The religion of Islam has a rich tradition in finance. However, crypto poses new questions. Devout Muslims debate what their beliefs will say about Bitcoin (BTC), Dogecoin (DOGE), Shiba Inu (SHIB), and the rest of the crypto universe. We have prepared this detailed news for Kriptokoin.com readers.
BTC, DOGE and other cryptocurrencies are attracting people as they skyrocket
Mu’aawiyah Tucker is a religious man. For years, Tucker has tried to avoid traditional banks, as the Koran forbids the practice of earning interest on loans. For a time, he invested his savings in the precious metal and described himself as the “gold bug”. But then, 40-year-old Tucker discovered Bitcoin.
Today, the London-based programmer and web designer runs a YouTube channel that seeks to address concerns other Muslims may have about cryptocurrency and argues that it actually has benefits for those who want to live in faith. In his view, the traditional Islamic principle of delayed gratification fits well with the “hodl” movement. Hodl is a belief among crypto investors that ignoring those who oppose and sticking with their investments will eventually work. Tucker says:
The whole ‘hodl’ mentality is essentially the same thing. We hold on to something and then wait for the reward to come.
However, whether cryptocurrency is actually allowed is a matter of debate. In recent months, leading religious authorities have issued fatwas warning their followers to stay away from cryptocurrencies, arguing that the wild price fluctuations and shady origins of cryptocurrencies make them more like gambling, which the Quran also prohibits. After issuing a fatwa against the use of crypto to journalists in November, Asrorun Niam Sholeh, head of religious decrees at the Indonesian council of Islamic scholars, made the following statement:
Cryptocurrencies as commodity or digital assets have the element of uncertainty, bet and loss. commercially illegal. It’s like gambling.
Tucker, if not less religious, is part of a younger, tech-savvy movement that argues that crypto offers Muslims a viable alternative to the traditional financial system. Tucker studied Islamic law from internationally respected scholars in Medina, the city where the prophet Muhammad was buried, and currently runs CryptoHashReview, a consulting firm that advises crypto projects on how to comply with Islamic law.
Tucker, “If the system is this bad, how can I justify staying in the system when I have another way?” says. Such discussions are not uncommon in Islam. The religion has a rich scholarly history in financial matters, and Islamic law, or sharia, has a solid financial component. For generations, religious leaders have discussed passages in the Qur’an about money. In general, Islamic finance seeks to establish business and investment rules that ensure that one group does not take advantage of the other or use the money to oppress another.
Other financial innovations such as gold reserves, credit cards, and currencies not backed by commodity options trading have sparked controversy in the past. The stakes are high. As the prices of BTC, DOGE and other cryptocurrencies skyrocketed over the past year, millions of people in the Islamic world have started investing in them, especially in Indonesia and Persian Gulf countries with digitally connected young populations.
Proponents say the crypto space will generate the next wave of technological innovation, bringing wealth and opportunity to those entering it. Skeptics argue that the crypto world is riddled with scams and doomed to a crash that could wipe out the savings of day-to-day investors who can barely afford such losses.
Why are cryptocurrencies opposed or supported?
Anas Amatayakul has spent his life studying Islamic law and history, speaking at conferences around the world, and teaching at some of the best universities in his native Thailand. He speaks with the patience and persistence of a teacher for a long time. When asked about his views on cryptocurrency, he replied, “Do you have time? I need to tell the background” and begins the story of God’s creation of Adam.
Amatayakul, who also leads the committee that advises the Islamic Bank of Thailand on sharia, says that he is not against technological change, that the cryptocurrency world moves so fast and advises Muslims to stay away from it for now. “This is to protect people in matters of wealth,” says
. He says a lot of people seek his advice on cryptocurrency. One of his former students, now studying in Cairo, even got into an argument with his roommate for increasing his electricity bill by running energy-intensive software that ‘mined’ or created new cryptocurrencies.
There is no central authority in Islam that can make a final decision about crypto. Scholars write books, give lectures, and meet at universities or religious conferences to solve new issues. Many Muslim-majority countries have sharia councils made up of respected religious leaders who issue fatwas and make statements for their decisions. While not binding, councils can influence government policy, and devout Muslims often look to them for guidance.
Although cryptocurrencies have been around for years, they have recently gained in value. According to CoinMarketCap, the value of cryptocurrencies taken together tripled from $770 billion in early 2021 to $2.9 trillion in November. A crash in January wiped out nearly half of that, but the prices of popular cryptocurrencies are still considerably higher than they were a few years ago. A single Bitcoin purchased for $30 or $40 in 2013 is worth about $40,000 today.
According to Pew Research’s November report, one in six Americans has invested in or traded in cryptocurrencies, although they currently have little practical use beyond speculation and investing. A handful of companies, including Microsoft and Whole Foods, accept cryptocurrency as payment, but usage is extremely limited.
