The debate ‘whether cryptocurrency Bitcoin is compliant with Shariah or not’ keeps going on as Islamic rulings abstain one from interest or ‘riba’ on loans and dealing with bitcoin involves interest. A Muslim cleric in December last year had declared that owning bitcoin was compatible with Islamic finance and meanwhile, other scholars disagreed and a fatwa against the cryptocurrency was issued by a top Islamic cleric of Egypt.
Matthew J. Martin, the founder of Blossom Finance – Indonesia based microfinance startup – which uses cryptocurrency to help Muslims with Islamic financial law; along with internal Shariah advisor Mufti Muhammad Abu Bakar in a study says ‘Bitcoin is compliant with Islamic financial law’. However, the condition is the local government should not forbid its usage in the region.
The founder of the financial firm says there is a widespread confusion among Muslims about cryptocurrencies. “Shariah law is not a single set of rules; it’s is a scholarly field subject to differing interpretations and opinions on various matters,” NewsBitcoin.com quotes him as saying.
According to Martin, the widespread confusion is due to ‘incomplete or contradictory opinions on the topic’ and issuance of different verdicts. “We wanted to offer clear guidance supported by solid research that benefits both laypeople and practitioners of Islamic finance,” he says.
Country’s law come first:
Giving an example, Martin explains: “In Germany, Bitcoin is recognized as a legal currency and therefore qualifies as Islamic money in Germany. But the Republic of Indonesia published guidelines this past January that declared all payments within Indonesia must be in Indonesian Rupiah.”
“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 says.
Currently, Blossom Finance states about ‘Initial Coin Offering’ saying “ICOs are highly uncertain, and not advised.” This is because one of the key goals of Shariah is the preservation of wealth and understanding that individuals should not invest more than they are willing to lose.