Cryptocurrency: A Currency or Investment Asset?
Abstract
As most countries use currencies to denote paper money created as a medium of exchange for buying and selling goods or services. Nevertheless, there are attempts from several entities to create a crypto asset named cryptocurrencies which aims to replace the functions of paper money. The issue arises whether cryptocurrency is valid to be used as a currency or investment asset according to Shariah’s perspective. This article aims to clarify the Shariah views on the legality of cryptocurrency, analyze the suitability of cryptocurrencies as a currency or investment assets, and finally, suggest that cryptocurrency is one of the investment assets or commodities in line with the requirements of Shariah. The research adopts pure legal research methodology utilizing content analysis on the primary and secondary sources. The research findings revealed that Islamic scholars have conflicting views regarding the legality of cryptocurrency as a means of exchange to replace the function of paper money and as an investment asset. Nevertheless, cryptocurrency and crypto assets are required today because of Maqasid Shariah, maslahah, and qawaid fiqhiyyah. Future research should focus on the usage and practice of cryptocurrency worldwide and its legal application in specific countries.
Keywords: cryptocurrency, currency, investment
References
[1] Jamarudin WN, Markom R. The application of fintech in the operation of Islamic Banking focussing on the Islamic Documentation : Post Covid 19.INSLA E - Proceedings. 2020;3(1):31-43.
[2] Al-Quran, Al-Baqarah, verse 2:278-279.
[3] Khan SN. ‘The legality of cryptocurrency from an Islamic perspective: A research note’ (2023) 14 (2) Journal of Islamic Accounting and Business Research, p 291. https://doi.org/10.1108/JIABR-02-2022-0041.
[4] Luhur Prasetiyo, Unun Roudlotul Janah, ‘Cryptocurrency as money: Islamic Monetary System Perspective’ (2022) 22 (1) Al-Tahrir, p 84-86. https://doi.org/10.21154/altahrir.v22i1.3617.
[5] Blandin A, Cloots SA, Hatim H, Rauchs M, Rasheed S, Allen JG, Bryan Z, Cloud K. Global cryptoasset regulatory landscape study (2019) (23) University of Cambridge Faculty of Law Research, p 15 https://doi.org/10.2139/ssrn.3379219.
[6] Gov. UK, Factsheet: cryptoassets - key terms and definitions, 2023. https://www. gov.uk/government/publications/economic-crime-and-corporate-transparencybill- 2022-factsheets/factsheet-cryptoassets-key-terms-and-definitions#:$\sim$: text=Cryptoasset%3A%20A%20cryptographically%20secured%20digital,%2C% 20stored%2C%20or%20traded%20electronically
[7] National Institute of Standards and Technology. Cryptography, (n.d.). https://www.nist.gov/cryptography
[8] Muedini F. ‘The compatibility of cryptocurrencies and Islamic Finance’ (2018) (10) European Journal of Islamic Finance, p 1. https://doi.org/10.13135/2421-2172/2569.
[9] Nakamoto. S, ‘Bitcoin: A peer-to-peer electronic cash system’ (2008) [White Paper]. https://bitcoin.org/bitcoin.pdf
[10] Luno, ‘What is a ledger? (n.d.). https://discover.luno.com/what-is-a-ledger/
[11] Murugiah. S, ‘Cryptocurrency adoption in Malaysia drops to 15% of internet users — data’, The Edge Malaysia, 24 Aug 2022.https://theedgemalaysia.com/article/cryptocurrency-adoption-malaysia-drops- 15-internet-users-%E2%80%94-data
[12] Trotz ED. ‘The times they are a Changin’1: Surveying how the Howey test applies to various cryptocurrencies’ (2019) 11 The Elon Law Journal, p 213. https://heinonline-org.eresourcesptsl.ukm.remotexs.co/HOL/Page?public=true&handle= hein.journals/elonlr11&div=8&start_page=201&collection=journals&set_as_cursor= 0&men_tab=srchresults
[13] Blandin A, Cloots SA, Hatim H, Rauchs M, Rasheed S, Allen J, Bryan Z, Cloud K. Global cryptoasset regulatory landscape study, p 18.
