In order for a money to be permissible, it must be exchanged between users or it must be in a feature that is generally accepted as a measure of value and gives confidence to users by its source.
What is important at this point is whether the medium of exchange known as money contains great uncertainty (garar) in its own essence, that is, in the form of production, in the stages of release and in the nature of interlocutorship, whether it is used as a means of deception (deception) and whether it is instrumental in the unjust and unjustified enrichment of a certain segment.
It is necessary to evaluate the provision of using each of the digital-crypto coins, which have emerged in recent years and have many varieties, in line with the above general principles.
Accordingly, it is not permissible to use digital crypto coins, which have serious uncertainties in their own essence, have an advanced risk of deception and deception, therefore do not have any security, and lead to the unfair and unjustified enrichment of certain segments such as practices known as pyramid schemes in the public opinion.
Directorate of Religious Affairs
Note: The Final and Evaluation Report of the Workshop on Crypto Coins in terms of Halal Finance on 07 March 2020 is as follows:
1. In terms of Islamic finance, the measure sought in money is stability in value and its respectability. For this, there must be a guarantor behind the money. The guarantor may be the society, or it may be the state or another institution representing the society, or even the system on which the money is based. The measure of what is used as money is not what its raw material is; what is essential in this regard is the custom, that is, the acceptance and circulation of something as money. After meeting the aforementioned criteria, there is no difference between whether money is a commodity, metal, paper, registered, electronic or cryptocurrency. Whether something has intrinsic/genuine value or not does not affect its provision to be money. As a matter of fact, in the Qur’an and Sunnah, no definition or determination is given as to what is or is not money.
2. It should not be forgotten that almost all of the money in circulation from paper money onwards are of a nominal or registered nature. Since these do not contain any real value like coins, they are more prone to manipulation, deception and fluctuations outside of value. For this reason, while conducting research on the possibilities of protecting the stability and reputation of money, on the other hand, the society and relevant stakeholders should be warned about the weak points of new coins such as crypto coins and the possible grievances they will cause.
3. Most of the studies on cryptocurrencies to date are based on bitcoin, the most common. However, there are also cryptocurrencies that work on a completely different basis, which are also produced on the basis of blockchain technology. It is important to consider crypto coins as a whole in the studies.
4. In the current evaluations and fatwas, the blockchain technology on which these coins are based is not mentioned, or as if as a whole, it is stated that all crypto coins and the technology they are based on are not permissible to the mentioned negativities. Putting this technology at the center in future studies will give more realistic results.
5. Crypto coins and the technology on which they are based are the co-working areas of different disciplines such as economics, finance, information technology and engineering as well as the ethical and fiqh dimension of the subject. For this reason, the evaluations to be made and/or the decisions to be taken should be taken by the boards to be formed by the joint work of experts from the relevant disciplines.
6. Although the use of crypto coins as “money” in its current form does not seem appropriate in terms of Islamic finance principles due to the negativities that arise or are likely to arise, this is not due to the blockchain technology on which the relevant coins are based. In this context, in the field of Islamic finance, besides blockchain technology, other financial technologies should be utilized to the maximum extent.
7. Although crypto coins have a number of negative aspects, they also contain negativities such as money laundering, financing illegal structures, high risk due to uncertainty, ignorance of money owners, lack of legal basis.
8. Costs are high in the production of digital currencies. The processors and computers required for this activity, which is figuratively called mining, are expensive to install, and the electrical energy they consume is quite high. It also takes a lot of time as production becomes increasingly difficult. This issue should also be taken into consideration in the evaluations about crypto coins.
9. Cryptocurrencies are stored in an encrypted electronic wallet. Therefore, if the password is forgotten or obtained by others, it becomes impossible to reach those coins. In the same way, there is no regulation on the transfer of the money to his heirs by inheritance in the event of the death of a person who has these moneys. This can be seen as contrary to the purpose of protection of property from a fiqh point of view.
10. Considering the evaluations on the subject, as a result, crypto coins are actually permissible; however, it is understood that some Islamic legal scholars do not consider it permissible to include it in the scope of sedd-i zerai subjects that are certain or highly likely to lead to the aforementioned drawbacks as they lead to the above-mentioned drawbacks. When these negativities are eliminated or minimized, there will be no obstacle to their permissibility.
11. Finally, in addition to many areas of financial technology, there is a need to hold more comprehensive scientific meetings on this subject and to focus on issues such as the technology, nature (goods, value, money) of cryptocurrencies and the extent of speculative problems arising from their use.
With greetings and prayers…
Islam with Questions
