The Practical Islamic Finance Podcast

Are all cryptos haram? - A rebuttal of the International Union of Muslim Scholars

December 03, 2022 Rakaan Kayali
The Practical Islamic Finance Podcast
Are all cryptos haram? - A rebuttal of the International Union of Muslim Scholars
Show Notes Transcript

Thanks for watching our video: Are all cryptos haram? - A rebuttal of the International Union of Muslim Scholars

The International Union of Muslim Scholars recently released an opinion that cryptocurrency is haram. 

I've reviewed their opinion and shared in this video why I think they're dead wrong!

None of the arguments cited by the international union of Muslim scholars for the prohibition of cryptocurrencies in Islam can stand the test of critical interrogation. 

I encourage viewers who see a flaw in my reasoning or those who agree to leave a comment.



Our channel is about helping people invest to build wealth in a halal way. We cover topics such as halal crypto investing, halal stock investing, and halal product reviews.

Anything you hear in this video is an opinion. It is not personalized financial advice. Make sure you do your own due diligence before making any investment decisions.

as Salam Malko, the International Union of Muslim Scholars recently released an opinion stating that Bitcoin and cryptocurrencies are prohibited. They give six reasons for their decision, and I'm about to review each of these six reasons and tell you why I think they are dead wrong. First, what did they say? The opinion says it is prohibited to deal with Bitcoin and other unofficial cryptocurrencies in their current condition. Trade them or manufacture. For the following reasons. Now, by unofficial cryptocurrencies, they are referring to cryptocurrencies that are not issued by a government. So in case a government does decide to issue cryptocurrencies in the future, they are in passing judgment on that. It's important to note that there are many cryptocurrencies, thousands of them that meet the definition of unofficial cryptocurrency. The language of this opinion doesn't seem to distinguish between them. It includes all of them regardless of their category, utility payments, security, stable coin, defi, nft, asset backed. All of these cryptocurrencies seem to be included by this opinion. This was the first red flag for me. It makes sense that different utilities of various cryptocurrencies. Different defining characteristics should bring about different opinions on their permissibility. I find this lack of nuance in this recent opinion, quite unbefitting. For a body that claims the lofty name of the international union of Muslim scholars, if I'm going to be even blunter, this lack of nuance is irresponsible. There are a large number of people that care about what this union has to say, so they should choose their words very. Most people who read this opinion think the opinion relates to all cryptocurrencies regardless of their utility. Yet the opinion itself seems to be referring. When you look at the reasoning, it seems to be referring to Bitcoin and Bitcoin like cryptocurrencies that are used to make payments and transfer value. Now we at Practical Islamic Finance will continue to take the time to analyze each individual crypto for what it is based. Its own merits in order to determine our comfort level, investing from a Halal perspective, and you can access our list of reviewed cryptocurrencies for free on practical islamic or using the link in the description. Now, continuing with the text of this opinion, the first reason for prohibition, which they cite says the following, the pillars of currency and the conditions of money are not met according to. Economists and others, and the pillars of money and currencies are to be a means of measurement and a medium between other funds so that the funds are estimated by them and that there is no purpose in their own objects, and that their ratio to other funds is one ratio. There is none of this in Bitcoin and similar digital currencies, and therefore it is not a real currency. Well, let's assume what they are saying regarding Bitcoin and similar cryptos not meeting the required conditions of currency and. Is in fact true for argument's sake. We'll assume this is true. Who said the only things that Muslims are allowed to deal with trade in and manufacture are forms of money or currency? Fruits and vegetables are not forms of money. Services are not money. Oil and gas are not money yet. These are all things that a Muslim is allowed to deal with, trade in and manufacture. So how does claiming cryptocurrencies are not money validate in any. The opinion that they should be prohibited for Muslims to deal with. This would be like when cars first came out, the authors of this opinion coming together and saying, well, we've reviewed the characteristics of cars and have concluded that because cars don't have hearts, tongues, tales, and many other parts, they do not meet the definition of a horse. Therefore, Muslims are not allowed to deal with tradein or manufacture cars. If you say dealing with X is prohibited in Islam because it does not meet the definition of money, you are implying that the only thing Islam allows you to deal with are forms of money. This is a false implication. So the first reason in this opinion can be. Very comfortably tossed out for being completely irrelevant