When a financial product uses the word Islamic in its name, it must be subject to critical interrogation needed to sort the wheat from the chaff. Of late, there are a lot of financial products in the market that claim to be Islamic but people have no other option than to rely on Shariah Advisory Board for the same. One such area is cryptocurrencies where scholars are divided into whether they are Halal or Haram. There are some principles that consider digital currencies halal while others consider it haram. So far it has been demonstrated that there are few perspectives and highlights of cryptocurrencies that are allowed to be halal. Based on all the available information it could be presumed that:
- Trading in digital currencies is free of interest rate (without riba) which is considered Islamic finance (halal), yet it’s not physical material as Money (maal) can address, accordingly, it’s not decent.
- Islamic shari’ah does not agree with virtual coins as a currency employed in deals and as such considers them as fake currency.
- Most countries with the exception of Germany and Japan declined to apply digital coins as a currency since they are not authorized by any formal association in the world, perhaps in the future, under central banks responsibility, they may be allowed (halal) to be used in Islamic banks.
- It has opened the lobby for money laundering or terrorist financing, where money changes hands without knowing who is the actual beneficial holder.
- It promotes (ghurar); the greed / craving of the dealer to make a quick profit, which gives the impression of gambling and that is expressly banned (haram) in Islamic Shari’ah.
- Also, cryptocurrencies are not backed by any asset so in view of no security or guarantee, it has high volatility and hazards.
The reality of digital currency trading in Islamic countries can be summarized as; Bahrain, UAE and Sudan are the countries that allow digital currency to be traded legally and these countries; Egypt, Saudi Arabia, Jordan, Syrian Arab Republic, Oman and Palestine are the countries that have legally prohibited digital currencies but allow the trading of digital currencies legally, but Sharia prohibits the circulation of these currencies (prohibition is suspended until further study, which may indicate the possibility of its approval later). Qatar, Algeria, Morocco, Kuwait and Libya are the countries that legally prohibit the circulation of digital currencies and these countries legally prohibit the trading of digital currencies. Finally, Somalia, Mauritania, Djibouti, Comoros and Tunisia are the countries that have not yet decided on digital currency trading and these countries are neutral and have not yet taken a decision regarding the trading of digital currencies legally or legally, and the matter is still under study, yet currencies are traded in them.
One of the arguments presented against the use of cryptocurrency is the wildly fluctuating prices. However, it is the volatility that offers an insight into the future. All currencies go through cycles of profit and loss. Cryptocurrencies are already going through the same initial cycles that more traditional currencies experience. However, rather than being a cause for concern, this is an indication that cryptocurrency is merely the newest form of currency and acts in the same way as any other. Unrestrained by national interests, unaffected by global events, cryptocurrency offers a financial resource that offers much benefits for the future. According to experts, cryptocurrency will replace all other forms of currency by 2030. Yet the question is, how prevalent is it right now, and does that offer an indication of its future existence and potential? The answer lies in being aware of the businesses that are already integrating digital payments into their choice of options for consumers.
Between savings fees and transaction costs, customers spend vast amounts of money on propping up Islamic banks and giving them more power. However, crypto finances cut that factor out and are widely considered to be the future of financial management. There is a distinct lack of intermediaries when it comes to digital finances, and that offers the possibility of much disruption when it comes to Islamic banking. Although users will still have to make use of digital currency wallets, the reduced costs combined with the absence of those costly bank fees are one of the major reasons why cryptocurrency advocates are so confident that the technology will eventually replace traditional financial services.