Muslims make up almost 25% of the World’s global population making them a key market for Bitcoin trading. Despite the Bitcoin taking off around the globe from the America’s, Africa, Europe and Asia, the Middle East hasn’t seen such a boom due to lack of information, potential misinformation and religious guidelines which hold significant weight in Muslim countries as Islam itself is not just a religion but a way of life for over 1.5 billion people in the globe. So the key question is, are Bitcoin’s from an Islamic sense permissible to trade?
Why Bitcoin may be Permissible
Islamic requires for a currency to hold actual value before it can be declared permissible to trade, this is to prevent fraudulent activity and money “created out of thin air” which holds no true value sold to other individuals with some knowledge from the seller declared not permissible. Bitcoin is in a large extent similar to gold or silver as they are all mined, have a limited quantity available and have attained value from supply and demand. Furthermore considering the Bitcoin has been in existence for a long time and has overall gained and retained value further adds to the argument that the Bitcoin is a legitimate currency.
However others may argue that Bitcoin isn’t like gold or silver and holds no true value but same can be said about paper currency considering it is paper after all and it only holds value because we perceive it to hold value so thus it can be used to trade and purchase goods, similar to what the Bitcoin can provide. Bitcoin is a digital version of gold and silver which can be used to facilitate transactions but due to their physical qualities and the inconvenience gold and silver hold in transactions due to their weight, size and issues surrounding security which makes them not the best methods of transaction. This is where the Bitcoin steps in as it holds similar properties to precious metals but can enable transactions to take place in a few minutes whilst providing anonymity and complete security.
Why Bitcoin may not be Permissible
However others argue the Bitcoin is not a currency due to its extreme volatility it brings to the markets as it had risen almost 2000% at its height in price within a year and then within the space of a few months crashed by 50%. This is the general trend the Bitcoin follows as it continues to rise and fall in value. So thus arguably making it a speculative asset which, but this isn’t the main issue the Bitcoin has which makes it non permissible. The main issue surrounding the Bitcoin is that it is easy to manipulate by small interest groups which profit from it at others loss, which in turn fuels exploitation.
Despite this argument others can potentially argue that fiat currencies themselves are speculative assets as individuals expect the currencies to retain value but however they don’t always do so. Such as Venezuela’s Bolivar which despite being the National currency of an oil rich Nation, it had lost significant value over a short period of time which had in turn led to consumer prices increasing by 8900% year-on-year in Venezuela. So if Nation state currencies are just as volatile as the Bitcoin in some cases then does that arguably not get rid of the last issue surrounding volatility the Bitcoin faces.
So can Muslims trade Bitcoin’s?
Whether Bitcoin is “halal” (permissible) or haram (not permissible) largely depends on whom the individual asks that questions with some Imam’s or other leaders in the Islamic community declaring it haram and with others on the other hand declaring it being halal. However one of the most extensive studies done into the Bitcoin was done by an Islamic scholar Muhammed Abu-Bakar of Blossom Finance who explored how the Bitcoin functions in a study to try and understand and find out whether the Bitcoin fits the strict definition of “money” under Islamic law.
One main argument the scholar presented was that in Germany the Bitcoin has been declared as a legal currency in Germany and therefore qualifies as being halal in that country and as more people learn and discover the uses of Bitcoin’s the more the Muslim community may begin to accept it as a halal currency as after all the sole purpose of the Bitcoin is to facilitate transactions.
The Islamic community accepting the Bitcoin as a halal form of currency will open the currency to the Muslim market which makes up of about 25% of the World’s global population which may be no wonder why the Bitcoin jumped $1000 after the news of the Bitcoin being declared halal broke.