Is Bitcoin Halal or Haram: A Shariah Analysis

[boled]

Is Bitcoin Halal or Haram: A Shariah Analysis
JAKARTA, Indonesia. - April 10, 2018 - As fluctuations and volatility continue to rock the cryptocurrency world, Blossom Finance has commissioned and released a working paper exploring the Islamic permissibility of bitcoin, cryptocurrency, and blockchain. The paper concludes that Bitcoin fully meets the definition of Islamic money under certain conditions and is generally permissible under Shariah. Blossom’s research also includes analysis of various legal opinions (fatawah) issued by prominent Islamic scholars on the topic. The research and development of the working paper was led by Mufti Muhammad Abu Bakar - Blossom’s internal Shariah advisor and Shariah compliance officer.

Clarity Needed: Is Bitcoin halal or haram?
Although interest, investment, and speculation in Bitcoin and cryptocurrency have continued to rocket upward, there remains growing confusion amongst Muslims - which make up nearly a quarter of the world’s population - as to whether Bitcoin and cryptocurrencies comply with Shariah law. Shariah law is a set of rules followed by Muslims in accordance with the guidelines of the Quran and teachings of the Prophet Muhammad, peace be upon him.

The Islamic finance sector, which offers financial products to Muslim individuals and Islamic institutions, adheres to Shariah law - clear understanding of cryptocurrency and blockchain continue to grow in importance as practitioners increasingly recognize that blockchain will transform every area of the global financial system in much the same way the internet transformed media and publishing.

“Contrary to popular myth, Shariah law is not single set of rules; it’s is a scholarly field subject to differing interpretations and opinions on various matters. Several recent fatawah issued by prominent Muslim scholars offered incomplete or contradictory opinions on the topic. With all the confusion out there, we wanted to offer clear guidance supported by solid research that benefits both laypeople and practitioners of Islamic finance” said Matthew J. Martin, CEO of Blossom Finance.

A fatwah (plural: fatawah) is a legal opinion issued by a Muslim scholar that expresses opinions, advice, and/or rulings on a certain topic.

“I’ve had so many people ask me ‘Is Bitcoin halal or haram?’, and the honest answer is ‘it depends’. Bitcoin is not just a currency, but it’s also a transaction and payment network. And blockchain itself is a whole category of technology with wide ranging applications” said Blossom CEO Matthew J. Martin.

Bitcoin Qualifies As Islamic Money
Bitcoin and similar cryptocurrencies fulfill the economic roles of money - acting as medium of exchange, unit of account, and store of value - and also gain status as Islamic money by being “customary money”. Shariah recognizes customary money as being anything that gains monetary status through wide acceptance in society or by government mandate.

In Germany, Bitcoin is recognized as a legal currency and therefore qualifies as Islamic money in Germany. In countries such as the US, Bitcoin lacks official legal monetary status but is accepted for payment at a variety of merchants, and therefore qualifies as Islamic customary money.

Rulings by Islamic scholars that claim Bitcoin is not permissible because it is subject to fluctuation and/or has the potential for use in illegal activities are not valid reasons under Shariah, since these factors are external to Bitcoin: the price of bitcoin is subject to supply and demand, just like commodities and fiat currencies, and the use of any lawful thing for an unlawful purpose cannot not make the thing itself unlawful.

National Law Supersedes Shariah Permissibility
Although Bitcoin’s properties and increasingly wide acceptance qualify it as Islamically permissible “customary money”, Bitcoin is not permissible as money in jurisdictions where government law or mandate forbids Bitcoin or prohibits Bitcoin’s use in payments.

The Republic of Indonesia issued clarification in January 2018 that all payments within Indonesia must be in Indonesian Rupiah, and therefore Bitcoin is not allowed to be used for payments. However, this clarification should not be seen as an anti-bitcoin stance - the same legal tender laws in Indonesia also forbid gold, silver, US Dollars, and Euros. It remains legal to buy and sell Bitcoin in Indonesia.