to prohibition. The second reason that they cite is that cryptocurrencies and Bitcoin has none of the functions of money and currencies, the most important of which are being a general medium of exchange, a measure of value, a store of wealth, and a standard for future payments of debts. Bitcoin and other similar digital currencies do not perform. Any of these functions? Well, I have to admit, it's kind of hard to distinguish between the first and second reasons here. They do seem largely redundant. If I'm being generous, I'll say the second reason is saying that not only are cryptocurrency not valid forms of money or currency, but they're also unable to fulfill any of the functions of money and currency. So from this, we're supposed to make the rather acrobatic jump in logic to say, this is a reason why Muslims are not allowed to deal with trade-in or manufac. Sorry, this is not valid reasoning for prohibition in Islam. Valid reasoning for prohibition in Islam is to say a Los says the prophet piece upon him said So and so is har, and this new thing is really similar to that thing. Which we know to be Hi, and therefore this new thing is hi, and there hasn't been any of this so far, so let's keep going because believe it or not, it actually gets worse. The third reason that is mentioned is that cryptocurrencies are not goods because they are meant to be exchanged and not intended for themselves. As our goods, nor are they financial assets. There are not any type of asset in kind assets services or something similar and cannot be considered as shares. Cash holding intrinsic value, a right or a benefit. This argument is basically saying we're trying to fit cryptocurrency. Into a bucket that we're familiar with, and it's not really fitting neatly into any of these buckets. And since it isn't like anything we're familiar with, we're just gonna say it is prohibited. This is the exact opposite of the Islamic approach. This is because an Islam, the default for everything is permissibility, with exception to rituals of worship, of course. Therefore, the proper sequence here is to start with the list of things that are prohibit. In Islam and to see if cryptocurrencies are like any of these prohibited things. And if it isn't and it doesn't have the same impact as any of these prohibited things, then the matter in question is permissible. The opinion fails to say which prohibited category cryptocurrencies fall in. It is completely un-Islamic to say because we aren't able to categorize crypto into something we are familiar with. It is therefore, This is not how prohibition in Islam works, as I've shown it is in fact the opposite of how Prohibition works. Now, putting this erroneous approach aside that claims they made about cryptocurrencies are false, cryptocurrencies are a type of asset. Namely a digital asset. The definition of an asset is something that is either useful or valuable. One can have legitimate arguments about the usefulness of various cryptocurrencies, and indeed, I will submit that many of the cryptocurrencies that are out there today, and perhaps a majority of them, are completely. There is no real usefulness in them. However, I would consider some of them to be quite useful. Consider Bitcoin users using the Bitcoin network can transfer value through the Bitcoin network to anyone on the planet in any amount, at any time, just as easily. As they send a person email, I think that's useful. However, usefulness aside, what you cannot really argue with is the fact that these cryptocurrencies definitely have value, as is evidence by the fact that their prices readily verifiable at any point in time. And often there exists a highly liquid market. For holders to realize this price at any time. This is certainly true for Bitcoin and it's true for many other cryptocurrencies. If you have any doubt that Bitcoin is an asset, just ask yourself, who has the higher net worth all else being equal? Someone with no Bitcoin or someone with 10? Which of the two would you rather be? Of course, the Bitcoin holder. Has a higher net worth and therefore Bitcoin is an asset. That said, as I mentioned, this is in my mind, the less important of the two points I made. The more important point is that their entire approach is backward. Whether or not Bitcoin is like some other category that we're familiar with. Is irrelevant to the question of whether or not it should be prohibited. The relevant question is to ask, is Bitcoin like something that we know is prohibited? That would be a good reason to say it is prohibited, but this question wasn't even asked. What matters is. Whether or not Bitcoin and other cryptos meet the definition of something that has been prohibited by a lost power dialogue or his messenger piece be upon him, and this argument has yet to be made. The fourth reason for the opinions prohibition of Bitcoin and crypto curr is that Bitcoin and similar digital currencies do not represent any real. Nor are they issued by the guarantee of a state that approves them or a central bank that guarantees them and for money. It is a necessary condition that it is guaranteed in value by the one who issues it for centuries. Jus have been aware of the dangers of this deed limiting the right to mint money to the duties of the state and the Salton Iam. Ahed May a law. Mercy on him said it is not appropriate to strike Dhes