The founder of Blossom Finance startup Matthew J. Martin and Shariah compliance officer Mufti Muhammad Abu Bakar have published a study that concludes bitcoin may or may not qualify as Islamic money depending on the position held by a given local government towards the use of digital currencies. The research comprises the in-depth analysis of various legal opinions on Islamic banking and Bitcoin.
Martin explains that despite the growing interest in cryptocurrency among Muslims, there is still a lot of controversy and confusion on the matter. Martin have been frequently approached with the questions about bitcoin’s compliance with the set of rules and regulations observed by Muslims adherent to the tenets of the Quran.
“Contrary to popular myth, Shariah law is not a single set of rules; it’s is a scholarly field subject to differing interpretations and opinions on various matters. Several recent fatawah issued by prominent Muslim scholars offered incomplete or contradictory opinions on the topic. With all the confusion out there, we wanted to offer clear guidance supported by solid research that benefits both laypeople and practitioners of Islamic finance,” – the CEO of Blossom Finance explains.
“I’ve had so many people ask me ‘Is Bitcoin halal or haram?’, and the honest answer is ‘it depends’. Bitcoin is not just a currency, but it’s also a transaction and payment network. And blockchain itself is a whole category of technology with wide ranging applications,”- Martin noted.
Martin explains that bitcoin is viewed as “customary money” from an Islamic perspective. However, national law prevails over Shariah permissibility and thus it all depends on the country. For example, whereas in Germany bitcoin is officially recognized as a currency, Indonesian government declared Indonesian Rupiah the only legal means of payment within the country.
The founder of Blossom emphasizes that bitcoin technology is highly aligned with the Shariah goal of reducing excessive uncertainty.
“Blockchains prove ownership of the asset – it proves you actually have the money you’re sending in a transaction. Conventional banking literally loans money into existence, and that is completely incompatible with the Shariah principles of money,” – he states.
As of the initial coin offerings (ICOs), the research regards them as “highly uncertain and not advised” to Muslims, because Shariah emphasizes the preservation of wealth and undesirability of investments associated with high venture risks.
“ICOs, or initial coin offerings, often lack clarity on: a) what are investors actually buying, and b) what are the investors’ rights,” – the report concludes.
The full research paper can be found through this link.