Trading in cryptocurrencies like Bitcoin has been declared banned for Muslims by the National Council of Islamic Scholars in Indonesia, as the popularity of digital currencies increases in the world’s largest Muslim-majority country.
- There are more cypto investors in Indonesia – 6.5 million people – than stock market investors
- Social media has contributed to the growing trend of cryptocurrency among young people
- At least two religious organizations in Indonesia oppose cryptocurrency decision
In a recent online forum, the Indonesian quasi-government The Council of Ulemas declared a fatwa, or a non-binding religious rule, that cryptocurrency is haram – prohibited by Islamic law.
An ulema is a Muslim scholar recognized as having specialized knowledge in Islam.
According to Islamic law, a transaction must meet certain requirements, such as having a defined physical form and value.
“Cryptocurrency as a currency is prohibited because it has elements of uncertainty, evil and does not meet Islamic requirements under Sharia law [law]KH Asrorun Niam Sholeh, head of religious decrees of the council, said in the forum.
However, Mr. Sholeh added that while cryptocurrencies as a currency are banned, they could be traded as a commodity or digital assets if they meet the requirements.
The council has served as the authority on sharia compliance in Indonesia, but it has been criticized for other controversial fatwas.
In 2018, he issued a fatwa raising concerns about a measles and rubella vaccine because it contains traces of pig and human cells.
The council also issues halal certificates – the opposite of haram – for food and other products consumed in the country.
Nahdlatul Ulama (NU) is one of the largest Islamic organizations in the world with around 90 million members and followers.
In October, its East Java branch also issued a fatwa declaring cryptocurrencies haram.
East Java NU Vice President Ahmad Fahrur Rozi, known as Gus Fahrur, told the ABC that the fatwa was based on the results of a forum for discussion on issues relating to jurisprudence Islamic.
One of the conclusions of the discussion, in which both legal experts in cryptography and Islamic law participated, was that crypto trading tends to involve “fraudulent practices and gambling.”
“Just as it is not permissible for a person to buy indistinct objects, like ‘fish in the sea’ or ‘birds in the air’,” Gus Fahrur told the ABC.
He said cryptocurrencies were similar to gambling as well, as people speculate on the value without knowing the cause.
Practices such as gambling are not allowed in Islam because the value and price are undefined and could be financially and physiologically harmful to those involved.
In comparison, he said the shares have a clear value and the price goes up or down based on the performance of the company.
Due to the huge elements of speculation about the value of cryptocurrencies, they considered it “inappropriate to be used as an investment instrument,” he said.
The booming crypto trend in Indonesia
According to data from the Indonesian Ministry of Commerce, the number of crypto investors in the country has grown from 4 million people at the end of 2020 to 6.5 million people at the end of May 2021.
It exceeded the number of investors in the stock market, which is around 2.4 million according to Bank Indonesia, the central bank.
Putri Madarina, a Certified Financial Planner and Founder of Halal Vestor, a Financial Planner and Sharia Education Service in Jakarta, said that the booming interest in crypto investments in Indonesia was in part due to social media, especially TikTok.
“It’s even in full swing during the COVID-19 pandemic, we’re actually in the second wave of the crypto trend,” Ms. Madarina told the ABC, referring to the crypto boom three years ago. years.
Ms Madarina has been investing in crypto since 2017 and said the Islamic decree had not deterred her from continuing to invest in crypto.
“What we have purchased is digital merchandise, like a collection that we consider valuable,” she said.
She also viewed crypto as an “evil” – an Islamic term for property – which can take many forms.
“So as a medium of exchange, I think that’s not a problem,” said Madarina, who is also the treasurer of an Islamic fintech association in Indonesia.
“As a property, I don’t see any Islamic rule violated, unless it was designed to be a means of deception, which is also an external factor that we cannot control.”
‘I am a Muslim, I am the fatwa’
Ainun Najib is an Indonesian member of NU based in Singapore who works in IT.
He didn’t start investing in cryptocurrencies until January 2021.
He said he was aware of the halal and haram controversy, but that there was no official fatwa from any religious organization at that time.
He viewed the purchase of Bitcoin as the purchase of land or gold, but in a digital form protected by “mathematically impenetrable encryption.”
“Initially, I intended [to keep bitcoin] as an asset, like my long-term savings. In the long term, I’m talking about 10 to 20 years. “
But in less than a year, Mr. Najib decided to free up all of his bitcoin assets with a total value of $ 45,000.
“Because of the fatwa [from NU East Java], he said, explaining the reasons for his decision.
He said that although he understood the blockchain technology used in cryptocurrencies, the fatwa was for him an “expert recommendation”, like how doctors recommend a patient at high risk for cancer to stop smoking and drinking alcohol.
He believes that since he has no knowledge of religious law, he should turn these decisions over to experts in the field, such as the Kyai – an expert on Islam – or religious scholars.
“I am a Muslim. In the context of Islam, I am the fatwa,” he said.
“[But] it is our choice to follow it or not. But I think the right decision would be to follow him. “
Fatwas may change in the future
Cryptocurrency is still the subject of much discussion among scholars and Islamic institutions around the world.
In 2018, the Grand Mufti of Egypt banned Bitcoin trading because he was subject to risks for traders due to price fluctuations.
Haitham al-Haddad, a British Muslim scholar, also considered cryptocurrencies to be non-halal because it was virtual currency with “no tangible value”.
Similar views have also been shared by Muslim scholars in countries like Turkey, Malaysia and Saudi Arabia.
But others have taken the opposite view, including South African Darul Uloom Zakariyya, Pakistani Shariah Adisory Muhammad Abu Bakar and other Muslim scholars in Qatar and the United Arab Emirates.
Ms Madarina said cryptocurrency was a “hot topic” in the Muslim world.
She added that the new Islamic decree would have less impact on the decisions of cryptocurrency investors and instead be an “eye opener” for investors or those about to enter the market.
“And I haven’t seen a drop in the number of interests yet.”
Gus Fahrur said the fatwas were not rigid and the views of Islamic scholars on crypto trading could change.
“The fatwa is dynamic. Yes [cryptocurrencies] no longer contain any element of speculation and… if there is official state regulation that protects it from speculators, then we will have no problem. “
He pointed out that the fatwa is currently aimed at protecting the community.
“Everyone wants to make a profit, don’t they? But please don’t speculate,” he said.
“What if cryptocurrencies collapse because they weren’t built on a valid and solid foundation, what will happen?
And for Mr. Najib, there is a possibility that he will resume investing in cryptocurrencies in the future.
“When the expert changes [their] Vue is fine, we can also follow it again… if there is an updated fatwa, then I will follow it again. “