Volatility and Unclear “ICO”s Highly Uncertain, Not Advised
One of the key goals of Shariah is preservation and protection of wealth. Cryptocurrency markets also remain highly volatile. All investors should exercise extreme caution and never invest more money than they are willing and able to lose.

ICOs, or initial coin offerings, often lack clarity on: a) what are investors actually buying, and b) what are the investors’ rights. Many such offerings likely fall afoul of having gharar, meaning, excessive uncertainty, and therefore do not qualify as permissible Islamic investments.

Bitcoin/Blockchain Shares Core Principles With Shariah
Despite price volatility, Bitcoin’s underlying blockchain technology is highly aligned with the Shariah goal of reducing excessive uncertainty as well as the Shariah prohibition against fractional reserve banking. Its immediate primary application remains in payments and for exchange.

“Blockchain proves ownership of the asset - it proves you actually have the money you’re sending in a transaction. Conventional banking literally loans money into existence, and that is completely incompatible with the Shariah principles of money” said Blossom CEO Matthew J. Martin

referring to the Shariah rules of money that require all money to be exchanged “hand to hand” and never on a fractional reserve basis, as is the norm in the conventional (non-Islamic) global banking system.

“Blockchain gives you mathematical proof of ownership and that’s overall much more in line with the spirit of Islamic finance than any digital fiat money.”

source : https://blossomfinance.com/press/is-bitcoin-halal-or-haram-a-shariah-analysis
get used to reading carefully before writing a comment. if necessary read thoroughly to study it.

[hotimbineh]

I am a Muslim and do not understand Islamic syariat in depth. before I know bitcoin I invest and trading FOREX and a friend introduce me with bitcoin and trading bitcoin and altcoin here I can say bitcoin halal karna from transaction aspect no usury and fund which we ivetasikan can not be lost and burned because the price reduction as FOREX

[Xester]

Bitcoin is in accord to the Shariah Law. What is being taught in that law that a muslim should not engage is gambling. Bitcoin is a currency and at the same time it is like a commodity like gold and thus it cannot be considered gambling. Some muslim scholars have already have this viewpoint and said that bitcoin is healthy to be used by the Muslim community.

[AnisahSiti]

The idea of ​​creating a new currency based on cryptography. Another use of cryptography can support people's lives in the field of buying and selling digital currencies called cryptocurrency. Cryptocurrency is a digital currency that is not regulated by the government, and does not include the official currency. This concept is the basis in the birth of digital currencies that we are currently familiar with the term Bitcoin, which is used as a means of payment like the currency in general.
Pros and cons regarding the use of Bitcoin currency as a means of payment, occurs not only in Indonesia, but also in other countries. This is because Bitcoin has not fulfilled some elements and criteria as currency applicable in Indonesia. Bitcoin is also not a currency issued by the state, but issued through the cryptography system of computer networks. In terms of being, Bitcoin is not a coin, paper, silver or gold.
for me personally, bitcoin is legitimate and lawful, as long as bitcoin is not used for the purpose of speculation, cheating, and other criminal purposes. halal to be used as an investment tool, to be halal which requires similar currencies and values ​​to be the same and cash is also fulfilled because Bitcoin transactions exchange currency between Bitcoin. unless otherwise different, the bitcoin may be exchanged for Rupiah, Dirham, United States Dollar or any other currency.
If viewed from the point of view of the advantages and disadvantages of Bitcoin have both if used as currency, namely the absence of a legal umbrella that regulates the circulation of Bitcoin currency. In addition there is no single institution that is responsible if there is abuse against Bitcoin such as theft, money laundering, fraud, and other criminal acts. Bitcoin has no recognition of national borders, is unaffected by political conditions in government, acts as a protected value of inflation, and as a new form of community savings that is applied with a system that is not troublesome because the role of the bank as an intermediary has been eliminated.

