There has been great and bizarre attempts by Muslim authorities in recent times to offer a ruling on bitcoin and crypto currencies in general. For future reference, we shall identify this community as the “bitcoin is haram” fuqaha. After having examined the various rulings, expressions, or commentary by these authorities that have commented, there are several attributes that they all share.
- None of these Bitcoin is haram fuqaha whom the common laity have resorted to ask these questions are scholars of their own right. Most of them being students of knowledge at most, they dont have solid juristic foundations from which to answer properly, even just from within the Islamic standpoint on economics, irrespective of cryptocurrencies. The basis for this lies in point number four below.
- Even among the scholars of them, the next reality that was easily detectable is their lack of knowing through actual research what is the blockchain, the technology behind it, and the mechanics of its operation, how it is actually issued, in whose hands does it actually lie within, concepts of decentralization, mining, proof of work, proof of stake, and other sub categories that make up the entire science of blockchain.
- None of these authorities are experts in Islamic economics specifically, which makes commenting on how to correctly juxtapose the issue of cryptocutrencies into a proper hukm shar’i as severely handicapped to say the least. In this regard, the only five Islamic authorities that are able to correctly assess the proper Islamic ruling on cryptocurrencies. They are shaykh Ustadh Abdu-Shakur, Shaykh Joe Bradford, and shaykh Majid Jarar and shaykh Musa Furber. As with any prerequisite for offering any ruling on Islam regarding new issues, one has to have detailed knowledge of a specific field of the shariah as well as having in-depth research into the novelties that have been developed among the culture. Shaykh Abdu-Shakur and Shaykh Joe Bradford have excelled in the shariah and shaykh Joe Bradford has specifically gained his degree in Islamic economics and is thus more than qualified to offer an Islamic perspective on the Islamic conception of what is currency, monetary matters and policy. Moreover, these two, specifically with shaykh Abdu-Shakur have studied in-depth the nature of cryptocurrencies and the block chain and knows the mechanics and nature of cryptocurrencies thus giving them an advantage of understanding the topic from angles that the bitcoin is haram fuqaha fail miserably in educating their audience with proper analysis. Shaykh Musa Furber is also undertaking extensive research into crypto currencies and has already contributed several writings on the topic and will produce more material.
- The commonalities of these faulty answers that have emerged about cryptocurrencies from the bitcoin is haram fuqaha share a specific point of conception. They all have a western ideological conception of currency in general that does not match the historical narrative of Islam’s actual conception of currency from the standpoint of the Messenger of Allah ﷺ and the companions رضي الله عنهم.
- Another common feature among today’s bitcoin is haram fuqaha is their mythical conceptions of the current monetary systems that do not match the reality of the modern world or even the centralized systems of the past.
- The last of the core features among the “bitcoin is haram” fuqaha is that they are easily prone to conflate two unrelated realities together and perform fallacious qiyas. The objective of this series is to expose this!
It is with our pleasure to present a series of commentaries regarding these various responses in a single platform in order to dispel the mistaken notions developed by our bitcoin is haram fuqaha regarding bitcoin and cryptocurrencies in general.
Part One: Ata Bin Khalil Abu Al-Rashtah
Shaykh Ata bin Khalil begins his commentary on cryptocurrencies with the following
1- Bitcoin is not a currency; it does not fulfill the conditions of a currency because the currency which was accepted and implemented by the #Prophet (saw) was the Gold and silver currency i.e. Dirhams and Dinars. This Islamic currency fulfilled three important conditions.
He then lists why
•It was a basis to evaluate the goods & services, i.e., it was a measure for prices and wages.
•It was issued by a central #authority which undertook the responsibility of issuing the dirhams and the dinars and it was not an unknown body.
•It was widespread and easily accessible among the people and it was not exclusive to a group of people only. Applying the above on the Bitcoin, it is clear that it does not satisfy the three conditions above:
The first error here is in the preamble where he mistakenly claims that there are “Three important conditions”. These conditions are NOT conditions for a currency to be valid and even less so that it be deemed Islamic or halal. We will endeavor to explain this later by the Grace of Allah Subhanahu.
