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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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.

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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.