A paper presented to the Seminar on Cryptocurrencies at The International Islamic Fiqh Academy of the Organization of Islamic Cooperation
All praise is for Allah, Lord of the worlds, and blessings and peace be upon the one who was sent as a mercy to the worlds, our Prophet Muhammad, and all his family and companions.
Every day the world of economics presents us with innovations that require clarification as to where they fit in the schema of Islamic law. In the course of the fourth [Industrial] Revolution, the conflux of technical sciences and economics has produced encrypted digital currencies, of which Bitcoin is the most prominent.
Undoubtedly, these currencies comprise a new development whose Sharīʿah ruling was not previously clarified. Since the types of these currencies have increased and Bitcoin has made its presence strongly felt in the financial markets, it has become necessary for scholars to undertake an examination of this problem through organized collective ijtihād in the context of the fiqh academies. The International Islamic Fiqh Academy discussed it and issued Resolution No. 237 (24/8) regarding electronic currencies, which states:
The Council of the International Islamic Fiqh Academy, established by the Organization of Islamic Cooperation, held its twenty-fourth session in Dubai from 7–9 Rabīʿ al-Awwal, 1441 AH, corresponding to 4–6 November 2019 CE. After reviewing the recommendations issued by the academic symposium on electronic currencies that was held by the Academy in Jeddah, from 10–11 Muḥarram 1441 AH corresponding to 9–10 September 2019 CE, and after listening to the discussions that took place around it, it decided the following:
First: concept, transactional mechanisms, and risks:
1) The concept of electronic currencies is general and includes credit cards, prepaid cards, electronic checks, etc. Based on that, the discussions finally adopted the use of the term encrypted digital currencies. Among the most famous of these currencies are Bitcoin, Ethereum, and Ripple, despite the differences between them. What distinguishes these currencies is that they are encrypted numbers and do not have a tangible physical entity or physical presence, and they are traded between the transacting parties without an intermediary. This method of transacting is called a peer-to-peer system. They are classified, according to the research papers presented, into three types: first, coins: Bitcoin is of this type; second: altcoins such as Litecoin, Bitcoin Cash, Ethereum and Ripple; and third: tokens, which are assets that can be exchanged for commodities and cryptocurrencies. One of the most prominent features of the first type is decentralization, which means that no government or private entity supervises their issuance. Most cryptocurrencies are based on blockchain technology. This technology is what produces the currency and preserves the complete record of transactions in the currency. A feature of Bitcoin is the existence of a debate about the identity of the issuer.
2)Dealing with cryptocurrency is done directly through platforms available on the internet or through brokers. There are fees to be paid for these platforms. Each customer must have a special electronic wallet on his computer, documenting ownership of the encrypted digital currencies he owns and the ability to dispose of them. One of the most prominent features that distinguishes dealing through platforms and electronic wallets is the possibility of using pseudonyms, which is called anonymity.
3)Some countries, such as Malaysia, have made it necessary to obtain required licenses from the concerned authorities in order to establish electronic platforms and have put in place regulations for dealers in those platforms, most notably proof of the customer’s identity in order to register.
4) Despite the spread of these currencies in many countries in thousands of shops, as well as the exchange of national currencies for them, and their acceptance by some governmental entities, many studies indicate there are risks involved in dealing with cryptocurrency in general, most notably price fluctuations.
Second: The Sharīʿah ruling: Through the research presented and the discussions that followed, it was found that there are issues affecting the Sharīʿah ruling that are still under consideration, including:
1.1. What is the essential nature of cryptocurrency? Is it a commodity, a benefit, a financial investment asset, or a digital asset?
1.2. Is cryptocurrency considered property possessing value from the Sharīʿah perspective?
Third: In view of the foregoing and the great dangers that surround these currencies, coupled with the instability associated with dealing with them, the Council recommends further research and study of the issues that may influence the ruling.