The second error just within this preamble is when he identifies gold and silver as “the Islamic currency”. Firstly, there is no “Islamic currency” that existed. Gold and silver was the currency of the world for eons. When Islam finally was perfected through our Messenger Muhammad ﷺ, Islam did not come to invent an entirely new conception of finance and economics. It brought us sound principles in dealing with others in transactions. For all intents and purposes, the Arabs could have been trading and buying with camel teeth as a means of exchange and considered money by them, backed by nothing but the labor it went into extracting the camel teeth, it would have been perfectly acceptable as per Islam.
As for point one, bitcoin is a way of evaluating goods and services. Unfamiliarity is not the basis to presume the judgment of value of goods and services! Just as gold is a standard to certain markets, so is the US dollar is to many markets, likewise bitcoin is itself its own standard to markets and crypto markets.
The next assumption he makes in point one after claiming a central authority is “necessary” he then says “and not some unknown body”. This is incorrect. The “issuer” of bitcoin is not “some unknown body” that he characterizes but rather it is the known body of “miners”. Miners are those who create bitcoin through a concept known as proof of work! And this body of miners can be “the people”. Anyone can be a miner, including our brother Ata bin Khalil. Thus it is a body of people who create bitcoin NOT by creating imaginary money like the centralized authorities, but through a proof of work architecture in which coins are finite in nature, thus increasing the value over time. This is different than current normative fiat systems of modern governments who purposefully manipulate, inflate, and deflate economies upon the whim of private banking interests which typically runs against the interests and well being of the human populace.
He then claims in point number two that the currency of the Messenger of Allah ﷺ was “issued by a central authority”. Firstly, there was no “central authority” in Islam for this function. The polity of Islam’s ruling authority did not even formulate its own coin until the khilafa of Umar ibnul-Khattab رضي الله عنه. Prior to the khilafa of Umar, the Muslim ummah was a decentralized network utilizing varying forms of medium of exchanges like actual gold, silver, copper, dinars minted by the persian mushrik empire and the romans. Moreover, the libertarian environment of the Muslim polity at the time of the Messenger ﷺ and the companions had a major portion of its economy from the agrerian bartering system which likewise had the attributes of
- No central authority, Decentralized
- No united basis for a single conception of value. Hence why it is a barter system as it was the independant ijtihad of people to determine the value of one commodity from another form of commodity, goods, or services!
Mansour Zarra Nehzad in his “A Brief History of Money in Islam and Estimating the Value of Dirham and Dinar” he notes the following historical fact of the early Muslim period from the Messenger of Allah ﷺ until the time of the khilafa of Abdul-Malik bin Marwan. He says
“During the early Islamic era, the Byzantine dinar, that weighed one mithqal (a unit of weight, equal to about five grams) was the currency used by people in their exchanges. However, though it was the official currency of that time, the state did not have any control over its use by people in their exchanges. This situation lasted until the year of 74″
The bulk of references utilized by Mansour are from Baladhuri, which is an arab history work.
Thirdly, even with the khilafa of Umar رضي الله عنه minting the first coin tokens within the khilafa, the populace not only absorbed the official coin of the khilafa, but likewise largely retained the bartering system as well as other mediums of exchanges. The same happened during the time of Ali رضي الله عنه where Ali minted his own coins issued by the khilafa but gained no use case among the people as a medium of exchange. All of these factors inadvertently proves a couple of matters.
A. That a qualifying currency as being “valid” is NOT dependent on a centralized issuing authority. This is a modern conceptual innovation that has no basis in the shariah and is a by-product of post nation state paradigm and more specifically of the centralized banking systems largely finalized in the early part of the 20th century.
B. That the ultimate and primary basis of how money was used and the forms of exchanges is determined by “the people”.
The last point he claims is that “it was widespread and easily acceptable and not exclusive to a group of people”. This analysis of our brother demonstrate that he for all intents and purposes does not know what he is talking about. Cryptocurrencies (bitcoin, altcoins) are exactly “easily accessible and widespread”. Anyone can get however much they want from anywhere on the planet. In fact, it is much easier to acquire a satoshi (a small portion of bitcoin, similar to how a penny is in the conception of a dollar) for anyone on the planet regardless of race or residence than to acquire the same economic worth of one’s own national currency.
