euro, the British Pound, the US dollar, the Saudi Riyal and so forth.

It only deals with these currencies here, the digital cryptocurrencies that we see here, that’s all it’s going to deal with. I like it. It’s very simple, easy to use. You cannot exchange large amounts. I don’t think you can exchange more than– I don’t know, I don’t know the amount but you cannot exchange really large amounts on here.

But I use it because I think it’s safe. I’ve never had a problem with it. You cannot do any margin trading on this, no day trading, no short selling, none of that. It’s strictly exchanging one coin for another. That is it. It’s clean. It’s simple. It’s easy. I like it. I give this site a thumbs up.

Here is a great article. I’m going to put the link for this as well, ShapeShift cryptocurrency exchange review, great article on ShapeShift. If you’ve never heard of it before, it’s a great way for you to learn about ShapeShift, gets into what it is, what cryptocurrencies you can trade, how they accept payment methods.

And ShapeShift, it tells you right here. Wow! It’s highlighting the whole thing, “Only facilitates crypto to crypto exchanges”, which I think is brilliant. That way they stay away from getting into trouble with the law in regards to using any type of government currency to trade out to buy another cryptocurrency.

I think it’s very smart on their part to do that. I think here they get into the pros and cons of the website. So, ShapeShift, I like it. I give it a thumbs up.

So, that’s my whole take on it. That’s my take on these websites. I know I haven’t gone over every single website that people have sent me. It’s just impossible for me to do so. Again, exercise caution when you’re looking at these websites.

Always keep in mind that, you know, if you have a solid understanding of basic Islamic principles when it comes to trade, if you understand riba al buyu, what that is, you should do fine in being able to identify whether these websites are a scam or they are the real deal or not. So, that’s my take on it. Insha’Allah it was a benefit to you. And, yeah.

Summary

All right. So, as a wrap up is investing in Bitcoin halal or haram? Well, we know that it is not haram. It’s actually not haram. It’s not haram. However, there are certain guidelines or principles that you should follow when it comes to investing, right? Keeping in mind that speculation is the norm.

Some element of risk will be there once you– when you invest in something. But the fuqaha, our teachers, tell us that when it comes to investing, we are supposed to do our homework, investigate the matter. And that investment vehicle you’re looking at is it halal? Is it haram? Who are the financial backers behind it? What is the– what’s the product itself? What’s the pros and the cons of the product?

Just doing due diligence, really making sure that you really ask questions and do your research before you invest in something. I mean if you don’t do that then you can argue, if you’re not going to do any research and you just hop in there, you jump in there and you throw money into it, then you can say that that is like a form of gambling and we know that gambling is haram, gambling is haram.

So, again, if you do your research, you’ve done your research, you feel confident that you’ve checked as many nook and crannies as you can check then you invest in it and you put your tawakkul, your trust, you put your tawakkul in Allah and you let the outcome be as it may. And that is that.

I wanted to thank you for checking out blogpost number four of this four-part series. You’ve hung in there. You made it all the way through. In our first blogpost, we talked about currency, then we talked about trade, then we talked about bitcoin mining and now investing.

I want to thank all of you who have shared this, viewed this, spread it far and wide, thank you so much. Alhamdulillah! May Allah reward you. I ask that you always keep me in your du’a (prayer), I always need them.

Please stay tuned. I’m looking to actually hop back into doing interviews with the podcast series and I have in mind, already have in mind a couple of people to reach out to. It’s just a matter of getting them to agree to do the podcast and actually solidify a date with them.

But please stay tuned as some more interviews on the podcast series will be coming up. JazakAllah kheir. As-salamu alaykum wa rahmatullahi wa barakatuh. Masalamah.

PLEASE KINDLY SHARE THIS ARTICLE IF YOU’VE FOUND BENEFIT IN IT

Assalaamu Aleikum and welcome to part 3 in our 4 part Is Bitcoin Halal Series. Today we’ll touch on, is bitcoin mining halal or haram? We’ll talk about the general opinion on bitcoin mining by our scholars and we’ll also take a look at bitcoin mining hardware you can use to mine bitcoin as well as bitcoin cloud mining.

But let’s answer the main question, is bitcoin mining halal or haram?

At the time of writing this blog post, there is still no consensus among the fuqaha that Bitcoin in and of itself is haram. If you are mining bitcoin yourself with your own bitcoin mining hardware, then we cannot say that this is haram.

You are purchasing the mining equipment and/or maybe you are joining a mining pool, and this is not haram. However, cloud mining may be considered haram because there is a high percentage of gharar (uncertainty) associated with cloud mining and the sharia prohibits business dealings that are not transparent or unclear due to uncertainty.

You can learn more by reading the blog post or watching the video below in case you would rather not read. You can also use the menu in the video to go to different parts of the video.

If you choose to mine for bitcoin or any other cryptocurrency, simply make sure to follow the laws of the country you live in and make sure to do your proper research before investing any money or time into bitcoin mining. 

Always keep in mind that you should verify all information for accuracy, the age of the content you are reading, and carefully consider your own financial situation before making your decision.

This blog post is for informational purposes only.

Links to videos in this blog

• DIY Bitcoin Mining: Hardware (part1)
• DIY Bitcoin Mining: Software (part 2)
• Raspberry pi and GekkoScience Compac USB Stick Bitcoin Miner 8gh/s+ (BM1384)
• Working USB Bitcoin Farm with Raspberry Pi running Minera
• Bitcoin Mining in July 2017 – Still Profitable?
• 3 Reasons Why You Should Not Cloud Mine

Video Transcript

Assalamu alaikum and thank you for joining me for today’s blog post. Today is blog post number three of our four-part series, the, Is Bitcoin Halal Series. In part one we covered currency. In part two we talked about, is trading Bitcoin halal or haram? And in today’s blog post, we’re going to get into bitcoin mining. Is bitcoin mining halal or haram? 

So, let’s hop into that real quick today. Okay, now as we covered in the first and second blog post that we had. Number one, currency. We mentioned that the fuqaha as of yet have not classified bitcoin as money.

In our second blog post when we talked about trade when mentioned that, when it comes to trading bitcoin, bitcoin is not subject to rules of riba al buyu. So, the rules of trade don’t really apply to bitcoin. Again, because it doesn’t fall into the categories we talked about.

And if you haven’t read that blog post, if you haven’t caught that video, go back and check them out. Again, check out the first one that talks about currency and the second one that talks about trade.

We got into a little bit in regards to showing you the different categories and classes of trade- of items of trade that the fuqaha broke them up into classes- and we talked about that and what that means in regards to rules that apply to trade to items that fall into those categories. So, again, go back and check that out.

What Scholars Say About Bitcoin Mining

So, with that being said, we’re going to get into bitcoin mining. So, with bitcoin mining, people are always asking, “Hey is mining for bitcoin halal or haram?” So, as we mentioned, Bitcoin in and of itself is not haram.

So, the fuqaha have not unanimously, there is no mashoor (popular), there is no consensus that Bitcoin in and of itself is haram. It’s more of a wait-and-see approach with the fuqaha and to exercise caution when you’re using it.

And also, it seems like it’s also more about paying attention to the law of the land of the country where you live in; seeing if Bitcoin in your particular country is legal to use or not. But when it comes to bitcoin mining, bitcoin mining in and of itself, we cannot say that it is haram.