except with the permission of the Salton. And this was in the book, UL and Ara may aah have mercy on him, said it is disliked for the subjects to strike the Dhes even if they are pure, because it is the matter of the em. Now, as for existence, Bitcoin and digital currencies are just as. And just as existent as any other software. If the website of the International Union of Muslim scholars is real, then Bitcoin and other cryptocurrencies are real as well as for being issued by a guarantor or state. In no instance is this mentioned as a requirement in either of these sources of truth in Islam, which is Lass book or the son of. A profit piece be upon him. Citing what Iam Ahed said more than a thousand years ago is wrong, and it's embarrassing. To be honest, it's wrong because Iam Ahmed lived in a very different time that didn't have the technologies we have today, such as the internet and block. And what is possible today, he may have never even imagined. It is reasonable to suspect that his opinion may have been very different if he had been surrounded by the technologies we have at our disposal today. It's embarrassing because I, ed was not divine. He was not divinely guided, and yet he is being cited more than a thousand years after his. As if his opinion is a proof of something, the fact that we are looking to Imam Ahed or then a thousand years after his death for guidance on a matter as modern as blockchain and cryptocurrency suggests, and I'm gonna be blunt here, intellectual laziness. Rather than coming up with fresh ideas that are appropriate for the context in which we live, we're relying on the opinions of a man who has been dead for more than a thousand years, was not divine or divinely guided and lived in a much different time and context. And I'd like to think that if Iam Ahed was alive today, he would probably agree with me. Most people don't agree with themselves from 10 years ago, so it's more than likely that if Iam Ahmed were alive today, he would not agree with all the opinions he had a thousand years ago. Yet some of us still insist on clinging onto them and citing them as if they were revelation. It's no coincidence that you can trace the decline of the Umma and it's. Stop leadership to around the time. Many of these books that we continuously cite today stopped being written. Finally, the necessity of state backed or state issued or state guaranteed currency has been empirically proven to be false. The only thing that matters for the value of. Is that it maintains the confidence of its users. Whether or not the issued currency is backed by a state will not save its value if it loses the trust of its users. Look at the Lebanese Lara has the full support and backing of the Lebanese government. But the Lebanese people don't trust its value as is evidenced by its price compared to pretty much anything else. And as is evidence by the popularity of Bitcoin in Lebanon, they trust Bitcoin. A lot of Lebanese do trust Bitcoin a lot more than they trust the Lebanese Lara. Look at Zimbabwe. It has the full backing end support of the Zimbabwe government, and yet it is approaching zero almost because the people lost their trust in it. So the source cited for this. Is out of context and more importantly, the claim is empirically false. Next, dealing with Bitcoin and similar digital currencies and their circulation does not achieve any significant benefit for Muslims nor for their countries, neither in industry, in technologies, or in real trade. It's circulation and dealing with it is contrary to the purpose. Of Sharia and money without naming what those purposes are. First of all, you are not allowed to prohibit a technology because you don't see its potential. This is what caused some Muslim scholars to strongly oppose the printing press when it first came out. According to some sources, the prohibition was so serious that at one point it was punishable by death. This prohibition or negative view towards printing presses persisted for near. 300 years, and I think it's reasonable to believe that this prohibition contributed in some way to Muslims falling behind other nations in scientific scholarship. This prohibition was all made possible because it did not rely on anything that a lost pound Dallas says, or the prophet piece be upon him, said rather. A few vocal voices were given too much weight and these voices failed to see the potential of this new technology. We should make sure not to make this same mistake again. Second, the benefits of some cryptocurrencies are already demonstrably real. For example, consider a transaction cost. It's not uncommon for a domestic money wire transfer to cost 25 to$30 at least here in the United States, sending money internationally can be even more expensive. Compare this cost with$16 million worth of do coin being transferred earlier this year for. Less than$1. This reduction in transaction costs is a very real benefit that makes it easier for people to do business with one another globally. Not to mention there is no telling how the benefits of cryptocurrencies evolve in the future. Third, the opinion contradicts itself. And proves that cryptocurrencies are useful when it says later in the opinion that the committee excludes cases of necessity and urgent need from the prohibition of dealing with Bitcoin and digital currencies, such as helping Muslims who