So on all three accounts he offers, the shaykh Ata bin Khalil is grossly mistaken from head to toe.
Another slight point to make here is that while efforts have been employed by the salaf chiefly Umar and Ali رضي الله عنهما to implement our own unique monetary system of the khilafa, mind you AFTER the era of wahy, it wasn’t until the khilafa of Abdul-Malik bin Marwan of the Umawi era that an actual monetary system established by enforcement was adopted in Islam. This contextualizes the claim of there being an “Islamic” currency.
He then continues reiterating the same points in an almost redundant fashion, the following
It is not a basis to evaluate the goods and services; it is only a tool of #exchange of specific goods and services.
It is not issued by a known body, but it is unknown.
It is not widespread and easily accessible among the people and it is exclusive to those who exchange it and recognize its value, i.e. it is not for all the society.
Therefore, the Bitcoin currency is not considered as a currency in the Islamic Shariah
There is no need to rehash in detail what was already established above. For the sake of brevity, a brief response to these, based on the material above shall be added with other analysis not covered from the above
- it IS a basis of a store of value. Its volatility does not negate this characteristic, it just denotes added volatility. Volatility affects medium of exchange issues more so than its store of value use case.
- it IS issued by a body. They are people and they “mine” the coins similar to miners digging up gold in an old fashion form of “proof of work”. It is not “unknown” like the shaykh mistakenly claims. Moreover, even if we were to entertain that his mistake was actually the truth, even if for arguments sake it was unknown, what qa’ida of Islam, what asl in usulul-fiqh requires that in order for money to be acceptable is that it has to be issued by “a known body” when in reality, the dirhams and dinar used in the time of the Messenger, were NOT in the sphere of any authority. No authority issued them and their initial adaption is largely unknown. Nobody knows who brought up dirhams and dinars except that linguistically, they were derived from the drachma and denarius of Roman and Sasanid empires.
- it IS widespread and absurdly easily accessible to anyone on earth. How he concludes its not easily accessible is shocking but a considerable blunder that could happen if one does not know what they are talking about.
- the last point deserves an entire work unto itself. He says “bitcoin currency is not considered as a currency in the Islamic shariah” as if implying that the Shariah itself has a definitive guide in determining the validity of any currency. Where the shariah remains silent, he concludes conditions for it which are absent from the Qur’an, Sunnah, and the interpreted law of the early jurists. His claim contradicts the very life process of economics during the time of the Messenger ﷺ and the companions.
He continues on with his commentary saying
2- Hence, Bitcoin is no more than a product; however, this product is issued by an unknown source; it has no backing. In addition to this, it is a big domain for fraud, deception, speculation and cheating, and therefore, it is not allowed to trade in it i.e., it is not permitted to buy or sell them. Especially because of its unknown source, this casts doubt that the source is linked to major capitalist countries, especially America, or gang associated with a major country with malicious purpose, or major international companies for gambling, drug trafficking, money laundering and organized #crime_management. Why else is the source unknown?
Shaykh Ata bin Khalil has a conception of the current prevalent monetary systems that does not match even reality today. He says “it” meaning bitcoin “has no backing”. Does shaykh Ata not realize there is no currency in existence in any country that has no backing? All monetary systems are “fiat” systems based on “debt” and not based on “value” or resources.
Unlike the fiat systems the current bitcoin is haram fuqaha are blindly defending to the detriment of the people and the Muslim masses, cryptocurrencies like bitcoin (and other altcoins) value are determined by a number of factors
•Limited Supply and supply/demand.
•Energy put in in the form of electricity to secure the blockchain.
•Blockchain difficulty level.
•The utility of the currency, and how easy it is to use and store.
•Perceptions on its value by the public.
•Price of Bitcoin.
•Confidence in traditional systems.
All of these matters play role in the value and ultimately driving the backing of the digital currency. But even before all of that, the primary role that is the basis of all points is “public perceptions of value”. If the public (people) ultimately see and hold value to a thing, it will be used as a medium of exchange, will have a store of value, and a unit of account, the three main properties for the validity of honest economics.