Now, there are some things that you should pay attention too. So, I’m going to look at mining from two different perspectives. The first one being mining for bitcoin yourself; meaning, you purchased the hardware. You join a mining pool and you’re mining bitcoin or any other altcoin that’s out there.

And the second one is cloud mining. And I actually did a video, a blog post, on cloud mining. So, that’s out there for you to check out as well. So, let’s go ahead and first let’s talk about bitcoin mining. I’m sorry- mining yourself – not cloud mining – mining yourself.

First thing I want to talk about is, if you want to get into bitcoin mining there are some things that you probably want to pay attention too; certain equipment that you want to take a look at. So, I’m going to go ahead and share with you some equipment that you may want to take a look at. I’m pretty sure some of you out there have already done some research on this.

Some of you have contacted me through my website here and let me know that you’re new to Bitcoin. So, if you’re new to Bitcoin this probably will be even more [of] benefit to you. In the hopes that we won’t have you wasting time or money.

So, I want to talk about some equipment that you should look at. Some things to think of and then I also want to touch on bitcoin mining when it comes to cloud mining because there are some concerns there that I think- where you have to pay attention to the sharia in regards to cloud mining.

So, let me go ahead right now and let’s go ahead and hop into mining on your own with hardware that you have either purchased or rented so let’s go ahead and take a look at that right now.

Bitcoin Mining Hardware

Okay, so, for those of you thinking about mining bitcoin at home, I wanted to share with you hardware that you should look at. So, this is a really good video where this guy, his name is Fred, he’s going to show you an inexpensive way to set up a mining rig at home that’s not going to break the bank.

He’s going to use bitcoin miners that are USB sticks. Now one thing I want you to pay attention to is, look at the date as to when this video was published in 2013. That’s old. That’s old. So, we have to keep in mind that the Bitcoin, the hash rate on the Bitcoin network has gotten much higher.

It’s increased dramatically since then. So, keep that in mind when you’re looking at videos on YouTube that talk about setting up mining rigs for yourself at home. You want to keep in mind, look at when the video was made. Look at the products that they’re using. It’s really important. You have to be able to make sure that whatever you purchase is going to be well worth the investment.

So, let me go ahead and – let’s make this big here. Let’s close here. Press play. I’m going to fast forward here. Handsome young gentleman right there but we’re going to fast forward. All right, so, here’s the setup. Here’s the setup. So, if you look over here to the left, you’re going to see the Raspberry Pi 3.

This is going to be your minicomputer. This is going to be the casing to protect this Raspberry Pi. I highly recommend to have a protective case for it so this way – it’s so exposed that you don’t want something to fall on it or you drop it or you, God forbid, you step on it by accident.

So, you want to have a protective case for your Raspberry Pi 3. You want to have a fan because, your fan, that’s going to keep your bitcoin USB sticks cool. And this is going to be your USB hub. It’s going to be your USB hub where you will go ahead and plop those suckers in right there. Plop in your USB mining sticks in order to mine. And this is going to be your memory card.

Now, one thing I will say is – let me go ahead and let the video play out here – one thing that I will say is keep in mind that these Bitcoin Erupters, these are ASIC Bitcoin Erupters. These are no good in 2017. At the time of the making of this blog post these are no good. No bueno. No good. Don’t get these. I don’t think you’re going to see any profit whatsoever with those. They’re just not going to cut it nowadays.

This video here is pretty much going to be him explaining to you, showing to you, the different hardware and he’s going to get into showing you how to set up the hardware and he does a really really good job of that – Let me go ahead and fast-forward here. Let’s see here. Again, getting into the setup – Here we go right here.

Like I said, this is going to be just an excellent video overall. I mean, it shows you all the hardware equipment that you’re going to need to use to build your own mini mining rig. You know, to build this rig isn’t going to break the bank. You don’t need to spend thousands of dollars.

It’s a great do-it-yourself little video on that so, I am going to include this in the show notes there. So, you can go ahead and check this out. Let me go ahead and escape out of this video and pause it.

So, again, he just showed you a layout of what equipment to use, and I had mentioned that even though he was showing the Bitcoin Erupter – just again, just want to make, drive the point home, when it comes to this Bitcoin Erupter, you’re going to see this out on the market. They are still selling this. Don’t buy this. Don’t buy it.

You’re not going to make any money with this. You’re going to lose money. Don’t buy this. Okay, this is old. 2013 video, old. The premise of the video, the equipment he’s showing you how to set up is good. But this particular USB mining stick, that’s past its prime.

So, what do you want to look at? Let’s go to this video here. This video, check out the date on this video. 2016. So now this is 3 years later. This video, I will also include this link in the notes of this blog post – let’s go ahead and make this big here, close this.

And I’m going to press play – alright so, in this video you’re going to see again that he is also using a Raspberry Pi 3 as his minicomputer. You can see there that he has the protective casing. You always want to make sure that you’re going to protect your minicomputer. You want to protect your investment. I want to go ahead and fast forward, to here – let me back up – there you go.

So, you can see right here, so this right here is going to be your Gekko 3. This is going to be the Gekko, I’m sorry the Gekko 3, the GekkoScience. The GekkoScience USB mining sticks. These are going to be superior to the Bitcoin Erupter. And as you can see here, this person also has a USB hub, a multi-port USB hub, and a fan because I’m telling you these suckers run hot. Blazing hooooot! HOT! So, again you can see now in 2016 we see that we are using the Gekko miners.

Let me show you another video here. This one here. Now look at the date of this video. This one was published in March of 2017. So, this is this year. And – let me make the video, enlarge it here, close this out, press play – and I’m just going to sort of walk through this video here. He is also using a Raspberry Pi 3 still in 2017.

This is still good to use and you can see here what he’s showing you is his little farming set – let me pause the video – this is his USB board. He is using the GekkoScience USB bitcoin mining sticks and obviously you can see the fan because again we said that this runs hot. When this sucker mines, it’s really, really hot.

And over to the left, I think at some point he’s going to show you, he’s showing you the, his mining sticks there and then over to – I think the left-hand side up here, you’re going to see his power supply. So, this is the power supply that he is using, but again I just wanted to show you these videos just so you can see the equipment, what these people are using.

Let me go back for a second here. So, in this video, so this video I said this is going to be a great do-it-yourself tutorial on what hardware to use and how to put it together, that’s part one. He also has a part two that’s pretty good to check out as well.

The part two is just a software – but this really gets into software meaning like bitcoin wallets. What wallets to use. So, they’re good, again, the videos are old, but they still have value in them. There’s still value in this.

So, let me do this right now. Let me hop over to the Islam and Bitcoin website. I’m going to go over to the products tab and I’m going to click on mining.

So, let me click on that and that’s going to bring up the mining page here and on this page, you can see that this is where I have listed all the equipment that relates to bitcoin mining.

I did my best to put equipment on this page of quality. I only put equipment on this page that I thought would be worth it and disregarded anything else. So, the top of the page you’re going to see the Gekko USB mining stick. I go ahead and give you some background on it here so that you can read up on it. This is, like I said, it’s going to be far superior than the Bitcoin Erupter that he was showing you in that older video there.

Here you’re going to have your USB multi-hub-ports. That’s where you’re going to, you’re going to use this to put in your USB mining sticks. This is a 10 port USB 3.0 hub. Down here this is a 12 port USB 2. I would go with this, I think this is going to be better, you’re 10 port USB. Why? Because it’s a 3.0. So, the 3.0 is going transfer data faster. And I think that’s going to help you when it comes to mining.