Crypto is very different from other financial products in that transactions are recorded using technology known as Blockchain software that runs on many different computers around the world. Instead of a bank or government that is the arbiter of who owns what, Blockchain allows transactions to be recorded without a central authority.
Islamic finance has adapted to the changes of the past. Traditionally, investments and currencies have to be backed by physical assets like gold, Amatayakul says. But as non-gold-backed fiat currencies such as the US dollar became more popular during the 20th century, scholars studied them and eventually incorporated them into Islamic finance. Today, fiat currencies are allowed because they are issued and guaranteed by a recognized authority (in this case, the US government), Amatayakul says.
Amatayakul, “But for cryptocurrencies, not all are known. Who does it?” he asks. The crypto world is full of scams known as ‘carpet pulling’, whereby a proponent of a new currency will collect real dollars from investors and then disappear.
Tucker acknowledges that crypto is still fraught with questionable investments, and that great interest from Muslims and others alike has been driven by its potential to make money by speculating on it. Many people ask him if certain cryptocurrencies are sharia-compliant, he says.
Someone recently asked him if a cryptocurrency called Wife Doge is in line with Islamic law. Dogecoin, a cryptocurrency that started out as a joke about an Internet meme featuring a Shiba Inu dog known as “DOGE,” has gained in value last year when Tesla CEO Elon Musk began tweeting about it. However, Tucker says he’s never heard of Wife Doge. Surprised, he looked up. “Look, there’s a cryptocurrency called Wife Doge. There is a whole website, a picture of Dogecoin (DOGE) and a female version of Dogecoin (DOGE) in a wedding dress,” she says.
Tucker says such stories help him understand why Islamic scholars are backing down against cryptocurrency. Still, he notes that he thinks the resistance is mostly due to a lack of understanding of fast-moving technology. Tucker says, “I’ve been in this field since 2017. I have a technical background. “I’m technically young, so being young it’s easier to understand these concepts,” she says. He tells the story of meeting a scientist and tries to explain how Blockchain works. “He was there for seven hours, seven long hours. At that moment I realized that we have a long way to go because this is a huge paradigm shift.”
“Cryptocurrencies and Bitcoin are in childhood, we must let them grow”
Whether the Islamic world dives or avoids crypto could have an impact on the price of cryptocurrencies and the future of technology. According to the Sovereign Wealth Fund Institute, four of the 10 largest sovereign wealth funds are managed by predominantly Muslim countries in the Persian Gulf and together hold hundreds of billions of dollars. While these funds are not required to invest solely in sharia-compliant assets, the majority of them are mandatory. Khaldoon Al Mubarak, head of one of the UAE’s sovereign wealth funds, when asked about cryptocurrency in December, told CNBC, “I think it’s real. “While a lot of people are skeptical, I don’t fall into that category,” he said.
Muneer Khan, head of Islamic finance and Middle East practices at London-based law firm Simmons and Simmons, has worked in Islamic finance for 20 years, advising banks on how to produce sharia-compliant financial products. “There has always been an element of debate, especially regarding the newer, less understood forms of finance,” Khan said from his home in Dubai. “There are many sharia scholars around the world, but relatively few experts in finance, and even fewer scholars who understand today’s finances.”
This creates a situation where spiritual leaders who may not fully understand cryptocurrency make statements about it, which are then followed by others. “For the average guy on the street, it might be a big ‘I’m never going to do that’. This is a warning they will rely on without understanding the nuances,” he says.
Still, some Muslim-majority countries such as the United Arab Emirates and Saudi Arabia are trying to create their own digital currencies. “Governments are looking at how they can diversify their economies by moving away from hydrocarbons. Part of that looks at fintech, and part of fintech is digital assets,” he says. Young people in Muslim countries are also increasingly interested in crypto as a way to increase their opportunities. Khan comments:
In general, there is a divide between the older generation and the younger generation, and crypto is seen as a stabilizer, a new opportunity to start over. The situation is not different in the Islamic world.
Khan expects adoption to increase in the Muslim world as elsewhere. He also says that there are cryptocurrencies that can really appeal to conservative Muslims. “No interest, no exorbitant fees, and efficiency and less friction in terms of wages and costs, these are all inherently sharia-compliant aspects,” he says.
But for now, many Islamic scholars are not convinced. Amatayakul notes that a number of scams, the highly speculative nature of cryptocurrencies, its connection to money laundering and crime, and the difficulty of figuring out exactly who is behind certain projects have led to a situation where most people should avoid cryptocurrencies. Amatayakul ends his statement with the following statements:
Cryptocurrencies and Bitcoin are in their childhood. We have to let him grow up and become an adult.
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