[boled]

I am a Muslim and do not understand Islamic syariat in depth. before I know bitcoin I invest and trading FOREX and a friend introduce me with bitcoin and trading bitcoin and altcoin here I can say bitcoin halal karna from transaction aspect no usury and fund which we ivetasikan can not be lost and burned because the price reduction as FOREX

your point of view is simple, and I agree, I also do not know too much about sharia law related to economics, so let's learn together here, this topic we make a tool to learn more by reading the views of friends who comment.

Bitcoin is in accord to the Shariah Law. What is being taught in that law that a muslim should not engage is gambling. Bitcoin is a currency and at the same time it is like a commodity like gold and thus it cannot be considered gambling. Some muslim scholars have already have this viewpoint and said that bitcoin is healthy to be used by the Muslim community.

this means there is nothing illegal from all means of payment, either bitcoin or crypto, goods used for barter, or money of a country. which makes it illegal is a way of usage, and becomes evil by its use. if I do not misunderstand your point, then this becomes clearer.

[franky1]

bitcoin is a currency (asset class currency) and not a gambling token(poker chip)

so bitcoin is halal, as is the dollar a currency and not a gambling chip so the dollar is halal

the confusion comes when governments say that bitcoin is not recognised as money. but the same goes for the dollar
you cannot pay national taxes in sharia countries using the dollar.
you cannot pay court fines in sharia countries using the dollar.

this is not about halal or haram. this is about the legal tender.
only the national currency of the country is legal tender of that country. this does not mean other currencies are then haram. it just means its not a nations national currency.

so relax. a nation not accepting a currency to pay fines/taxes does not make a currency haram.

i emboldened and enlarged the most important thing the OP wrote

National Law Supersedes Shariah Permissibility
Although Bitcoin’s properties and increasingly wide acceptance qualify it as Islamically permissible “customary money”, Bitcoin is not permissible as money in jurisdictions where government law or mandate forbids Bitcoin or prohibits Bitcoin’s use in payments.

The Republic of Indonesia issued clarification in January 2018 that all payments within Indonesia must be in Indonesian Rupiah, and therefore Bitcoin is not allowed to be used for payments. However, this clarification should not be seen as an anti-bitcoin stance - the same legal tender laws in Indonesia also forbid gold, silver, US Dollars, and Euros. It remains legal to buy and sell Bitcoin in Indonesia.

[boled]

bitcoin is a currency (asset class currency) and not a gambling token(poker chip)

so bitcoin is halal, as is the dollar a currency and not a gambling chip so the dollar is halal

the confusion comes when governments say that bitcoin is not recognised as money. but the same goes for the dollar
you cannot pay national taxes in sharia countries using the dollar.
you cannot pay court fines in sharia countries using the dollar.

this is not about halal or haram. this is about the legal tender.
only the national currency of the country is legal tender of that country. this does not mean other currencies are then haram. it just means its not a nations national currency.

so relax. a nation not accepting a currency to pay fines/taxes does not make a currency haram.

i emboldened and enlarged the most important thing the OP wrote

National Law Supersedes Shariah Permissibility
Although Bitcoin’s properties and increasingly wide acceptance qualify it as Islamically permissible “customary money”, Bitcoin is not permissible as money in jurisdictions where government law or mandate forbids Bitcoin or prohibits Bitcoin’s use in payments.

The Republic of Indonesia issued clarification in January 2018 that all payments within Indonesia must be in Indonesian Rupiah, and therefore Bitcoin is not allowed to be used for payments. However, this clarification should not be seen as an anti-bitcoin stance - the same legal tender laws in Indonesia also forbid gold, silver, US Dollars, and Euros. It remains legal to buy and sell Bitcoin in Indonesia.

very reasonable, our way of thinking is actually the same, for me as a Muslim, Bitcoin is just a tool, just like when we want to exchange an item, a car can I exchange with a small house, and become legitimate if mutually agree, values ​​that are considered worth it, and feel nothing is mutually harmed. this means, if bitcoin has value, and someone wants to have it, then he offers something that can interest me, then agree to exchange it. then there is nothing unlawful in the dilamnya.
it's just that there are some who think differently from us, then I hope there is something clear to get them from this thread. thanks for sharing oponi here

[BitDane]

Related to hot news halal and haram bitcoin or other virtual currency. I have no opinion or fatwa to accuse. As for my thoughts, like a knife, if used to cook he has a law of halal. but if used to act crime then he entered the law haram.