[14] Jeremiah R. ‘Safeguarding cryptocurrency and digital asset investors in Malaysia’,1 (lxi) Malayan Law Journal. 2022;3-4.
[15] Commodity Futures Trading Regulatory Agency (CoFTRA). Aset Kripto [Crypto Asset], 2020. https://bappebti.go.id/resources/docs/ brosur_leaflet_2001_01_09_o26ulbsq.pdf
[16] Handagama S. ’ Indonesia regulatory switch could see crypto classed as securities, not commodities’, CoinDesk, 26 Jan 2023. https://www.coindesk.com/policy/2023/ 01/25/indonesia-regulatory-switch-could-see-crypto-classed-as-securities-notcommodities/
[17] Hayes A. Stablecoins: Definition, how they work, and types, 2023, Investopedia. https://www.investopedia.com/terms/s/stablecoin.asp
[18] Genç E. Algorithmic Stablecoins: What they are and how they can go terribly wrong, 2023, CoinDesk. https://www.coindesk.com/learn/algorithmic-stablecoinswhat- they-are-and-how-they-can-go-terribly-wrong/
[19] Wooldridge LQ. ‘Fiat money: Currencies that derive their value largely through trust in the governments that issue them’, Insider, 16 July 2022. https://www.businessinsider.com/personal-finance/fiat-money
[20] E-Crypto News, ‘ How many cryptocurrencies have failed in 2023?’, 2023. https://ecryptonews. com/how-many-cryptocurrencies-have-failed-in-2023/
[21] Statista, Bitcoin (BTC) price per day from Apr 2013 - May 21, 2023, 2023, https://www.statista.com/statistics/326707/bitcoin-price-index/
[22] Jerina I, Mohamad Y, Ali B. ‘A study on relationship between crypto currency, commodity and foreign exchange rate’. The Journal of Muamalat and Islamic Finance Research. 2022;19(2):10. https://doi.org/10.33102/jmifr.v19i2.457.
[23] Mahomed Z, Mohamad S, Mania C. the Shariah Verdict, (2017), CIAWM Bulletin, p 35. https://www.inceif.org/archive/wp-content/uploads/2018/04/Crypto-Mania-The- Shariah-Verdicts.pdf
[24] Abu-Bakar M. ‘Shariah analysis of bitcoin, cryptocurrency, and blockchain’, (2017), Blossom Labs, Inc. https://islamicbankers.files.wordpress.com/2019/02/2017-shariahanalysis- of-bitcoin-cryptocurrency-blockchain.pdf
[25] Rani MA, Salleh AD. ‘ Bitcoin: Analisis Mata Wang Maya Menurut Perspektif Siyāsah Shar’iyyah’ [Bitcoin: An Analysis on Virtual Currency from Siyasah Shar’iyyah Perspective] (2019) 4 (1) Journal of Contemporary Islamic Law, hlmn 35. https://myjurnal.mohe.gov.my/filebank/published_article/88584/4.pdf
[26] Jamal AA. ‘Pakar kanan kewangan Islam tidak setuju fatwa berhubung mata wang kripto’, MalaysiaNow, 12 Disember 2021. https://www.malaysianow.com/my/news/2021/12/12/pakar-kanan-kewangan-islamtidak- setuju-fatwa-berhubung-mata-wang-kripto
[27] Filka CW, Fauzul HNA. ‘Inacoin cryptocurrency analysis: An Islamic Law Perspective’ (2019) 2 (2) Journal of Islamic Economic Laws https://doi.org/10.23917/jisel.v2i2.8585.
[28] Filka CW, Fauzul HNA. ‘Inacoin cryptocurrency analysis: An Islamic Law Perspective’ p 169.
[29] Tawfeek F. ‘Egypt’s Dar al-Iftaa deems Bitcoin currency as forbidden in Islam’, Egypt Independent, 1 January 2018. https://egyptindependent.com/egypts-dar-aliftaa- deems-bitcoin-currency-forbidden-islam/
[30] Selçuk M, Kaya S. ‘A critical analysis of cryptocurrencies from an Islamic jurisprudence perspective’ (2021) 8 (1) Turkish Journal of Islamic Economics, p 144. https://www.tujise.org/content/6-issues/15-8-1/a130/tujise-8.1-130.pdf https://doi.org/10.26414/A130.
