While crypto-currencies such as Bitcoin have been around for years, they have recently been the talk of the media because of their dramatic increase in monetary value.
The news, which came as a pleasant surprise to those who had mined bitcoin some years ago, reignited the debate of whether or not crypto-currencies were compatible with Islamic laws.
Indonesian scholar Muhammad Abu-Bakar recently led a study and came to the conclusion that Bitcoin, along with other crypto-currencies, are halal.
"Bitcoin is permissible in principal as Bitcoin is treated as valuable by market price on global exchanges and it is accepted for payment at a wide variety of merchants… Moreover, many private individuals accept Bitcoin as a medium of exchange in their private transactions"
This conclusion is largely supported by the fact that Bitcoin is recognised as legal currency in Germany.
Halal or haram: an ongoing debate
"halal" is the Arabic term for "lawful" or "permitted"; "haram" means the opposite. Any object, food or practice that is deemed halal is therefore compliant with Islamic laws, otherwise known as the Shariah law. The reason why crypto-currencies' have been inaccessible to muslims until now is that Islam forbids the use of currency without intrinsic value.
In January, Egypt's Grand Mufti ruled Bitcoin trading as against Shariah law because of its risky and unregulated nature, which could lead to fraudulent practices. Mufti's counsellor Magdy Ashour added that "This currency is used directly to fund terrorists (…) It has no set rules, which is considered as a contract annulment in Islam".
The validity of cryptocurrencies needs to be fully approved in order for muslims to engage in crypto trading. Many of the world's top Islamic finance scholars debated the issue during the 16th Annual Shariah Conference last month but failed to come to a definite conclusion because of the speculative nature of Bitcoin.
What does this mean for bitcoin?
If other scholars were to support Muhammad Abu-Bakar's theory, this could mean even bigger changes for Bitcoin.
Islam is the fastest growing religion in the world with over 1.6 billion worshippers. If crypto markets were to open to 23% of the world's population, Bitcoin could see a dramatic increase in value. Shortly after Abu-Bakar's study was published, Bitcoin price surged from $6,962.6 to $7,720.27 in less than an hour and over one billion dollars' worth of trades were recorded.
But the consequences for Bitcoin do not end here. If Bitcoin were to be adopted by Islamic law, we could witness a heavy influx of investors who had previously avoided the crypto market, as well as a mainstream adoption of Bitcoin.
