Buying and selling virtual currencies is not compatible with religion at this time because of the fact that their valuation is open to speculation, they can be easily used in illegal activities like money laundering and they are not under the state’s audit and surveillance
The objections given in the article seem to boil down to this:
- open to speculation
- can be used for illegal activities
- we (the state) can’t track and audit it
The first reason applies to investments in general: people invest expecting to make a profit in spite of the risk of a loss.
The second reason applies to fiat currencies, bonds and bond-like instrument (e.g., sukuk), and other many other instruments and assets.
The third reason isn’t less about auditing and surveillance and more about state control. Transactions can be tracked through the blockchain. The blockchain is a public ledger, and you can easily follow the creation, transfer, and splitting of Bitcoins. Auditing is definitely not a problem. As far as surveillance and tracking are concerned: they’re harder than following bank transactions but easier than accepted paper instruments. This reason boils down to them being harder to tax and more difficult to use for spying.
I fail to see how any of the reasons mentioned above would render them unlawful (haram).
If those reasons are sufficient for declaring something haram, then we had best apply them to everything else sharing those features. Like fiat money, bonds, gift cards, touch and go cards.
(And Allah knows best.)
[This was originally posted to Facebook. I have added a few of my edits & comments below.]
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UPDATE 1. Before anyone brings up gold or silver standards: double-check your calendar.
Before anyone brings up intrinsic value and how it applies to things: double check the Maliki books about what the books really say about skins, and double check the Shafii books say about selling smoke for heating.
UPDATE 2. Some crypto assets and ICOs are garbage. Some are not. And fiqh rulings need to be based on authentic fiqh correctly applied to an accurate understanding of the issue at hand. Instead what we are getting is kitsch, fallacy, and fantasy.
UPDATE 3. Before commenting on these things, one needs to read about crypto assets in general & the fiqh of sales, and then read articles that discuss them together. They also need to be choosy when it comes to learning about crypto: just like everyone became an expert of Islam overnight on 9/11, everyone became an expert in crypto once BTC broke $7000. I found Melanie Swan’s Blockchain: Blueprint for a New Economy [link] to be a gentle introduction to blockchain in general; I prefer it over The Blockchain Revolution. I recently shared something on my timeline that I mentioned was a nice intro.
When it comes to crypto, people tend to hear only about Bitcoin and scammy ICOs. They don’t hear about projects that are involved with more traditional institutions, like governments, banks, and IBM. So let me drop two links to the Stellar/IBM project: 1, 2.
UPDATE 4. Just to be clear:
There are many legitimate Shari’ah-based concerns when it comes to crypto assets as a class and to transactions involving them. I just don’t see the ones mentioned above as being among them.