Islam and cryptocurrency, An Islamic Point of View
In Dubai’s decades-old Gold Souq, customers from around the world haggle over bangles and necklaces. Elsewhere in the emirate, the region’s top center for gold trade, bullion is playing a new role in financial engineering from an Islamic point of view. A local start-up company founded last year, OneGram; is issuing a gold-backed cryptocurrency – part of efforts to convince Muslims that investing in cryptocurrencies complies with their faith.
Halal or not halal:
The speculative nature of cryptocurrencies has triggered debate among Islamic scholars over whether cryptocurrencies are religiously permissible. Cryptocurrency companies are seeking to sway the debate by launching instruments based on physical assets and certified as valid by Islamic advisors. Each OneGram cryptocurrency unit; is backed by at least a gram of physical gold stored in a vault. The idea is to limit speculation.
“Gold was among the first forms of money in Islamic societies; so this is appropriate;” said Ibrahim Mohammed, the Briton who founded the firm with other investors last year. “We are trying to prove rules and regulations from sharia are fully compatible with digital blockchain technology.” Tens of millions of dollars worth of the currency has been issued so far. About 60 percent of the planned number; of coins remains to be sold; OneGram hopes to issue them all before listing them on exchanges around the end of May. OneGram obtained a ruling that its cryptocurrency conforms with Islamic principles from Dubai-based Al Maali Consulting. It is one of dozens of advisory firms around the world that offer their opinion on whether financial instruments meet Islamic law standards.
Islamic law committees:
Only around 20 to 30 percent of banking in the Gulf and Southeast Asia follows Islamic principles; many Muslims use conventional finance if it offers higher returns or more convenience. But the issue of religious permissibility is influential and could determine whether Islamic funds and institutions; which are formally committed; to the principles of Islamic law deal in cryptocurrencies. “One of the biggest difficulties is that there is so much to talk about, and so little certainty in the way crypto will be playing out,” said Ziyaad Mahomed of HSBC Amanah in Malaysia. He chairs its Sharia Committee, which oversees Islamic transactions.
“They are also very different in terms of their underlying commodities, projects or businesses, so it’s not appropriate to have a blanket sharia ruling for all,” said Habib. He is involved in a project to categorize; cryptocurrencies based on sharia-compliance criteria. “Most of the existing sharia rulings either deal with the only bitcoin or include all types of cryptocurrencies, disregarding their peculiarities.”
Complexities:
Another problem is that many Islamic law scholars have trouble understanding the complexities of digital currencies; said Harris Irfan; managing director at Cordoba Capital in London. “I would caution against accepting any fatwas from community scholars on the subject of fiqh al-mu’amalat; the jurisprudence of transactions, which is a highly complex area of sharia.” Irfan chairs the UK Islamic Fintech Panel; a think-tank that is drafting guidelines for accreditation of sharia-compliant fintech products, including cryptocurrencies. Mahomed said some degree of consensus had emerged globally that cryptocurrencies were a form of wealth; or maal – one step towards acceptance.
