Dr. Mohamed Ali El Gari and Dr. Mohd Daud Bakar on the Permissibility of Cryptocurrency (2020)

In this panel titled “Crypto Conundrum in Islamic Finance: Digital Assets and Shariah Compliance,” Dr. Mohamed Ali El Gari and  Dr. Mohd Daud Bakar consider the question whether cryptocurrency is permissible from an Islamic legal perspective. Dr. Bakar opines that cryptocurrency is an asset and not considered currency because it does not fulfill three conditions: use as a valid medium of exchange, stable stock value, and known unit of measurement. Although he acknowledges that cryptocurrency is in use as a medium of exchange, the electronic product currently lacks a stable stock value and known unit of measurement. However, he adds that if cryptocurrency comes to be backed by gold or silver, it could be deemed to be a rival to traditional currency and thus be understood as valid currency. Dr. El Gary opines that cryptocuruency can be permissible only if it is possible to establish that that it qualifies as wealth (māl) or as an asset according to the Islamic law (sharī'a). Doing so requires determining the presence of three conditions: the currency must be in use with a societal desire to normalize its usage, its use must be permissible under normal circumstances, and its must have a value assigned to it in habitual and customary practice. Applying these criteria to cryptocurrency, he concludes that it does meet all three conditions and thus determines that, while it is permissible to use because it is fungible, all the rules restricting the use of money under the rules of excessive interest (ribā) must apply. He further notes that one must be cautious in its use due to cryptocurrency’s speculative nature, which could border on gambling, but that this is not sufficient to say that it religiously impermissible (ḥarām) at presence. Collectively, the panel advises that those who are not very knowledgeable on the cryptocurrency and its attendant issues are to avoid it.