So, let me scroll down here and this is going to be your Raspberry Pi, your minicomputer. So, you can purchase it on its own, on its own without the casing or you can go ahead and purchase it with the kit.

The kit gives you everything you need. I totally, highly recommend if you are going to go this route just get the kit. Save yourself some time. Don’t try to go out there and try to put things together piece-by-piece. You’ll probably end up spending more money. This kit is going to give you the protective case, the power supply, your cables, your memory card, so you’re going to be good to go if you go that route. So, I would suggest doing that.

So, let me show you this video.

Now this video, look at when this one is produced, Bitcoin Mining in July of 2017, so now we’re pretty much caught up to present day. At the time of making this video, this blog post I should say, at the time of making this blog post, this video is still valuable for today.

Now, why do I think this video is important? He is going to talk about – let me go ahead and make this big – this video, he is going to get into showing you different equipment to use for mining. So, you see right here, he’s going to get into the Antminer, the Bitcoin Erupter. He’s going to mention just as I did that this no good to use. No good to use.

So, what I’m going to do now is – I want to fast-forward in this video to about here – he goes through some equipment, but the one that you want to pay attention to is when he talks about the Antminer S9. This is going to be your workhorse.

This is going to be the Bitcoin hardware, the mining product that is going to turn you a prophet insha’Allah. The price tag though is pretty darn high. Check out this video. Check out this video. He gets into all the analytics. He talks about your electricity costs, the price of the equipment, how much bitcoin you going to earn per day. It’s an excellent video and again I’m going to put these links in the notes of this blog post. So, check that out.

Let me go back over to the website here and I’m going to scroll down just to show you on this page the Antminer S9. Here you go. Like I said, this is going to be the “big daddy”. The big worker. Check out the hash rate. This thing is hashing at 13.5 terrahash. That is larger, bigger, than the hash rate of the Bitcoin Network right now.

With that being said though, look at the price. That’s a lot. $2,500 you may find it for $2,300. That’s a big chunk. That’s a big chunk. That’s a big price to pay for that; however, insha’Allah, that is going to make you a prophet insha’Allah. That is going to turn you or profit.

If you scroll down the page here you’ll see that I also have the power supply for it. So, you have the power supply for the Antminer S9.

Can You Make Money Mining Bitcoin?

So, let’s get into talking about the reality of making a profit. I’m not showing you all of this just because I want you to come to my website and purchase the equipment. If you do, great. Alhumdulilah. That would be wonderful. But I want to be honest with you.

As your Muslim brother, your brother in Islam, we’re supposed to be honest with each other. If you are looking to purchase the Gekko USB stick, keep in mind that this is not going to make you some huge profit.

I don’t want you to think that if you go ahead and get the USB stick and you go ahead and get your USB hub, you get your Raspberry Pi 3 and you put your mining rig together that you’re going to all of a sudden just, alhumdulilah, you’re going to make a $1,000 per month in bitcoin. $500 per month in bitcoin. That’s not going to happen. It’s not going to happen.

Keep in mind that the hashing rate of these USB sticks are very low. So right here you can see that it says 8 gigahash. I think it goes up to 13. It’s not going to be a lot. You could potentially lose money with this. I think you may just break even.

Some people, some people are able to make a profit with this but not everyone. And the people who make a profit with this they do so by tweaking, and I don’t know how they do this, if some of you know please tell me. Leave comments in the blog post below. They are able to tweak their USB hub. I think they’re able to tweak it so that they maximize the data transfer rate in this USB hub which then allows this USB stick to maximize its hashing rate.

It can hash at a higher rate and transfer the data faster. Like I said, I really don’t see you making a huge amount of profit with this. I don’t want you to be delusional and have all these dreams and hopes that if you get this it’s going to make you a lot of money off the bat.

I think if you’re just looking to get your feet wet with bitcoin mining. You want to try it out on your own. You want to do it in a manner that is relatively easy then this is a good way to go, but know that you’re probably not going to make huge profits. I think that you are probably going to make something in the realm of maybe $0.20 per day. $0.30 per day. It’s not going to be hundreds of dollars.

If you live somewhere and you don’t have to pay electricity costs even better. That’s good. If you have to pay electricity then you have to figure out if you’re going to lose money or not. Again, this is good if you just want to get your feet wet. This is good if you want to earn some bitcoin, mine some bitcoin, but you’re not really concerned about making huge profits.

There are some people out there who do make profits and they do so by tweaking, again, they are able to tweak their USB hub. But again, don’t look at this as though you’re going to make huge profits. You’ll make some, you’ll get bitcoin, inshallah no doubt about it you’ll get bitcoin, but it won’t be this huge, it’s not going to be huge amounts.

And the price for this, the price is really, let me see how much it is. The price to get into this if you want to mine with it. Here you go right here, so we can see here you’re looking at about 70 US dollars. 69/70 US dollars to purchase a Gekko USB mining stick.

If you see right here, look here, it says, you can go from 8.5 up to 15+ gigahash, gigahash speed and if you see here it says that your USB port must be set at a higher speed rate. It should be set above specs in order to hit that 15 gigahash rate.

So, I think the people who are really making some kind of a profit, they are tweaking out their USB hub. Okay? All right. Again now, the way that you’re really going to make some money is if you go the route of going for the [Antminer] S9.

I don’t think this is even released yet but the price tag is really high. I don’t think that most people can afford this. I really don’t think so. I know some of you out there do mine bitcoin. You’ve contacted me and you’ve told me that you’re doing it. I don’t think everybody can afford $2,500 though.

So, that’s all I wanted to show you in regards to the hardware. Again, I will post all the links there. Mining bitcoin on your own from what I’ve seen there is nothing haram about this at all. You’re purchasing the equipment, you’re joining a mining pool, bitcoin in and of itself is not haram. Mining, it’s not haram. No one [scholars] said it’s haram.

So, if you want to do this, give it a shot. Give it a try. Okay, so let’s talk about cloud mining. I want to talk about cloud mining now.

Bitcoin Cloud Mining

All right, so now that we’ve finished covering bitcoin mining as it relates to purchasing your own equipment, building your own mining rig, now we want to touch on cloud mining.

Now, when it comes to cloud mining – let me go ahead and click on the blog tab here – now, I had published a blog post sometime back that was called, “Should I Cloud Mine?” – let me go ahead and click on this – “Should I Cloud Mine?”

And in this blog post I covered my experience with cloud mining, and I cloud mined with Genesis. So, let me go ahead and lower the volume here just to show you that – let’s see here. Where do I want to go? Let’s try, is it here? We’re just doing some guesswork here. So, let’s wait for this to pull up, yes.

So, in this blog post, again, I talk about my experience with Genesis Cloud Mining. It’s a very thorough video that I produced. Very long, about 45 minutes long. I know, very long. But in the video, I actually do cover my experience with Genesis.

As you can see here, I even get into showing you the daily payouts that I was paid from my cloud mining. Again, you get to see the dashboard. You get to see all inside my account. We talk about the pricing of the contracts. It’s a very very thorough blog post. I definitely would say that you should go ahead and check that out.

But now as I’ve gained more knowledge in regards to how cloud mining works and my studies in Islamic Finance, I’ve now come to the conclusion that I believe that cloud mining is no good. And I do not recommend cloud mining and that led to a blog post that I published called, “3 Reasons Why You Should Not Cloud Mine.” “3 Reasons Why You Should Not Cloud Mine.”

