Articoli

The Compatibility of Cryptocurrencies and Islamic Finance


Abstract


In this article, I shall examine the compatibility of Bitcoin and other cryptocurrencies within the context of Islamic law. I shall begin by an introduction of Bitcoin and other cryptocurrencies. I will then discuss the history of money in Islamic history, with an emphasis on the importance ethical financial dealings. I will then argue that Bitcoin and other cryptocurrencies are highly compatible within Islamic finance, and in many cases, actually provide solutions to problems of government institution controlled currencies, arguing that Bitcoin and other cryptocurrencies better address several problems that early Islamic finance scholars were concerned with. Unlike traditional fiat, the supply of Bitcoin and many other digital currencies are fixed, thereby eliminating potential for gharar (deception), and also inflation. In addition, unlike fiat and precious metal coins, digital currencies cannot be altered, forged, or manipulated. Moreover, cryptocurrencies’ peer-to-peer transactions remove the need for any banking institution, thereby eliminating any risk with a third party controlling one’s money. I shall then conclude with a summary of the main points of the article, and examine future possibilities with regards to the role of digital and cryptocurrencies.


Keywords

Bitcoin; Cryptocurrencies; Islam; Shariah; Islamic Finance; Islamic Banking

Full Text:

PDF


DOI: http://dx.doi.org/10.13135/2421-2172/2569

References


References

Adam, M. F. (2017). Bitcoin: Shariah Compliant? Amanah Finance Consultancy, pages 1-54. Available Online: http://darulfiqh.com/wp-content/uploads/2017/08/Research-Paper-on-Bitcoin-Mufti-Faraz-Adam.pdf

Ahmed, Z. (1989). Currency Notes and Loan Indexation. Islamic Studies, Vol. 28, No. 1, pages 39-53.

Aitken, R. (2017). OneGram & Dubai Trading Platform In $500M ‘Gold-Backed’ Cryptocurrency Venture. Forbes. May 2nd, 2017. Available Online: https://www.forbes.com/sites/rogeraitken/2017/05/02/dubai-trading-platform-onegram-in-500m-gold-backed-crypto-venture-sharia-compliant/#7c5849f7bf56

Anwar, M. & Haque, Z. (1993). Strategies to Settle Existing Debts under an Islamised Banking System [with Comments]. The Pakistan Development Review, Vol. 32, No. 4, Papers and Proceedings PART II, pages 961-971.

Antonopoulos, A. (2016). The Internet of Money. Merkle Bloom LLC.

Antonopoulos, A. (2017a). Bitcoin Q&A: Energy Consumption. Bitcoin Open Blockchain Community Event. October 29th, 2017. Available Online: https://www.youtube.com/watch?v=2T0OUIW89II&t=2s

Antonopoulos, A. (2017b). Worse Than Useless. The Baltic Honeybadger 2017 Bitcoin Conference. Available Online: https://www.youtube.com/watch?v=cO2UOhGEC_A

Bank of England. (2014). 2014 Q1. Quarterly Bulletin, 54(1).

Bergstra, J. A. (2015). Bitcoin and Islamic Finance. Semantics Scholar. January 1, 2015. SemanticsScholar.org, pages 1-19. Available Online: https://pdfs.semanticscholar.org/3a7d/7f35440191f1217d7b4f49f50079c4e9708e.pdf

Blossom Financial (2017). Blossom Financial. Available Online: https://blossomfinance.com/#/

Bradbury, D. (2017). Is Bitcoin the Answer in a Financial Crisis. The Balance. October 30, 2017. Available Online: https://www.thebalance.com/is-bitcoin-the-answer-in-a-financial-crisis-391275

Chapra, M.U. (1996). Monetary Policy in an Islamic Economy, pages 27-46. In Money and Banking in Islam. Ziauddin Ahmed, Munawar Iqbal, & M. Fahim Khan (eds.). Institute of Policy Studies, Islamabad, Pakistan. Available Online: http://www.isdb.org/irj/go/km/docs/documents/IDBDevelopments/Internet/English/IRTI/CM/downloads/Distance_Learning_Files/Monetary%20Policy%20-%20Umer%20Chapra's%201980%20Paper%20(published%20in%201983)(Dr.%20Tahir).pdf

Choudhury, M.A. (2014). Money in Islam: A Study in Islamic Political Economy. London, England. Routledge Press.

Das, S. (2017). OneGram Launches $500 Million ICO for Sharia-Compliant Gold-Backed Digital Currency. Crypto Coins News. 29 May, 2017. Available Online: https://www.cryptocoinsnews.com/onegram-launches-500-million-ico-sharia-compliant-gold-backed-digital-currency/

Dhaliwal, S. (2017). Is Bitcoin Halal? How Cryptocurrency Conforms with Shariah. Coin

Evans, C.W. (2015). Bitcoin in Islamic Banking and Finance. Journal of Islamic Banking and Finance, Vol. 3, No. 1, pages 1-11.

