The Indonesian Ulema Council declared crypto off limits for Muslims under Sharia law.
Crypto is haram
Even though cryptocurrencies in and of themselves are apolitical, they often get misappropriated for political causes. The same goes for religious causes, and that is particularly relevant in this case, as the Indonesian Ulema Council (MUI) declared the use of cryptocurrencies to be haram (forbidden) under Islamic law. MUI chairman Asrorun Niam Soleh stated in his reasoning at the Ljtime Ulama Forum that cryptocurrency was “gharar, dharar, and contrary to Law Number 7 of 2019 and BI Regulation Number 17 of 2015.”
In Islamic finance, “gharar” and “dharar” refer to cryptocurrencies as involving uncertainty or risk and harm, which are both forbidden under Sharia law. What’s more, chairman Soleh deemed that cryptocurrencies:
- Don’t have a physical form (correct).
- Have no real value (questionable).
- Are of unknown total amount (in Bitcoin’s case plain false).
- You cannot hand the property rights over to the buyer (also false and equally true of fiat currencies).
With the MUI representing the top Islamic scholar’s body and religious authority on Sharia compliance in Indonesia, the country with the biggest Muslim population in the world, one would expect the Council’s fatwas (recommendations) to have an impact on Indonesians’ perception of crypto.
Another Indonesian Islamic organization says no to crypto
The MUI’s fatwas follows the recommendation of the East Java branch of Indonesia’s largest Islamic organization Nahdlatul Ulama (NU), which has previously declared cryptocurrencies to be haram. Its chairman Kiai Azizi Chasbullah argued that while the bahtsul masail participants believed that crypto cannot be legalized under Islamic sharia law, even though the government recognises cryptocurrency as a commodity. Essentially, the NU came to the same conclusion as the MUI and deemed crypto to have an element of speculation that could not be reconciled with Sharia law.
A representative of the Lirboyo Islamic Boarding School Kediri agreed, saying that the prevalence of fraud in crypto contributed to its rejection. Other scholars noted that cryptocurrency was akin to gambling and could therefore not be accepted under Islamic religious law.
Australian Islamic finance DeFi platform takes a different approach
Not all Muslims agree with this notion, though. A Sydney-based team is building a “Sharia-guided” decentralised finance platform called “The Marhaba Decentralized Financial Platform.” It is to provide the Islamic world a DeFi platform informed by core Sharia tenets.
Naquib Mohammed, chief innovation officer of Blockchain Australia and Marhaba’s CEO and founder, underscored the core tenets of Islamic religious law that both the financial body providing the service and the client receiving it were to win in a financial transaction. Marhaba was aimed at the inclusivity of the community and a trusted place to onboard faith-conscious Muslims without a doubt. He also added that one of the reasons Bitcoin was contentious in the Islamic ecosystem was Satoshi Nakamoto’s anonymity, which casts doubts on its legitimacy under Islamic law.
It will be interesting to see how the Islamic world adapts to the emergence of crypto, considering 37% of Singaporeans, a partially Muslim country, are interested in paying in crypto, and Indonesia is the country with the second-biggest rate of crypto ownership in the world according to Finder.