And the number one reason that I would say why you shouldn’t cloud mine it because of what it’s called “gharar”. Gharar means uncertainty. Technically I believe it means deception but according to Islamic Finance when you are dealing in contracts, gharar is normally understood to mean uncertainty.

Now, when you purchase a cloud mining contract, there is no way for you to truly verify that the bitcoin you are receiving is from that company actually performing any mining. There is no way for you to really authenticate, to verify that the bitcoin that you are receiving or any of the altcoins that you are mining for.

There is no way for you to truly authenticate that they are actually mining those coins and that the payout that you are receiving, that the bitcoin that you are receiving, is actually from, actually from them mining.

Now what’s interesting is, don’t just take it from me, there’s a gentleman by the name of Andreas Antonopoulos – I’m going to turn up the volume here and just play for you a segment of this video that I published, and you can always go back and check it out for yourself. You can check out the full blog post, the full video here.

I just want to play a portion of it for you so that you can see, you can see for yourself – if I can get it here. Come on. – All right, so you can see for yourself Andreas, his take on cloud mining. So, we’re going to play that right now.

“Yeah, 95% of cloud mining schemes are scams. They are straight up Ponzi schemes and the reason is, there is no effective way to prove whether the money you’re making comes from the mining share that you’ve invested in or simply from the money that the people after you are investing into the same scheme which is what a Ponzi is.

Cloud mining in itself is almost always a Ponzi. I have not seen a single one that I would trust, yet, I’ve seen hundreds of examples of them collapse. So, if they’re making money from mining but they’re not actually running any hardware, they’re just putting some money in and money keeps pouring out every month, I would take a 95 to 5 percent bet on that myself that it’s a Ponzi scheme.” ~ Andreas Antonopoulos.

Conclusion

All right, so there you have it. Now, what he touched on is what we would call gharar. And again with an Islamic contract, when you’re doing business between two parties, there shouldn’t be gharar in the contract. The element of gharar should not be in the contract. Now with that being said, I completely understand that the sharia does allow for some percentage, a small percentage of gharar depending on the circumstance.

So, what do I mean by this? I will share with you an example that was provided to me by my teacher. Now, let’s just say you are a grocery store owner. You own multiple grocery stores and you are interacting with a farmer and you’re purchasing barrels of apples from a farmer.

So, you’re purchasing apples from a farmer and the farmer is selling you one hundred barrels of apples. And let’s just say maybe each barrel weighs about 50 pounds and you’re going to distribute these apples all across the different stores that you own throughout the city.

Now, what happens is, when you go to purchase those apples from that farmer, 9 times out of 10, most of the time, you are not going to open up all 100 barrels and check each and every single apple to make sure that all the apples are in good quality, that they’re not rotted, that they’re not damaged, or to even check to make sure that there are apples in the barrels.

Realistically you are not going to do that. You may randomly check some barrels here and there, but most likely you’re not going to open up each and every barrel and check every single apple, you’re not going to do that.

And the fuqaha realized that for sake of practicality, for sake of ease, you’re not going to do this. So, this type of uncertainty is allowed. This is a slight uncertainty that is permissible.

However, you can argue that cloud mining is different. Cloud mining is different. You’re not opening up, it’s not like you’re dealing in barrels of apples. You’re giving money to someone trusting that that person is going to mine bitcoin for you and there’s no way for you to verify that the person is actually mining bitcoin for you.

You don’t know whether they are doing that or just giving you your own money back in small proportions as bitcoin and telling you that you are actually receiving bitcoin from their cloud mining services. You simply just don’t know. It’s an uncertainty that is just there. At least I believe so.

So, just to wrap things up, when it comes to the question, is bitcoin mining halal or haram? Generally speaking, we can say that there is nothing haram about it if you purchase your own mining rig and you have your own equipment or let’s just say you are paying someone else to cloud mine for you but you actually can, maybe you can go to their house or their apartment and you can actually look at the mining rig itself and you trust this person and you know that you are actually receiving bitcoins from their cloud mining process.

However, when it comes to these organizations [companies] that are out there in other countries that you yourself, you can’t visit their location, you have no way to verify whether or not you are receiving bitcoin from their cloud mining services, this would be known, at least from my understanding, this to me seems to be gharar.

And I do know that in Islamic Finance when you have a contract between two people, two parties, the element of gharar should not be there. So, that wraps it up for this blog post when it comes to, “Is bitcoin mining halal or haram?”

Insha’Allah you found benefit in it. I ask that you do share this. Again, especially if you found benefit in it. So now we see that we’ve advanced in our series, the, Is Bitcoin Halal Series. The first blog post that we had dealt with currency, “Is classified as money according to the Sharia?” The second blog post we touched on trade.

In this blog post we now touched on mining, bitcoin mining. And in the next blog post that we have coming up we’re going to touch on investing in bitcoin, “Is Investing in Bitcoin Halal or Haram?” Please stay tuned to check that out. That blog post is coming up sooner than later insha’Allah and I just wanted to thank you for checking out this blog post today.

Assalaamu Aleikum and welcome to part 2 in our 4 part Is Bitcoin Halal Series. Insha’Allah today we’ll talk about trading bitcoin. We’ll take a look at how the fuqaha (scholars) view bitcoin and what this means when it comes to trading bitcoin.  

Many Muslims are asking the question, is bitcoin trading halal or haram?

As of the making of this blog post, there is still no consensus among the scholars that bitcoin can be classified as money. Therefore, bitcoin cannot be subject to the rules of riba al buyu. So, we can say that, at this time, trading bitcoin is not haram.

Now, some scholars have given fatwas that bitcoin is haram and others say bitcoin is halal. But again, there is no consensus that bitcoin is haram, and in Islam, we always start with the Islamic principle that things are considered permissible until proven otherwise.

I agree with the scholars who say that bitcoin is halal since I believe their argument and understanding of bitcoin is more accurate than those scholars who argue the opposite. Not only do some scholars see bitcoin as halal, but they also see that bitcoin can be classified as money.

And if the scholars reach a consensus that bitcoin can be classified as money, then not only is it permissible to trade bitcoin, but then we must now also apply the rules of riba al buyu when trading bitcoin.

To learn more about trading currency and how bitcoin comes into play. Please watch the video below or read the article below as we discuss what are the rules of trade in Islam.

Video Transcript

Assalamu alaikum and thank you for joining me for today’s blog post here with the Islam a Bitcoin project. Today is the second blog post in our 4 blog post series. Our series is called, Is Bitcoin Halal Series.

Now, in our first blog post of the series we talked about currency. We talked about how does the sharia define money? What is money? What is a currency? And where does bitcoin fall into that? And what do the fuqaha (Islamic scholars) have to say about bitcoin as it relates to money according to the sharia?

Now, if you’ve missed that blog post please do go ahead and check it out. As for today, we are going to step into blog post number two in the series and we’re going to talk about trade.

Now let me just start off by saying that this is not meant to be a fatwa series. I’m not here to give a fatwa. I always say I’m not a mufti. I’m not an alim. I’m not a big time sheikh. I am simply a student of knowledge sharing with you information that I have learned from my teacher in my studies as it relates to Islamic Finance with the hopes of benefiting myself first and foremost and all of you out there as well.

Keep in mind that even though I may share with you information that I have learned from those teachers, scholars, that I’ve taken knowledge from it may be that another scholar out there has a difference of opinion and this is quite normal in Islam.