Geiger, P. (2017). Get into Bitcoin before the next financial crisis. Medium. September 11, 2017. Available Online: https://medium.com/@philgeiger/get-into-bitcoin-before-the-next-financial-crisis-f0707e2d56c1

Holthaus, E. (2017). Bitcoin is ruining the planet. Grist, in Business Insider. December 6, 2017. Available Online: http://www.businessinsider.com/bitcoin-is-ruining-the-planet-2017-12

Investopedia (2017). Fractional Reserve Banking. Available Online: https://www.investopedia.com/terms/f/fractionalreservebanking.asp

Jenkinson, G. (2017). Keiser-Bitcoin like ‘Moses’ for Gold. Coin Telegraph. December 5, 2017. Available Online: https://cointelegraph.com/news/keiser-bitcoin-like-moses-for-gold

Kshetri, N. (2017). Can blockchain technology help poor people around the world? The Conversation. April 30, 2017. Available Online: https://theconversation.com/can-blockchain-technology-help-poor-people-around-the-world-76059

Maierbrugger, A. (2017). Shariah-compliant, gold-backed digi-coins could change Islamic Finance. Gulf-Times. June 27, 2017. Available Online: http://www.gulf-times.com/story/554731/Shariah-compliant-gold-backed-digi-coins-could-cha

Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Available Online: https://bitcoin.org/bitcoin.pdf

Nakamoto, S. (2009). Bitcoin open source implementation of P2P currency. P2P Foundation. 2009-02-11. Available Online: http://satoshi.nakamotoinstitute.org/posts/p2pfoundation/1/

New Yorker (2013). The Bitcoin Boom. The New Yorker. April 1st, 2013. Available Online: https://www.newyorker.com/tech/elements/the-bitcoin-boom

Popper, N. (2016). Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money. New York, New York. HarperCollins.

Redman, J. (2015). Bitcoin Brings ‘100% Mathematical Certainty’ to Comply With Islamic Law. Coin Telegraph. June 25, 2015. Available Online: https://cointelegraph.com/news/bitcoin-brings-100-mathematical-certainty-to-comply-with-islamic-law

Redman, J. (2017). When It Comes to Scarcity and Anti-Counterfeiting Bitcoin Actually Outshines Gold. Bitcoin.com. April 11, 2017. Available Online: https://news.bitcoin.com/scarcity-anti-counterfeiting-bitcoin-outshines-gold/

Rosic, A. (2016). Ethereum Vs. Bitcoin: What’s The Main Difference? Huffington Post. December 20, 2016. Available Online: https://www.huffingtonpost.com/ameer-rosic-/ethereum-vs-bitcoin-whats_b_13735404.html

Shah, N. (2006). Women’s Human Rights in the Koran: An Interpretive Approach. Human Rights Quarterly, Vol. 28, pages 868-903.

Siegfried, N.A. (2001). Concepts of Paper Money in Islamic Legal Thought. Arab Law Quarterly, Vol. 16, No. 4, pages 319-332.

Tar, A. (2017). Digital Currencies vs. Cryptocurrencies, Explained. Coin Telegraph. December 13, 2017. Available Online: https://cointelegraph.com/explained/digital-currencies-vs-cryptocurrencies-explained

Thompson, D. (2017). What On Earth Is Going On With Bitcoin? The Atlantic. November 30, 2017. Available Online: https://www.theatlantic.com/business/archive/2017/11/bitcoin-delusion-conquer-world/547187/

Wells, N. (2015). Can you find the forgery? CNBC. 3 September 2015. Available Online: https://www.cnbc.com/2015/09/02/can-you-find-the-forgery.html

Wilber, D.Q. (2016). Fantastic Fakes: Bustin a $70 Million Counterfeiting Ring. Bloomberg Businessweek. April 27, 2016. Available Online: https://www.bloomberg.com/features/2016-counterfeit-money/

Worstall, T. (2016). The Problem With Fiat Money – Fake Coins and the Problem of Counterfeits. Forbes. December 28, 2016. Available Online: https://www.forbes.com/sites/timworstall/2016/12/28/the-problem-with-fiat-money-fake-10-rs-coins-and-the-problem-of-counterfeits/#59a3257e4d48

Zeveloff, J. (2012). The Real Price of Counterfeit Money. Business Insider. April 18, 2012. Available Online: http://www.businessinsider.com/the-real-price-of-counterfeit-money-infographic-2012-4

Zhao, W. (2018). Egypt’s Religious Leader: Crypto Trading Forbidden Under Islamic Law. CoinDesk. January 2nd, 2018. Available Online: https://www.coindesk.com/egypts-religion-leader-crypto-trading-forbidden-by-islamic-law/


Article Metrics

Metrics Loading ...

Metrics powered by PLOS ALM

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

EJIF - European Journal of Islamic Finance has been approved for inclusion in ERIH PLUS and in DOAJ 


Indexed by
EBSCO Discovery Service e Arab World Research Source: Al Masdar


European Research Centre for Islamic Finance www.ercif.org 

Registrazione Tribunale di Torino n.: 29
data registrazione: 21.10.2014
ISSN 2421-2172
Direttore responsabile: Paolo Biancone

Università degli Studi di Torino

___________

Licenza Creative Commons

EJIF content is licensed under a Creative Commons Attribution 4.0 International License.