It doesn’t come as a surprise to many as Islamic societies are known to label cryptocurrency trading as a form of “Haram”. In the past, many Islamic organizations have opposed the trading in digital assets like cryptocurrency or non-fungible tokens. Recently, the Tarjih and Tardid Council of Muhammadiyah also issued a similar memorandum stating that “Tarjih’s fatwa stipulates that cryptocurrencies are illegal both as an investment tool and as a medium of exchange,”. The community has deemed the currency illegal by issuing a fatwa.
This particular Islamic organization, Tarjih Council of Muhammadiyah and Central Executive Tajdid Of Muhammadiyah provided just a few arguments that supported this decision. The Islamic council stated that the use of cryptocurrencies is unlawful or illegal as it accounts for “gharar” and “dharar”. The two aforementioned terms basically point towards cryptocurrencies carrying elements of ‘speculation’. Quoted in fatwa “This speculative nature and gharar is forbidden by the Shari’a as the word of God and the hadith of the Prophet SAW and does not meet the values and benchmarks of Business Ethics according to Muhammadiyah.”
Fatwa: The Expository Argument
Fatwa provided only two points of contention. The first was the asset’s volatile and speculative nature. The other issue with cryptocurrencies is that the asset doesn’t tick the standards of Islamic barter, i.e medium of exchange. Islamic Council condemned the unreliability and misuse of crypto.
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The Council also expressed concerns regarding the legitimacy of the currency as Bitcoin and other cryptocurrencies still haven’t been recognised as currency or a medium of exchange backed by an underlying asset such as gold. These ideas are emphasized by the Islamic fatwa, which states that crypto cannot be considered a viable investment because it is a dynamic asset.
Any asset that is prone to speculation and fluctuation will be considered ‘Haram’. These principles are also applicable to illegal activity that is conducted using cryptocurrencies. The digital asset also has a tendency to be used for gambling purposes, additionally crypto isn’t a tangible asset making it another reason why the Islamic community forbids the same.
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How does Fatwa affect cryptocurrency trading in Indonesia
The Indonesian Ulema Committee (MUI), had earlier demanded a similar ban in November 2017. However, the MUI was open to accept crypto as long as it is located in accordance with Sharia Tenets. The other Islamic organisation that declared cryptocurrency ‘Haram’ was Nahdlatul Ulama making Muhammadiyah the third most prominent Islamic organisation to label the asset same. Sharia law stipulates that the digital asset must be traded, and not only as an investment. According to the Commodity Futures Trading Regulatory Agency, they decided to investigate and suggest that cyptocurrecy would still be available in Indonesia.
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In recent years, Indonesia faced a few bans due to religious objections. However, the Indonesian market is optimistic about crypto adoption. Crypto transactions zoomed up in the country and recorded close to $9.8 billion in asset’s transaction. This was an indication that numbers have increased by 1,222% in 2021 as compared to 2020.
The same is true for crypto investors. According to the report, 11.2 million were seen as of the end in 2017, which represents a 180% rise compared with 2021. Therefore, it is safe to conclude that another fatwa won’t dull the asset’s popularity among Indonesians.
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