It is quite normal for the fuqaha to have differences of opinion amongst each other so no need to get into squabbles or some extreme debates over the matter. So, let’s hop in today’s topic of discussion right now. Is trading bitcoin halal or is it haram? what does the sharia have to say about trade as it relates to bitcoin? What do the fuqaha have to say about trade as it relates to bitcoin? Let’s go ahead and take a look at that right now.

Is trading bitcoin halal or haram? So, that’s what we’re going to look at with this blog post. The first thing we’re going to do is take a look at some hadith that the fuqaha normally look at when it comes to trade.

After that we’re going to talk about money and see how does trade come into play when we are talking about money and where does bitcoin fall into that. And after that we’re going to look at some basic principles in Islam when it comes to trade; when it comes to things such as futures, short-selling, binary options and the like. So, without further ado, let’s go ahead and move ahead and hop right into it.

Hadith About Trade and Riba Al Buyu

Okay, there are two hadith that the fuqaha normally look at when it comes to trade and both of them can be found in Muslim. This first one we’re going to look at is Muslim, Hadith number 1587 and this is narrated on the authority of U’bada ibn al-Samit (May Allah be pleased with him) and he said that the messenger of Allah said, (may peace and blessings be upon him).

Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates and salt by salt; like for like and equal for equal, payment being made hand-to-hand. If these classes differ then sell as you wish if payment is made hand-to-hand. (Muslim 1587)

So, right here we can see that there are six items that are mentioned in this hadith and these six items are what the fuqaha look at to derive rulings when it comes to trade and if you see that the messenger of Allah (may peace be upon him) is saying when you’re trading like for like, gold for gold, silver for silver, wheat by wheat and so on, that the trade should be equal for equal and the payment should be made hand-to-hand.

Meaning it should be on the spot trading and then he (pbuh) says, if the classes differ, then sell as you wish so long as the payment is still being made hand-to-hand. And we will take a look at what these classes are as we move along further here in this blog post.

The second hadith that the fuqaha look at his also found in Muslim and this is Hadith number 1584. This one is narrated on the authority of Abu Sa’id al-Khudri (may Allah be pleased with him) and he said that the messenger of Allah (may peace and blessings be upon him) said,

Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, salt by salt, like by like, payment being made hand-to-hand. He who made an addition to it or asked for an addition in fact dealt in riba. The receiver and the giver are equally guilty. (Muslim 1584)

Now we can see here that this hadith also mentions the same six items that we found in the previous hadith. The only addition to this hadith is the introduction of a riba. And what type of riba are we discussing here?

We are discussing riba al-buyu and riba al-buyu is trade where an increase takes place and where this increase is not permissible. Riba al-buyu is seen as haram. This ruling of riba al-buyu applies to the trade of items that fall within a particular category or class of items. Now, if you remember the two hadith that we just took a look at it mentions six items of trade.

These six items fall into certain classifications and we’ll take a look at this as we move further along in the blog post. But just know that because these items fall into these particular classes the fuqaha will take a look and see if riba al-buyu is the end result when trade is taking place when it comes to these items.

And again, we said that riba al-buyu is haram. So, what we need to do now is also see where does bitcoin come into play as it relates to riba al-buyu, but for now let’s take a look at the six items and have a little discussion on this further.

Six Items of Trade

Now here we see six items of trade mentioned in the Quran and/or hadith and these six items are gold, silver, wheat, barley, dates and salt.

Now as previously mentioned we said that the six items that were discussed, talked about, in hadith fall into two different classes and we can see what these classes are. Right here over to our left we see that we have the class of items that are measured by weight.

That being gold and silver and over to our right we can see items that are measured by volume. That would be wheat, barley, dates and salt and these are the two classifications that all these six items fall in and this is what the fuqaha will take a look at and use this as the foundation of how to make ruling when it comes to trade.

Now out of these items, gold and silver, the items that are measured by weight, these two items are seen as money; money being a medium of exchange. Over history though, sometimes salt was also used as money. But by and large all throughout history even until today gold and silver still rule and they are still seen as money

This piece of paper is normally used as trade in the marketplace to purchase an object of sale, but it’s not an item that we normally say falls under the category of being measured by volume nor do we say that the piece of cotton paper is something that’s normally measured by weight. So, what do we do with this?

The fuqaha, well, first of all, know that the- a piece of paper would normally be considered a countable item and countable items are things such as books, pens, shoes, an article of clothing, a car, a house and the like.

But the fuqaha said, wait a minute, we’re not going to look at this piece of paper that is called the U.S. dollar, we’re not going to look at this as a countable item because at one point the U.S. dollar was backed by gold and this U.S. dollar is being used as the currency of a government, of a Nation; therefore, because of that, the fuqaha have now shifted the US dollar, the US Federal note, and all [paper] currencies of all governments, they have put them in the category of gold and silver.

That category being items that are measured by weight. They have made an exception for paper currency to fall under this category and the rules of trade would apply to these currencies as such; the same rulings that apply to gold and silver.

How Do We Classify Bitcoin?

Now we introduce bitcoin onto the scene. And most people will ask, “How do we classify bitcoin?” Do we say that bitcoin should be an item that is measured by weight or do we say that bitcoin is an item that is measured by volume? Well, clearly we can see that bitcoin can be used to purchase an object of sale.

We also know that bitcoin is commonly compared to gold. Bitcoin is regularly called digital gold. We also know that, in quite a few countries, bitcoin is legal to use as a form of currency and it is even seen as an asset class and you can invest in it. We can also perform currency exchange with bitcoin. So, with that being said, clearly we can see that bitcoin should be categorized as an item that is measured by weight. 

And if this is indeed what you believe, then you would be…wrong. You would be wrong. Incorrect. In fact, at this time bitcoin does not fall into either of the two categories that scholars look at when it comes to trade which is, items measured by weight or items measured by volume.

Now some of you will say, “Well why not?” Well, that’s because our scholars have not classified bitcoin as money, and I touched upon this in the first blog post of this series, of the Is Bitcoin Halal Series.

We talked about bitcoin and how the fuqaha look at bitcoin whether it’s classified as money. Whether it’s halal or not. You can find all of that out in that blog post so if you missed it please do go and check it out, but know for now, as of now, our scholars have not classified bitcoin as money therefore we cannot say that bitcoin must follow the Islamic rules of trade.

Now with that being said, if we know that the fuqaha have not defined bitcoin as money, if we know that the fuqaha, our scholars, do not place bitcoin in the category of items that are measured by weight, if they do not classify [it] in the category of items measured by volume, then we say that bitcoin is not subject to the guidelines of riba al-buyu. Riba al-buyu applies to items of trade that fall into either of the two categories- items measured by weight or items measured by volume.

Bitcoin falls into neither therefore riba al-buyu does not apply.

Now in time this may change, but again, as of now, as of the making of this blog post, we can say that we cannot enforce the Islamic rule of trade upon bitcoin because again, one, it’s not classified as money and two, it does not fall into either class mentioned by our scholars.

So, is trading bitcoin halal or haram? As of the making of this blog post, we can say that as of today, there is no consensus amongst the fuqaha that trading bitcoin is haram. And now that we’ve taken a further look at the rules of trade, we can now see that the fuqaha do not classify bitcoin as being an item that is measured by weight or an item that is measured by volume; therefore, we can say that the rules of trade do not apply to bitcoin.

