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Why Muslims Are Not Allowed To Trade Cryptocurrency
Haram or Not? For Muslims, the acceptance of cryptocurrency is a subject of controversy due to its compatibility with Islamic principles.
Cryptocurrency has rapidly gained popularity worldwide as a new form of digital currency and investment. However, for Muslims, the acceptance of cryptocurrency is a subject of controversy due to its compatibility with Islamic principles.
Indonesia’s National Ulema Council (MUI) has declared cryptocurrency as haram or forbidden. The decision is based on the belief that cryptocurrency involves elements of uncertainty, gambling, and potential harm.
In this article, we will explore the reasons behind this stance, while also examining the perspectives of other Muslim-majority countries on cryptocurrency trading.
Crypto Not Banned in Indonesia
The MUI holds significant authority on Shariah compliance in Indonesia, a country with the largest Muslim population, and they are consulted by the finance ministry and central bank on Islamic finance matters.
Despite the MUI’s declaration, it does not mean that all cryptocurrency trading will come to a halt in Indonesia. However, this decree may discourage Muslims in the country from investing in cryptocurrencies and may lead local institutions to reconsider issuing crypto assets.
The head of religious decrees, Asrorun Niam Sholeh, clarified that if a cryptocurrency as a commodity or digital asset adheres to Shariah principles and demonstrates clear benefits, it may be considered for trading.
It’s important to note that this stance is not an official decree, and it does not outrightly ban cryptocurrency trading in Indonesia.
However, this decree may discourage Muslims in the country from investing in cryptocurrencies and may lead local institutions to reconsider issuing crypto assets.
Reasons Why Cryptocurrency is Controversial In Islam
1. Islamic Principles on Trade and Finance
Islamic finance is guided by Shariah principles, which emphasize ethical and halal (permissible) transactions. The prohibition of riba (interest) and adherence to transparent and ethical trade practices are central to Islamic finance.
2. Uncertainty and Speculation
Cryptocurrency trading involves significant uncertainty and speculation, which goes against the Islamic principle of avoiding gharar (excessive uncertainty). The volatile nature of cryptocurrency prices raises concerns about its compatibility with Islamic finance principles.
3. Gambling and Games of Chance
Some scholars compare cryptocurrency trading to gambling and games of chance, both of which are strictly prohibited in Islam. The unpredictable nature of cryptocurrency prices may lead to outcomes resembling gambling, which raises ethical concerns for Muslims.
4. Lack of Tangible Asset Backing
Most cryptocurrencies lack tangible asset backing, which contradicts the Islamic finance principle of having tangible assets to support transactions. The absence of such backing may pose challenges to the permissibility of cryptocurrency trading.
5. Interest and Usury Concerns
Islamic finance strictly prohibits riba (interest) and usury. Some critics argue that certain cryptocurrency practices, such as lending and staking, may have elements similar to interest, leading to potential conflicts with Islamic principles.
6. Misuse and Illicit Activities
Cryptocurrencies have been associated with illicit activities like money laundering and fraud, raising concerns about participating in potentially haram transactions. The perception of cryptocurrencies being used for unethical purposes may influence Muslims’ views on trading them.
7. Lack of Regulation and Oversight
The absence of comprehensive regulatory frameworks for cryptocurrencies may lead to potential abuses and risks. Islamic finance places great importance on transparency and regulatory compliance, which may be lacking in the cryptocurrency space.
8. Divergent Opinions and Interpretations
The stance on cryptocurrency trading among Islamic scholars varies, with some supporting it under specific conditions and others opposing it outright. The diverse opinions highlight the complexities and ongoing debates surrounding the permissibility of cryptocurrency trading in Islam.
Perspectives in Other Muslim-Majority Countries
Now, what about cryptocurrency trading in other Muslim-majority countries? Interestingly, the stance of Indonesia’s religious leaders differs from their counterparts in other nations.
For instance, the United Arab Emirates allows crypto trading in certain zones, while Bahrain has supported crypto assets since 2019.
However, some Islamic countries, such as Bangladesh, Iran, India, and Iraq, have restricted crypto trade or even deemed it illegal.
These differing perspectives illustrate the diverse range of interpretations across Islamic communities.
Ideally, the use of cryptocurrency in Islam is a complex issue, and its permissibility varies from one country to another.