Try to think, halal and haram the knife. not the knife that has the nature of halal or haram. but the behavior of people who use that. so anyway we treat bitcoin and use cryptocurrency like what. that is what determines halal or haram in the eyes of god.

About Shari'a. in cryptocurrency knows no hidden costs. in contrast to bank loans either government or private. they always have hidden costs and tricks. this is called usury. inside bitcoin and aother cryptocurrency does not exist.

[qiwoman2]

I think it's very interesting to get the Islamic perspective on Bitcoin and like everything, it all depends what Bitcoin is used for also. If you are lending out Bitcoin to earn interest, then it becomes a haram act, but if you are lending out Bitcoin to someone doing business and you earn a profit share in that business, then it becomes halal. So I think everything even with Bitcoin is not black and white. Everything comes from intention, positive or negative but Bitcoin seems more halal to me than paper money as it has a limited supply, like gold and it's not inflationary. 

[solidrock]

Great stuff guys! Good to know for anyone, muslim or not.

[daarul50]

I can say that bitcoin is completely halal because when we store bitcoin in a wallet, the amount of bitcoin we store does not increase and does not decrease then bitcoin free from 'riba'. Different when we save money in the bank, then every month the money we save in the bank will experience the addition or reduction that they call the 'interest rate'. But, the legal bitcoin can be haram when we use bitcoin for things that are not allowed by Islam such as gambling.

[RawDog]

Is Bitcoin Halal or Haram: A Shariah Analysis

Your analysis and the others stupid reasoning are all not important.  Top cleric decides.  Your reasoning is a justification to do something not allowed.
https://qz.com/1171431/egypts-bitcoin-fatwa-cleric-bans-bitcoin-trading/

More brilliant analysis that tries to make it halal.  Boss says it is haram.  Therefore haram.  Do you really want to burn in hell?  Then keep up your dumb reasoning.

I can say that bitcoin is completely halal because when we store bitcoin in a wallet,

[boled]

Related to hot news halal and haram bitcoin or other virtual currency. I have no opinion or fatwa to accuse. As for my thoughts, like a knife, if used to cook he has a law of halal. but if used to act crime then he entered the law haram.

Try to think, halal and haram the knife. not the knife that has the nature of halal or haram. but the behavior of people who use that. so anyway we treat bitcoin and use cryptocurrency like what. that is what determines halal or haram in the eyes of god.

About Shari'a. in cryptocurrency knows no hidden costs. in contrast to bank loans either government or private. they always have hidden costs and tricks. this is called usury. inside bitcoin and aother cryptocurrency does not exist.

I agree with you, the most I underline is usury. for me:
- far from usury
- Not Relying On Fortune (Gambling)
- Unclear transactions (Gharar), this means, when economic transactions must be ensured in advance the type, quantity, quality, condition of goods or economic products so that no one mutually harmed.
- Accountable; meaning transparent. Thus, in the future, although the problem will be clear and there will be no accusation because of unrecorded transaction issues.
I think Bitcoin with its Blockchain already has an accountable element, the rest depends on who uses it.

[bitfocus]

why you guys always bring religion into anything?  especially when you have 4/5 different paths called MAZHAB and always your Leaders (Imams) are just opposing each other?

[boled]

I think it's very interesting to get the Islamic perspective on Bitcoin and like everything, it all depends what Bitcoin is used for also. If you are lending out Bitcoin to earn interest, then it becomes a haram act, but if you are lending out Bitcoin to someone doing business and you earn a profit share in that business, then it becomes halal. So I think everything even with Bitcoin is not black and white. Everything comes from intention, positive or negative but Bitcoin seems more halal to me than paper money as it has a limited supply, like gold and it's not inflationary. 