[31] Azzman AJ. ‘Pakar kanan kewangan Islam tidak setuju fatwa berhubung mata wang kripto’.
[32] Aishath M, Saeed Awadh Bin-Nashwan, Magda Ismail Abdel Moshin, Ismail Mohamed & Abdelrahman Al-Saadi, ‘Zakat payment from cryptocurrencies and crypto assets’ (2023) 16 (3) International Journal of Islamic and Middle Eastern Finance and Management, p 485. https://doi.org/10.1108/IMEFM-12-2021-0487.
[33] Muhammad Abu-Bakar, ‘Shariah Analysis of Bitcoin, Cryptocurrency, and Blockchain’.
[34] Muhammad Amir Husairi Che Rani and Ahmad Dahlan Salleh, ‘ Bitcoin: Analisis Mata Wang Maya Menurut Perspektif Siyāsah Shar’iyyah’ [Bitcoin: An Analysis on Virtual Currency from Siyasah Shar’iyyah Perspective] 4 (1) hlmn 35.
[35] Tarmizi L. ‘ Bayan Linnas Siri Ke-153: Hukum Penggunaan Mata Wang Bitcoin’, Mufti of Federal Territory’s Office, 15 November 2018, https://muftiwp.gov.my/en/perkhidmatan/artikel-soal-jawab/2773-bayan-linnas-153- hukum-penggunaan-mata-wang-bitcoin#_ftn73
[36] Securities Commission Malaysia. ‘Resolutions of the Shariah Advisory Council of the Securities Commission Malaysia’, 31 December 2022, p 187.https://www.sc.com.my/api/documentms/download.ashx?id=eadeb8bb-4c43-418a- 9777-1986bb8bf56c
[37] OneGram. (2018). https://onegram.org/
[38] Issa TM. ‘Islamic Coin: World’s first Sharia compliant cryptocurrency to launch in May, co-founder reveals’, ArabianBusiness.com, 18 April 2023. https://www.arabianbusiness.com/industries/banking-finance/islamic-coin-worldsfirst- sharia-compliant-cryptocurrency-to-launch-in-may-co-founder-reveals
[39] Rusli MF. ‘ Irsyad Usul Al-Feqh Siri Ke- 21 : Undang-Undang Jalan Raya Dan Kaitan Dengan Dalil Maslahah Mursalah’, Mufti of Federal Territory’s Office, 8 Mac 2018, https://muftiwp.gov.my/artikel/irsyad-usul-fiqh/2335-irsyad-usul-al-feqh-siri-ke- 21-undang-undang-jalan-raya-dan-kaitan-dengan-dalil-maslahah-mursalah
[40] Al-Quran, Al-Anbiya, verse 21:107.
[41] Nik SN, Basarud-din SK, Nur SM. ‘Penerimaan Zakat Ke Atas Mata Wang Kripto (Bitcoin) [The Acceptance of Zakat on Cryptocurrency (Bitcoin)]’, (2022), 4 (1) International Journal Of Zakat And Islamic Philanthropy, p 105. http://journal.zakatkedah.com.my/wp-content/uploads/2022/06/Vol.-4-Issue-1- 102-112.pdf
[42] IslamicCoin. (n.d.). https://islamiccoin.net/about
[43] Sanusi MM. ‘The Application of al-Qawācid al-Fiqhiyyah in the Area of Islamic Economics’, (n.d.). http://iaif.ir/images/khareji/articles/other/58.pdf
[44] Al-Quran AB. verse 2:275. Noradilah Abdul Wahab, Wan Mohd Khairul Firdaus Wan Khairuldin & Mohd Sani Ismail, ‘ Fiqh Muamalat Islam: Hukum Dalam Sistem Jual Beli Atas Talian (E-Dagang) Dari Sudut Pandangan Fuqaha [Islamic Muamalat Of Fiqh: Legal System In Selling Online (E-Commerce) From The Fuqaha Islamic View]’ (2019) 2 (1) AL-QIYAM International Social Science and Humanities Journal, p 28. https://al-qiyam.net/index.php/isshj/article/view/36