We can take it a step further and say the rules of riba al-buyu, they also do not apply to bitcoin. So again, is trading bitcoin halal or haram? We can say that, with certainty, as of the making of this blog post today, that there is no mashoor (popular) opinion, there is no consensus, no popular consensus or ruling that bitcoin, trading bitcoin in and of itself is haram.

Now let’s take a look at some basic rules of trade that apply to currency since many of you out there are involved in currency trading.

Hand to Hand (Spot) Trading

Know that hand-to-hand trading or trading within the same sittings, many times called spot trading, according to the fuqaha, this is permissible; not only permissible, but it is actually a requirement when it comes to currency trading because currency falls under the category of items that are measured by weight.

Now when it comes to the time period that is allowed for trading hand-to-hand, for spot trading, for trading in the same sitting, the fuqaha say, up to 48 hours is allowed to conduct the trade. If it falls within that time period it is considered a halal trade and a person may say, “Why are we given 48 hours? Why are we given so much time?”

The reason being is because the fuqaha realize that nowadays people live all over the world and we have people that live in different countries exchanging currency with one another and it might be that the person who lives in England is conducting trade with someone who lives in Saudi.

And it might be that the person in England, when they initiate the trade, the bank is open, but for the person in Saudi the bank is closed, or it might be vice versa- the person who initiates the trade in Saudi the bank may be open there, but in England, the other person who has the bank account in England, that they’re conducting trade with, the bank there is closed.

So, the fuqaha realize that time must be allowed for business hours to be open where the trade can be conducted.

They also realize that trade nowadays is done over the internet and different software applications are used to conduct trade and it might be that the software application will say that, your trade will be complete in 45 minutes, or it might be complete in one hour or it may take 15 minutes to complete.

So, the fuqaha realizing this say, well, you are given up to 48 hours to conduct your trade and this will be categorized and classified still as hand-to-hand trading; trading that is done within the same sitting or what is also called spot trading.

Short Selling and Futures Trading

Now when it comes to short selling the fuqaha say that short selling is haram. They say that it is haram. Why? Because many people who engage in short-selling, when it comes to currency, the trade is being conducted while the person does not have complete or full possession of the currency and the fuqaha say that you can only trade what you have when it comes to currency trading.

You must be in full possession of the currency before you can actually trade it and many times when it comes to short selling this is not the case; therefore, the fuqaha say that short-selling is haram.

Now what about futures trading? This is the same thing. You are initiating a trade now but the completion of the trade will not take place until a future date. It might be one month from now. It might be 6 months from now. It might be one year from now.

You’re conducting currency trade where, again, the trade- you will exchange the item of the currency far out, in a far future date. The fuqaha say that this is considered haram. You cannot do this. You cannot do this.

Again, the trade must be conducted hand-to-hand, spot trading, in the same sitting and you are given an allowance of up to 48 hours to conduct that trade and doing so within the 48 hours is deemed permissible. 

Binary Options

Now what about binary options? Now, I’m not going to explain in detail what binary options is. As a matter of fact, I’m going to share with you a link to a video (The Truth About Binary Options) that does an excellent job of explaining what binary options is but know that binary options basically is a form of gambling.

Binary options is basically a form of gambling and gambling is haram; therefore we say that binary options is haram because it is like gambling. Now if some of you out there can prove to me or show me that binary options is not gambling then please do leave comments in the comments section of this blog post but from everything that I have seen binary options is gambling and gambling is seen as haram.

Conclusion

And that will do it for today when it comes to bitcoin and trading bitcoin and what the sharia has to say about trade as it relates to bitcoin. Insha’Allah I was able to bring some clarity to the matter.

Hopefully you leave here today with a better understanding of how digital currency, how bitcoin works as it relates to the sharia in particular when it comes to trade. So now we’ve talked about currency and we’ve talked about trade and the third topic that we’re going to get into is bitcoin mining. Is bitcoin mining halal? Is it haram?

What are some things that you may want to think of and pay attention to if indeed you are thinking of stepping into bitcoin mining. We’re going to discuss that in our third blog post that will be coming up soon enough insha’Allah.

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Assalaamu Aleikum and welcome to the first blog post of our new, Is Bitcoin Halal Series. Part 1 of our series will take a look at money.

Is bitcoin classified as money in Islam?

Even though bitcoin does have all of the characteristics of what is considered money in Islam, at the time of writing this blogpost, there is still no consensus among the scholars that bitcoin is money. I believe that this will change.

But is bitcoin money? Does it spend like money? What is money in Islam? Watch the video below or read the video transcript below to see why I believe that bitcoin should be classified as money in Islam.

Video Transcript

As-salamu alaykum! And thank you for joining me for today’s blog post here on Islam and Bitcoin. And today’s blog post is the first blog post in a series of blog posts. A series that we are calling Is Bitcoin Halal Series.

Now, as many of you know, I posted a blog post sometime back called Is Bitcoin Halal? And we talked about Bitcoin in Saudi Arabia, Bitcoin mining. We touched a little bit on all those things.

Well, this blog post, in this series for that matter is an update to that. Now that I have finished my first round of studies with Islamic Finance, I wanted to share with you what I have learned with the hopes that it will be a benefit to all of us.

Now, keep in mind that as we go to this series keep in mind that this is not meant to be a fatwa (opinion from an Islamic scholar or Islamic body of scholars) series. I’m not here giving a fatwa. I’m not a big-time mufti (a Muslim legal expert who is empowered to give rulings on religious matters). I’m not some big-time sheikh (scholar).

I am simply a student of knowledge sharing with you information that I have learned from my teacher and other scholars that I have taken knowledge from, again, with the hopes that we all find benefit from it.

Also, another thing I would like to add is, in Islamic Sciences when we study a particular topic, we know that there are always differences of opinion. So, it maybe that what I study from my teacher or some of these scholars I’ve taken knowledge from, it might be that, they say one thing but you look at another scholar and they have a difference of opinion.

And alhamdulillah, it’s all good. This is the nature of things within the Islamic Sciences so nothing wrong with that. I just wanted to put that out there to make sure that we’re all on the same page moving forward.

So, with this, first blog post, we’re going to take a look at currency. Now, why currency? The reason why we’re going to look at currency first is because this will lay the foundation for us as we move further into the Is Bitcoin Halal Series. So, we’re going to look at things at bitcoin mining, trade, investing and at the heart of it, at the foundation of it is money. So that’s why we’re going to talk about it first.

Now, when people think of Bitcoin, what do they think of? They think of money. They either think of spending bitcoin as money. They think of trading bitcoin to make money or again investing in bitcoin at the end, to do what? To make money.

So, money is the reason why a lot of people are really interested in Bitcoin. So, this first blog post, we’re going to look at currency and money and what Islam has to say about money and then take a look at how it all relates to Bitcoin. See… or rather see, how Bitcoin relates to the sharia.

Now, with that being said, when it comes to currency, there are three questions that we’re going to cover today. Three questions that people normally ask when it comes to money as it relates to the sharia. I’m going to highlight those questions.

I’m going to highlight those questions. We’re going to look at it, explore it to some degree, and at the end of this blog post, at the end of this video here, we’re going to wrap things up and see how this will help us move forward when it comes to understanding Bitcoin as it relates to the sharia.

Our hope is to now start delving in a little bit deeper in understanding this new technology as it relates to sharia.

So, without further ado, as they say, let’s take a look at the first question right now. Let me pull up my notes as we hop in to the first question. Here we go, all right. So, let’s take a look at the first question, right now.

