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The cryptocurrencies have now reached almost every corner of the world. However, Muslims scholars have still no consensus on whether cryptocurrencies are halal. There are now even cryptocurrencies based on Islamic principals.
Are conventional cryptocurrencies like Bitcoin halal?
The trading of conventional cryptocurrencies like Bitcoin currently does not qualify to be halal. The main aim behind the buying and selling of cryptocurrencies is to to make a profit from the price fluctuation. It clearly includes characteristics of gambling, speculations and extreme risking. Even the sources of cryptocurrencies are not known, and investors who backed them are clearly involved in the interest-based business.
Conventional financial instrument and activities such as (gharar- uncertainty) and Maysir (gambling) are haram (prohibited).
Maysir
Maysir means gambling or speculation and it is forbidden in Islam. In fiat/ paper currency, the risk of gambling is medium, while high in digital-cryptocurrency (not assets-backed); but low is digital-cryptocurrency (assets-backed)
Gharar
Gharar means uncertainty which is also haram in Islam. However, Gharar is also present in paper currency. So, probably it may not the right argument for making cryptocurrencies haram.
Maqasid al-Shari’ah (the higher objectives of Islam)
Maqasid al-Shari’ah is absent in both fiat and Digital-cryptocurrency (not assets-backed), but its presence in Digital-cryptocurrency (assets-backed).
So, one thing is prominent, which makes Cryptocurrencies haram is the speculation or gambling factor. Conventional cryptocurrencies are not backed by real assets and value is highly volatile. Its price is determined by what other people are going to pay. So, the value of cryptocurrencies is purely driven by speculations.
Under the strict interpretation of what qualifies as money, cryptocurrencies miss that position. Islam only recognises commodities with intrinsic value as money like gold (Dinar), silver (dirham) or fiat money backed by gold or guaranteed by the governments. Cryptocurrencies are not backed by any real asset and even not regulated by governments.
In the case of cryptocurrencies and Bitcoin, some scholars have issued a fatwa comparing investing in cryptocurrency to gambling which is prohibited in Islam. Most traders of Bitcoin do the buying and selling based on speculations. But the risk is extremely high which makes it the most celebrating digital currency.
The table below shows the Bitcoin price changes from 2013 to 2020.
In many Muslim countries, gold-backed cryptocurrencies are like OneGram and HelloGold.