Shaykh Ata continues
The conclusion is that Bitcoin is only a product issued by an unknown (majhool) source which has no real backing, and therefore, is open to speculation and fraud, and it is an opportunity for the colonialist capitalist countries, especially America, to exploit such things so as to plunder the resources of the people.
A majhul is not a condition of adding tawthiq (validity) to a currency. This is not hadith sciences where t’arif of a narrator’s state is a necessary condition to accept a riwaya. This is a natural science, economics. It does not matter if unknown invisible aliens came and brought us a precious jewels from their home world which we know nothing about or where it is, if it holds value to the people, then it will gain critical mass and will be used as money if public perception finds value in it.
Shaykh Ata then claims an astounding claim. He says “it is open to speculation and fraud”! From which planet have we been living under for the past 5 centuries???? Did we somehow have an existence of jannah here on earth and once cryptocurrencies came, then all of a sudden “speculation and fraud” were born?? This is a common example of fallacious qiyas.
Firstly, scams and speculation were not born out of crypto markets, they were born out of fiat systems of centralized authorities that the bitcoin is haram fuqaha are absurdly defending. One of the primary reasons why bitcoin came into existence was to reduce this corruption of frauds/scams that people were subjected to in the traditional fiat systems.
Secondly, most importantly, the existence of scams, fraud, or black market activity does not place a hukm shar’i of tahrim on a tool especially if the negative dwarfs in comparison to the monumental normative good. Scams and fraudulent activity control the fiat centralized systems Ata are defending, yet its Islamic ruling is based on “ibaha”. The utility of money is not negated simply because criminals perform criminal activity. If Islam was implemented in this fashion, then we would have to place tahrim on all currencies because not only are scams and frauds prevalent in fiat systems, the fiat system itself is a giant fraud of inventing money out of nothing. Creating money out of nothing is the biggest scam of all and it is not validated simply because “a central authority allows it”. Yet with all of that said, money retains its ibaha (permissibility) status because the astronomical use case it holds for humanity. Nobody in their right mind says “money is haram because of all the scams, frauds, and speculation it contains”. If someone were to say this, everyone would conceive of them as a lunatic. Well, this is exactly how the bitcoin is haram fuqaha look and sound when they use as a reason such as “because scams takes place” as if the existence of scams invalidates the use case of an entire currency!
Shaykh Ata continues with the following
This is the reason why it is not allowed to purchase it due to the Shariah evidence that prohibit the sale and purchase of any unknown ‘majhool’ product, and the evidence for this is:
Narrated by Muslim in his Sahih from Abu Huraira that he said:
«نَهَى رَسُولُ اللهِ صلى الله عليه وسلم عَنْ بَيْعِ الْحَصَاةِ، وَعَنْ بَيْعِ الْغَرَرِ»
“The Messenger of Allah (ﷺ) forbade Gharar transactions and Hasah transactions.”
It is also narrated by Tirmidhi from Abu Huraira…
And the meaning of “Hasah sale” is when the seller of clothes says to the buyer: ‘” I will sell you whatever the pebble I toss falls on” or “I will sell you the land that the pebbles I toss fall on”. So, what is being sold is not known, and this is forbidden.
“Transaction of Gharar” which is uncertain; it may happen or not, such as selling fish in the water or milk that is not being milked from the udder, or selling what is carried by a pregnant (animal) and so on; it is #forbidden because it is Gharar.
Thus, it is clear that Gharar transaction or the uncertain, which is the reality of Bitcoin, which is a product from an unknown source and is produced by an unofficial body that can guarantee it, it is not permissible to buy or sell it). End of quote.
Ata Bin Khalil Abu Al-Rashtah
30 Rabi’ Al-Awwal 1439 AH
To end this, this entire quote here basically does one thing. All shaykh Ata has done here was to conflate an entire cryptocurrency into a ghirari transaction and hasah transactions.
What further proof does one need in order to realize that the current bitcoin is haram fuqaha have absolutely no idea what they are talking about. This is also one of the fallacious forms of qiyas identified above.