What is Money in Islam

Ok, so let’s take a look at the first question here, again, going back to my notes. The first question being, “How does the sharia define what is a currency and if that currency is permissible to use?

Well, it’s really easy. The fuqaha (body of scholars) define money as the following- They say money is a means. Money is a means used to purchase an object of sale. Again, money is simply a means used to purchase an object of sale. How do they define currency? Again, really simple, they say currency… currency is what is commonly used amongst the people to purchase an object of sale.

So, now we have to look at Bitcoin and we have to ask our self to follow a question. When we look across the world, is bitcoin commonly being used, is it commonly being used by the people to purchase an object of sale? And the answer is yes.

Yes, it is. We can clearly see that bitcoin is being used to purchase things like airline tickets. It’s being used to purchase coffee. It’s being used to purchase pizza. Some people even get paid their salary in bitcoin and depending on what country you live in, people are even paying their bills in bitcoin. So, we can see that, yes, people across the world are using bitcoin to purchase an object of sale.

Now, somebody might say, well, that’s great. That’s great Andre but what I want to know is when is currency or money haram? How does the fuqaha define money that is haram? How do they view haram currency or haram money?

Well, it’s really easy. The fuqaha, what they do is they take a look at the object. They take a look at the object that is being used for money, that is being used for currency. Now, let’s just say in your marketplace where you live, people are using a bottle of wine, alcohol, khamr (literally means covering. Commonly referred to as wine or intoxicants), khamr meaning alcohol. If where you live people are using a bottle of wine, the fuqaha would say that this is haram. It’s haram. You cannot use a bottle of wine as currency.

So, what does this mean for bitcoin? Bitcoin is clearly not a bottle of wine.

But what is bitcoin exactly? Bitcoin is nothing more than digital characters. Bitcoin is nothing more than digital characters and digital characters in and of itself is not haram. We can’t say that digital characters is haram. So, right now, again, we’re seeing that bitcoin seems to be falling in line with the sharia and the fuqaha defined as being money.

But wait, let’s not jump to conclusions just yet. There is one other aspect that we need to explore in order to see where bitcoin falls into this whole definition of money as it relates to the sharia.

Now, remember I said that the fuqaha said that when it comes to currency, they say that currency is what is commonly used amongst the people in order to purchase an object of sale. Now, the fuqaha, when they say people, they define people as, government.

They define people as government. So, not like you and me. So, you and I, we just can’t walk up into the marketplace and say, “Hey everybody! Today we’re going to use marbles and rocks. Marbles and rocks as currency. This is what we’re going to use today and let’s just call that, let’s call it a day.”

The fuqaha will say “Hey, slow your roll. Pull back on those horses young man. That’s not what we mean here when we say people. We’re not talking about you. We are talking about the government.”

So, the next question that we have to ask our self is the following. Is bitcoin used across governments worldwide as money? Meaning is it legal in governments across the world to use bitcoin? The answer is yes and no. Yes and no.

So, if you live in countries like the United States, Canada, UK, Germany and some other countries, then yes, it’s legal to use bitcoin. But if you live in some other countries, there are some other countries where it is not legal to use bitcoin.

Now, what I’m going to do is I’m going to share with you an article. I’m going to post it in this blog post, an article that I want you to take a look at. It is written by a Muslim sister. It’s a wonderful article (These Are the Top Countries Where Bitcoin Is Legal and Illegal) and I highly suggest that you check it out.

This article- she highlights the countries where it is legal to use bitcoin and illegal, meaning you cannot use bitcoin in these countries. She has written a wonderful article on this and I highly suggest that you take a look at it. I mean it would help you begin to see where you live- where you live, if bitcoin is legal or illegal to use. All right?

So, in this first question, now that we’ve taken a look at bitcoin and we see how is it that bitcoin relates to…how we can relate it to money as defined by the fuqaha, as defined by the sharia, this is now helping us begin to have a deeper look at this.

And we’re seeing that generally, bitcoin does seem to lend itself to how the fuqaha define money. However, there’s another question that comes up regularly when people talk about currency and what is permissible to use as currency and how you define currency. So, we should take a look at that second question. Let’s take a look at that right now.

Currency Backed by Commodity

All right so question number two that people normally ask is, “Does the sharia require that currency needs to be backed by a commodity such as gold, silver, oil, etcetera in order for it to be permissible, in order for it to be permissible to use?” The simple answer is, no.

No, it does not. Now, this is something that I find fascinating because you’ll read– I saw– I’ve seen articles out there where people sincerely and do believe that money has to be backed by a commodity. “It’s got to be backed by gold, brother. It’s got to be backed by gold. If it’s not, it’s not considered legitimate. It’s considered haram.”

Well, according to my teacher who I’ve studied with and other scholars who I’ve taken knowledge from, they said this is actually not the case. Money doesn’t need to be backed by gold, silver or any commodity whatsoever.

Money is simply an object. It’s simply a means used to purchase an object of sale. It doesn’t need to have any intrinsic value. It doesn’t need to be backed by anything.

There’s a really good article and again, I’m going to include this in the blog post it’s called, The Concept of Money in Islamic Finance, (correction: The Concept of Money in Islamic Economics) written by a brother and I do highly suggest that you check it out. But you know short answer is does money need to be backed by any commodities such as gold and silver and the like? The answer is no.

Is bitcoin backed by anything? No, but it doesn’t need to be so we don’t necessarily need to factor that in when we are looking at bitcoin and other digital currencies like it, looking at it to see if it qualifies as money according to the sharia. So again, simple answer is, no, it does not need to be backed by any commodity whatsoever.

Now let’s take a look at the third question because there’s still yet another question that comes up where people are like well… well, what about this question? What about this? So, let’s take a look at our third and final question right now.

The Production of Money

All right. So, our third and final question that we’re going to look at in this first blog post is the following- Does the fuqaha place importance on how the currency is produced in order to determine whether it is permissible or not?

Meaning, does the fuqaha look at whether the money comes off of a printing press, or do they look to see whether the money was created by physical labor or do they look to see if the currency or the money was produced by a computer? Do they look at all of these factors to determine whether it is permissible or not? And the answer is, no.

According to who, again, my teacher who I have taken my knowledge from, the answer is, no. Again, they simply look at the object.

So, take for instance, this right here. What is this? This right here is a US bank note. It is a $10 United States bank note. And what is this? This is simply a piece of cotton paper. That’s all it is. It’s cotton paper. Cotton paper in and of itself is not haram. It’s not haram.

This piece of paper has numbers on it. It’s the color green. It has a face on it. It has some writing on it. But in and of itself, all it is- it’s a piece of paper, cotton paper. And this in and of itself is not haram. It’s not haram. So, what does this mean for bitcoin? Remember, we talked about this already. What is bitcoin? We said earlier that bitcoin is nothing more than digital characters. Digital characters in and of itself is not haram.

So, when we take a look at these three questions, this now is allowing us to see how bitcoin falls into the definition of money according to the sharia. So, let’s do a quick wrap up to put it all together, Ok? Let’s do that right now.

No Consensus that Bitcoin is Money

All right, so someone is going to watch this and say, “All right, brother, I heard everything you just said so wrap it up for me. What does this all mean? Can I use it? Can’t I use it? What’s going on man? I just want to know, can I use it or not?”

All right, so as a wrap up, we understand that bitcoin so far is being used as money. So, we said in this blog post that bitcoin is currently being used worldwide to purchase an object of sale which so far checks off one box in regards to permissibility in Islam.

