Bitcoin is in line with Sharia Law, declares Islamic Scholar
A leading Islamic financial scholar has declared that leading cryptocurrency Bitcoin is fully compliant with Sharia Law.
The announcement coincides with a sudden price surge today when Bitcoin jumped by $1000 in under an hour.
The timing is leading to speculation that new Muslim investors may be responsible for the market surge.
Previously, many Islamic investors were unsure if the cryptocurrency qualified as money under strict definitions outlined by religious scholars.
Around 23% of the world’s population follows Islam, with most Muslims living in Asia Pacific nations like India and Indonesia.
The practice of lending money at high-interest rates, or usury, is prohibited under Sharia Law or Islamic Canonical Law.
Since the popularity of Bitcoin is continuing to rise, debate in the Islamic Scholar community has been raging.
Due to the volatility and huge profit and loss margins, some scholars were questioning whether Bitcoin qualifies as usury.
Difficult to quantify
With Bitcoin acting as a commodity and a currency all at once, it is a problematic currency to quantify.
It does fall under some definitions of customary money in Sharia law, however, due to its wide acceptance as a currency by society.
Now, a leading financial scholar, and Sharia adviser and compliance officer at Blossom Finance in Jakarta, has spoken out to clarify the issue.
Mufti Muhammad Abu Bakar published a paper on Tuesday 10 April to outline whether Bitcoin is Halal (permitted) or Haram (forbidden).
According to the paper, Bitcoin can indeed be Halal, permitted.
An excerpt from the paper reads:
“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.”
Bitcoin actually aligns well with Sharia
Sharia has bold ideas regarding the preservation of wealth.
This view has led to ICOs and the volatile cryptocurrency-trading market to be seen in a negative light.
However, Bitcoin and blockchain technology actually align well with the Sharia ideology.
Something Sharia Law forbids is fractional reserve banking because ownership of the money involved is considered usury.
Due to Blockchain undeniably proving ownership, it aligns more with Sharia Law compliancy than traditional banking.
This level of compliance was all highlighted by Mufti Muhammad Abu Bakar in his paper.
The ruling follows increasing pressure from the Muslim community to clarify the situation concerning cryptocurrency.
Just one day prior to the paper’s publishing, a major Islamic scholar conference concerning cryptocurrencies demonstrated how pressing the issue has become.
With Muslims accounting for almost 1 in 4 of all people in the world, the ruling could open up the market to a new pool of investors.
With so many potential investors previously sitting on the sidelines due to religious reasons, the ruling may well have accounted for the recent price surge.