Cryptocurrencies are not Islamic, a new directive tells Indian Muslims

Cryptocurrency has no set rules, and is forbidden in Islam, says a new directive from the All India Muslim Personal Law Board

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Rasheed Kidwai
is an ORF visiting fellow, author and journalist.

After its confrontation with the government over instant triple talaq, polygamy, nikah-e-halala and informal sharia courts, the All India Muslim Personal Law Board (AIMPLB) is now turning assertive. It is taking on bitcoins.

On 29 June, a senior functionary of the AIMPLB Maulana Wali Rahmani issued a statement in Urdu, giving reasons for why bitcoin should be avoided by all the faithful. His directive follows the Reserve Bank of India notice to all the banks in April to stop dealing with individuals and businesses transacting in virtual currencies within the next three months.

Scholars in Muslim countries are divided over the issue of cryptocurrency even as it thrives in countries like the United Arab Emirates that underlines the primacy of Islamic laws in its legal system. The UAE is considered home to a number of cryptocurrency “noobs” – an online term for “newbie” investors who deal with the digital currency.

In January this year, Egypt’s grand mufti issued a fatwa terming the trading of bitcoin as against Islamic sharia. Muslim scholars in Turkey too have stated that bitcoins were incompatible with Islam because their value was “open to speculation” and they could be used in “illegal activities”. Sharia principles, in addition to banning interest payments, emphasise on real economic activity based on physical assets, and frown on speculation.

Bitcoin, like 60 other cryptocurrencies, can be converted to cash when deposited into accounts at prices set in online trading. Beyond the method of payments, it has also emerged as a lucrative investment among speculators.

Rahmani cited a Saudi cleric Shaikh Assim Al Hakeem who had pronounced bitcoin impermissible under the Islamic law because they are “ambiguous” and provide anonymity to criminals. Al Hakeem described it as an open gate for money laundering, drug money and haram (forbidden) money.

Rahmani is AIMPLB’s general secretary and head of Imarat-e-Sharia, Bihar. He is also the founder of Rahmani30, a popular coaching centre for Muslim students seeking entry into AIIMS, IITs and NITs, among other institutions of repute.

He argues that financial currencies must be rooted within the Islamic finance model, such as paper currency, which can be exchanged in equal measure with gold and silver. “Bitcoin has no set rules, which is considered as a contract annulment in Islam. That is why it is forbidden,” Rahmani reasoned.

He also offered a brief history of currency notes and how Johan Palmstruch started his bank, the “Stockholms Banco”, in 1657. Tracing the rise of bitcoins over the years, he says over 10,000 bitcoins were required to purchase two pizzas in 2010, but by 2017, the value of a single bitcoin was over $10,000.

He raises six objections:

  1. No government or banking control over bitcoin
  2. No physical presence of coin or cryptocurrency
  3. Highly volatile, no link between cryptocurrency and physical assets such as gold, silver, metals.
  4. No protection against theft, hacking etc.
  5. Strong possibility of its use in buying drugs, money laundering, terrorism, anti-social activities
  6. No legal avenues such as moving courts and institutions to redress grievances

Privately, many Muslim scholars agree with Rahmani’s concerns, but are also questioning the rationale behind the AIMPLB issuing a directive that is beyond its mandate. The board was registered in 1973 with the objective of protecting Muslim personal law, in civil matters relating to marriage, divorce, inheritance, among others.

Some scholars point to the fact that the AIMPLB had abruptly decided in 1992-93 to become a party in the legal case relating to the demolition of the Babri Masjid. Prior to it, the AIMPLB had nothing to do with the dispute. Its involvement in the case has done more harm than good, they say.

 

The article had published at The Print.

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Rasheed Kidwai
is an ORF visiting fellow, author and journalist.

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