The second thing is we do know that some governments permit it to be used but some governments do not. So, some governments, yes, other governments, no. All right?

Third thing is we understand that bitcoin does not need to be backed by any commodity in order for it to be legitimate.

And we also talked about saying that the fuqaha they do not look to see how the currency itself is being produced in order to determine whether the object that’s being used or that currency is haram or not.

So, generally speaking, we can say that bitcoin is neatly falling into the package. Or falling in harmony into what we can consider money as defined by the sharia. But what did the fuqaha say about this? What did the fuqaha say? Because even though we can see this, we need to, we need to hear from our shuyukh (religious scholars), we need to hear from the fuqaha to see what is their take on this.

Believe it or not, even though we can see that bitcoin, again, does fall in line, in harmony with what the sharia defines as being money, the fuqaha, across the board, I have not seen, I have not seen a consensus or a decision across the board where the fuqaha actually classify and define bitcoin as money.

So, as it stands right now, the fuqaha have not classified bitcoin as money. And if you find somewhere where there’s either one scholar or a shura (a consultative council). A council of scholars that classify bitcoin as money, please let me know because I haven’t seen that. And what does that mean?

Some people might be scratching their head and say, “Wait a minute. You just said that it does XY and Z. People spend it, it doesn’t need to backed by gold, some governments find it permissible to use, you don’t need to worry about how it was produced, they’re not looking at that. You just said all these things brother, so what do you mean that the fuqaha they don’t classify it as money? Why not?”

Well, here are some of the reasons why. Let’s talk about that right now. First and foremost, let me take a look at my notes again. Ok, first and foremost, the reason why, again, goes back to the volatile nature of the pricing of bitcoin.

And the reason it is so volatile is because the fuqaha say that the market for bitcoin is speculative. It’s highly speculative. It’s a highly speculative. And because of this, the prices just go up and down and so drastically and I would agree with this. I think there are many people who are looking at bitcoin as a vehicle to make quick money.

So, you got people coming in and out of it, how can I make like a quick buck, how can I make fast cash? How can I make money? I want to make quick money get in, get out and that’s all I want from it. There are some people out there who don’t care. They’re not looking at bitcoin as the potential of how the technology of Bitcoin can be of benefit to humanity at large and there are people who don’t care; Muslims and non-Muslims alike.

There are a lot of Muslims out there who are simply hopping in and out of bitcoin to make money. There are a lot of Muslims who don’t care whether this can help humanity or not. They don’t care. They’re like, “I just want to make money. That’s all I’m concern about making money. If it benefits someone else, great, if not, whoopty doo, whatever, I want to make money.”

So, the fuqaha say that right now it is highly speculative and they don’t really view it as something that is really stable right now. So therefore, they’re hesitant. They’re hesitant to make the ruling in classifying it and calling it money.

Now, the second reason is because of the market capitalization of bitcoin. Heck, the market capitalization of all digital currencies as a whole. Now, what do I mean by this? If we look at bitcoin at today when this video was being made, the market capitalization of bitcoin sits around $40 Billion plus. It’s $40 Billion plus. That’s just what it is right now.

The fuqaha will say, when you compare this to the money that circulates the market worldwide- we’re talking about trillions of dollars. Trillions! 40 Billion? They look at it like, 40 Billion? That’s nothing. So, the fuqaha will look at this and say, “That’s nothing. That’s a drop in the bucket.”

Heck, we can look at Forbes magazine and see that Bill Gates, I think one time I looked and it said that Bill Gates, the net worth of Bill Gates was 52 Billion. So that means that one person in the world has more wealth than the entire marketplace of bitcoin.

Meaning the pool of money that sits in the marketplace, bitcoin. The value of it only comes out to 40 plus Billion dollars. And the fuqaha, some of them will say, “Well, that’s just simply too small. It doesn’t really make a dent in the world economy. It’s not really making a dent in the marketplace right now.” So, this is why they have been hesitant to give the thumbs up in saying that it is money.

The third reason that some of the fuqaha again, another reason why they’re hesitant to classify it as money is because some fuqaha will say, well, they don’t like the system in which bitcoin is being used. And what do they mean by that? They mean that bitcoin, they see it as being used for illegal activity.

They may say, “Well, bitcoin seems to be mostly used for crime, maybe buying drugs, maybe prostitution, a whole number of schemes that is just illegal and just flat out haram.” So, we know when bitcoin first came on to the scene, if any of you remember, there was this whole big thing about Silk Road and Silk Road was this one underground website where people were using bitcoin for all these nefarious, shady criminal activities.

Well, a lot of the fuqaha, I can’t say a lot of the fuqaha, but some of the fuqaha look at that and it makes them hesitant to classify this as money.

Now, with that being said though I think we are actually at a place now where I think bitcoin is now sort of coming out of that negative image. As we said earlier, people are using bitcoins in buying airline tickets. People get paid their salary in bitcoin.

They’re buying their groceries. They’re buying candy out of a vending machine with bitcoin. So, bitcoin has now, I think bitcoin has evolved to that place where people realize that people just don’t use bitcoin for haram or illegal activities.

Bitcoin is used for very legitimate purposes and we can even take that a step further. We now see that there are governments out there. Let’s take a look at the United Arab Emirates, for example. Take a look at the Emirate of Dubai.

The Emirate of Dubai is now utilizing the technology behind bitcoin. They’re looking to implement this technology into their government agencies in order to make things more efficient with their government services.

We can take a look at places like China. China is now implementing Bitcoin technology or blockchain technology into their banking system. And we also see that this is being done worldwide.

So, I think the latter reason where some of the fuqaha will sort of look at Bitcoin as some kind of criminal tool for criminal activity, I think we can kind of say that we’ve kind of moved beyond that right now. I think that’s safe to say- That’s safe to say.

So, what does this mean? All in all it simply means that bitcoin right now is not classified as money. Now, does it fit the guidelines according to the sharia as how the sharia would define money? Yes, it does. It actually does.

And there may come a day when the fuqaha do categorize it as money. But as of today, they do not. So, you might say well, ok well, is it permissible for me to use it or not? Well, one of the good things is this, the fuqaha have not said that Bitcoin is haram.

Their approach tends to be more of caution. If you’re going to use this, be cautious. And if you’re going to use this, pay attention to the laws of the land where you live in. Pay attention to the laws of the country where you live in. So, if you live in a country where Bitcoin is legal, Ok, alhumdulilah, we’re not saying it’s haram. You can use it but be cautious.

However, if you live in a country where the law of the land says that Bitcoin is illegal, then leave it alone, leave it alone. I highly suggest to anyone if you’re looking to step into using Bitcoin, pay attention to the laws of the country where you live in. You don’t want to get yourself in trouble. You don’t want to get yourself in trouble.

But again, as a wrap up, the fuqaha have not classified bitcoin as money, however they haven’t ruled it as being haram. They haven’t ruled is as being haram. It’s more of use it but with caution. Use it but with caution.

So, this is going to wrap up the first blog post we have in the series that we’re calling Is Bitcoin Halal Series. And this first blog post dealing with currency now lays the foundation for us to explore and understand better how we look at things like bitcoin mining, trade and investment. All right? So that is going to do it for today with this blog post.

Again, I always say if you found any benefit in this whatsoever, all benefit is from Allah, Subhana Wa Taala. Any mistakes I have made is all from me and I ask that you make du’a for me. I always say that if you found benefit in this, then share.

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