The shariah prohibits “gharar” transactions. Gharar takes place in the realm of “transactions”. It is not a “currency” nor does it take place in a currency in and of itself. Currencies CANNOT be gharar. Only TRANSACTIONS can be ghirari by nature.
Likewise he likens an entire cryptocurrency to a hasah transaction. Unlike cryptocurrencies, a hasah transaction is a transaction in which the end result of a commodity being bought and sold is unknown as was given in the hadith he quotes from sunan at-Tirmidi. Contrary to that, is cryptocurrencies where you know exactly how much you want and how much you’re going to buy it for. Likewise, this transaction is clear and in a public ledger that is irrevocable, virtually unhackable, and indisputable.
The logic does not flow, as the two are completely disconnected realities, one never converging with the other. Hasah and gharar occurs in transactions. A currency (of any kind) is intrinsically removed from the realm of gharar and hasah because these occur IN TRANSACTIONS, not a currency.
Moreover, in cryptocurrencies, we have a mechanism to end ghirar. Its called smart contracts and is a method based on the ethereum blockchain. Ethereum is a cryptocurrency based on a proof of work and transitioning into a proof of stake concept in which the transactions takes place as a “smart contract” which is a programable (programming language) statement embedded into a transaction. This is a complete antithesis to gharar for gharar relies on deception and smart contracts relies on clearly defined “if then, if else” commands and statements that outline the sound nature of a transaction. This can only be done on the blockchain technology that is cryptocurrencies.
Before cryptocurrencies, this reality was unheard of. Now it is possible to almost annihilate “gharar” transactions with special thanks to cryptography on the blockchain that centralized fiat money, gold and silver were intrinsically incapable of preventing.
One final point to add to add before finalizing my thoughts is his claim of “issuance of unknown origins”. This claim, is predicated on a faulty belief, a belief that a good portion of even the non-Muslim world has learned through research is in fact patently false. Muslims have failed to properly catch up to modern realities. It is a common folklore that “governments” issue currency. This fairy tale couldn’t be further from the truth. Its a common theme among private banking families and their associates to attach a form of officialness to the system they have in fact imposed on the global populace. The reality is the central banks of pretty much every country on the globe, which has been commonly identified as “the central banking system” is a PRIVATE network of individuals that are beyond the reach of government and whose reality for most of them are “majhul”. We only know some of the popular (well known) family banking dynasties whether it be the Desmarais family of Canada, Solaro, the dynasties that emerge from Florence like Salviati, Scali, Strozzi, as well as Smith and House of Rothschild in Britain and Germany, Oppenheim of Germany, as well as prominent dynasties of the American side like the Rockefellers, Goldman Sachs (yes, for those of you who dont know, Goldman Sachs is actually a banking family and the bank you typically conceive of, is owned by them), Warburgs. There are many more of them within the Anglo-European elite and there are likewise the same oligarchical structures set up of banking families in China, Japan, India, and South America. Shaykh Ata claims “it was not exclusive to a group of people only” in the beginning of this article yet the fiat systems of these centralized authorities is a direct confirmation of existing systems being just that, “exclusive to a group of people only”. These private banks control the market fluctuations that effectively crash or build economies.
Contrary to popular belief, people think that governments control their economic system and policies and nothing could be further from the truth. Private banking interests dictate to governments the policies that are to be enacted.
The current bitcoin is haram fuqaha community have a faulty conception that believes that governing authorities are the primary source of the issuance of currency. The American governement, for example, lost its right to mint its own currency when it signed away its autonomy and power to manage the economy with the Federal Reserve Act of 1913.
As the reader can see, the more illogically deduced conceptions of economics passed off as “reasoning” and “scholarly view” (which is largely unresearched as is clearly visible here) that the bitcoin is haram fuqaha continue to offer commentary on, the more they resemble the scholars of old who outlawed coffee and who outlawed radio on the basis that “it was magic”. Obviously those scholars had not even a shred of a clue of what on earth they were talking about and likewise the bitcoin is haram fuqaha match the same mindset fueled by ignorance and a lack of proper and thorough research into what they are trying to judge!!