Bitcoin might be considered “the most Islamic form of money ever created,” as highlighted during a conference in Abu Dhabi. The discussion revolved around how Bitcoin aligns with the principles of Sharia law.
Islam permits the exchange of anything regarded as money at its spot value, which includes Bitcoin, according to speakers at the event.
Understanding Bitcoin in the Context of Islam
Critics argue that money must have intrinsic value and be exchanged hand to hand to be halal. This belief is often based on a hadith by Prophet Mohammed, which states:
“Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand.”
Harris Irfan, CEO of Cordoba Capital Markets, clarified this interpretation at the Bitcoin Mena conference. He explained that the hadith emphasizes spot value exchanges, not necessarily the types of money being traded.
Economist Saifedean Ammous echoed this, saying the hadith refers to spot trading—a settlement where both parties agree on the value at the time of exchange.
Fiat Money vs. Bitcoin
Several speakers pointed out that fiat money, the regular currency issued by governments, often involves riba (interest), which is prohibited in Islam. They argued that while fiat money dominates the financial world, its creation inherently involves interest.
Ammous explained:
“Selling the time value of money is forbidden in Islam. Many accept fiat money as necessary, even though it relies on riba for its existence.”
Irfan also addressed the limitations of Islamic banking, noting that it often mimics conventional banking systems. He explained:
“Islamic banking reverse engineers conventional debt systems, creating new money the same way traditional banks do.”
Some scholars consider Bitcoin haram due to its lack of intrinsic value and government backing. However, Irfan countered this, saying:
“Nothing has intrinsic value, it’s subjective. For example, oil once had negative value but is now highly valuable, yet the substance itself hasn’t changed.”
Bitcoin’s Advantages Over Fiat Money
Irfan argued that Bitcoin eliminates ambiguity in ownership, unlike fiat money, which allows double-spending by banks. He also highlighted how Bitcoin is more accessible for sending funds, especially in critical situations.
“The only way I can send money to Gaza for aid is through Bitcoin. Traditional banking systems often block such transfers,” Irfan shared.
While some dismiss Bitcoin as volatile, Irfan claimed fiat money is even more unstable. Issues like restrictions on large withdrawals or international transfers make traditional banking less reliable.
Lessons from History
Ammous compared the skepticism surrounding Bitcoin to initial reactions toward other innovations. He cited examples like the internet and photography, which were initially deemed haram but later widely accepted.
“The Muslim world is missing out on the Bitcoin revolution,” Ammous stated. He emphasized the impact of timing when investing in Bitcoin, pointing out that its value has significantly increased over the past decade.
“Ten years ago, one dollar could buy 100,000 Satoshis. Today, it buys only 1,000. If we continue debating its permissibility for another 10 years, people will miss even more opportunities.”
Bitcoin continues to spark debates about its role in Islamic finance, but many experts see its potential to transform the financial landscape for Muslims worldwide.
