CRYPTOCURRENCIES FROM ISLAMIC PERSPECTIVES: THE CASE OF BITCOIN

Abstract

Cryptocurrendes' popularity has surged during the last few years. This is especially the case of bitcoin; one among cryptocurrendes which price has soared from USD1,000 in the first quarter of 2017 to USD20,000 by the end of 2017. It has now being used by merchants as a medium of exchange. Upon realizing its popularity, the CME Group that owns the Chicago Mercantile Exchange launched a futures contract on bitcoin. Yet, there are clses where bitcoin is banned by the country. This artide examines the implication of bitcoin on Islamic finance and questions its acceptance as a medium of exchange (money) based on its compliancy with shari'ah. By analyzing its nature and characteristics, the paper concludes that, stridly speaking, cryptocurrendes that are not backed with real assets are not shari'ah-compliant. However, the majority of shari'ah scholars are leaning towards approving bitcoin on maslahah basis Bitcoin is neither fiat money nor real money. The absence of an intrinsic value coupled with lack or zero supervision by the central bank will result in misusing bitcoin. Furthermore, we content that it has the elements of maysir and gharar. This can contribute towards sodo-economic injustices, thereby jeopardizing the maqasid al-shari'ah. Hence, based on a thorough analysis, we conclude that fiat cryptocurrendes are not shari'ah compliant. However, gold-backed cryptocurrendes are argued to be desirable and consistent with the maqasid al shari'ah.