are economically or politically besieged in countries or regions. So the committee actually recognizes that Bitcoin and some other cryptocurrencies. Do have real utility and can be used for good. This directly contradicts their statement that they do not achieve any significant benefit for Muslims or their countries. I should also mention that the potential for cryptocurrencies and their utilities is evolving all the time, and therefore making an argument for prohibition based on their utility today is extremely shortsighted. The last reason they give is that dealing. That is Bitcoin and cryptocurrencies and circulating. It leads to great evils and great harm to individuals, society and the state from money laundering operations, drug trade, weapons, trade, transferring a lot of money resulting from criminal operations, and thus contribute to an increase in criminal activities and financial fraud. And. Harmful consequences. The nation and its states must be preserved from it by blocking the pretext to it, which is the prevention of dealing and trading in these currencies. For the HAIs, there should be neither harming or Laura. Nor reciprocating harm, or which was included by Malik in El Malto. Of course, we want to minimize harm in society. Of course, sometimes cryptocurrencies are used for harm. Other things that are sometimes used for harm include the internet, mobile phones, cars. And cash. So are these other things prohibited as well, because sometimes they can be used for harm or is it more accurate to say that it is prohibited to engage in crime and harming others regardless of the technology being used? Is that a more accurate statement? I contest that it is so long as the crime is not inherent to the technology itself, the technology. Should not be prohibited. It should remain permissible. Further, there are more than 20,000 different cryptocurrencies each with different characteristics and different use cases that they're optimized for. So is the opinion suggesting that. All of these cryptocurrencies are used in crime the majority of the time. Some of these cryptocurrencies are meant for file storage, others to connect the blockchain to real world data and others for payments. So is the opinion arguing that all of these cryptocurrencies are used for crime most of the time? If so, the opinion certainly provides no evidence. Depending on the source, one finds wildly varying estimates of how much cryptocurrencies are actually used in crime. According to one article, these estimates vary from 1% to half of all activity, so there's clearly no consensus here. Moreover, according to the European Union Agency for Law Enforcement cooperation, or Euro Poll, crypto may be key to cracking down on crime. Blockchain networks allow investigators to easily follow illicit funds and recover stolen assets converted into crypto. Further Euro poll stated that the money laundering schemes detected are largely characterized by cash movements rather than any form of virtual currency. Although not all use of cash is criminal, all criminals use cash at some stage in the money laundering process while the world is looking with concern at the possible misuse of virtual currencies by criminals. This report may seem somewhat unusual. And that it is not highlighting a new phenomenon or an emerging risk. Money laundering schemes detected by law enforcement are still largely characterized by traditional techniques, in particular the use of cash. So it would appear that cash is more prevalent in crime than cryptocurrencies are. So is cash prohibited? The opinion makes a claim linking crypto and crime and then refers to count them zero sources to back up their claim. Not one source is cited in this opinion to back this claim up. There is no evidence that suggests that crypto is more prevalent in crime. Than cash or traditional currency, and therefore, this reason, again, like the five before, it does not stand the test of critical interrogation. I find none of the reasons cited in this opinion for prohibiting cryptocurrencies. Valid in any way. The opinion ends with the curious position that they are not saying cryptocurrencies are prohibited forever. If their utility changes, so will the opinion. The problem with this is that prohibiting today and waiting to see what happens. Means waiting for non-Muslims to develop the space for Muslims to have no role in developing this technology. It relegates Muslims to the role of consumers and excludes them from having a role in making the technology more beneficial. This consumer role. Is, in my opinion, unbefitting Muslims and we should not accept it. Overall, I find this opinion to lack the type of rigorous scholarship and cogent arguments that I would expect from a body that chose the very. Lofty name of the International Union of Muslim Scholars. We at Practical Islamic Finance will continue to take the time to analyze each individual crypto for what it is based on its own merits. In order to determine our comfort level investing from a Halal perspective, you can access our Halal reports for free on practical islamic We're using the link in the description. This took me a lot of time to put together, so if you don't mind, leave a like and subscribe and share. People that you think may be interested. Until next time, make sure to take care of yourself. Asum and peace be upon you are.