"if you lend Bitcoin to someone who does business and you get a share of the profits in that business, then it becomes lawful/halal". <- this is called shari'a. Investing in a business. then get the revenue share.
all back to the intentions and how we use them

Great stuff guys! Good to know for anyone, muslim or not.

thank you for taking the time to write here. Bitcoin for all walks, for all religions, for all races, for all nations, for all humans. not discriminating. but in managing what he has, it becomes his right to believe in him. not to blame or to judge.

I can say that bitcoin is completely halal because when we store bitcoin in a wallet, the amount of bitcoin we store does not increase and does not decrease then bitcoin free from 'riba'. Different when we save money in the bank, then every month the money we save in the bank will experience the addition or reduction that they call the 'interest rate'. But, the legal bitcoin can be haram when we use bitcoin for things that are not allowed by Islam such as gambling.

so we agree, not Bitcoin that is the problem, but how to use it that makes in halal or haram.

[Dexion]

I think we should look at the bitcoin law on how to get it.

if we get a bitcoin from a campaign, i think it's no problem.

but the more specific issue is bitcoin trading, because the people's paradigm about bitcoin is haram, and we need to straighten their assumptions.

and if we talk about bitcoin trading law, I think the law is still debated, and my attitude is to leave things unclear. because leaving the unclear is more survived.
and this is my attitude about bitcoin trading.

[boled]

why you guys always bring religion into anything?  especially when you have 4/5 different paths called MAZHAB and always your Leaders (Imams) are just opposing each other?

Bitcoin is very universal, believe me, it's not about religion, but about how we treat Bitcoin widely. I do not intend to make a conflict, I just want to find a clarity, especially for some people who still have a narrow view of Bitcoin. so I hope you do not direct the conversation on things that can make a mess. create an opinion and constructive feedback, and can help people think positively about Bitcoin. if anyone has a different view, then cherish him.

[BitcoinHodler]

What is being taught in that law that a muslim should not engage is gambling. Bitcoin is a currency and at the same time it is like a commodity like gold and thus it cannot be considered gambling.

why would you even say that? i mean it is so irrelevant here. bitcoin is obviously a currency and even if some groups don't see it as a currency they will see it as some sort of investment (a commodity for instance) but i do not believe there is anyone in the whole world who even thinks bitcoin is gambling!!!

[boled]

What is being taught in that law that a muslim should not engage is gambling. Bitcoin is a currency and at the same time it is like a commodity like gold and thus it cannot be considered gambling.

why would you even say that? i mean it is so irrelevant here. bitcoin is obviously a currency and even if some groups don't see it as a currency they will see it as some sort of investment (a commodity for instance) but i do not believe there is anyone in the whole world who even thinks bitcoin is gambling!!!

I try to clarify, please read carefully. he means, bitcoin is the same as currency. even the same as you are talking about, that bitcoin can be used as a commodity. and what he learns that gambling is not allowed, so he does not use bitcoin to gamble.

[boled]

I think we should look at the bitcoin law on how to get it.

if we get a bitcoin from a campaign, i think it's no problem.

but the more specific issue is bitcoin trading, because the people's paradigm about bitcoin is haram, and we need to straighten their assumptions.

and if we talk about bitcoin trading law, I think the law is still debated, and my attitude is to leave things unclear. because leaving the unclear is more survived.
and this is my attitude about bitcoin trading.

for me this is quite clear, as long as it is not used to do things that harm others, criminal transactions, fraud, and all evil actions. I am not seeking justification for my actions. but I do not see if bitcoin deviates from the wrong things. Bitcoin with blockchannas is quite transparent, the transactions can be seen, the value is also there. but it becomes different if it is linked to the law of a country, seeing very high bitcoin price movements, the volatility is sometimes extreme, I understand if there are some countries including my country (Indonesia) worried if there is a bubble, because each country has a policy to protect economic conditions them, and do not want a crisis because the currency is not used. I also accept whatever policy my government in my country is about bitcoin.