Is Bitcoin Halal Series: Currency - Is Bitcoin classified as money according to the sharia?
Audio length 26 minutes and 20 seconds.
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Articles to Review
These Are the Top Countries Where Bitcoin Is Legal & Illegal by Palwasha Saaim
The Concept of Money in Islamic Economics by Mudhakkir Abdul
Well, this blog post, in this series for that matter is an update to that. Now that I have finished my first round of studies with Islamic Finance, I wanted to share with you what I have learned with the hopes that it will be a benefit to all of us. Now, you know, keep in mind that as we go to this series keep in mind that this is not meant to be a fatwa (scholarly opinion from an Islamic scholar or Islamic body of scholars) series. I’m not here giving a fatwa. I’m not a big-time mufti (a Muslim legal expert who is empowered to give rulings on religious matters). I’m not some big-time sheikh (scholar), right? I am simply a student of knowledge sharing with you information that I have learned from my teacher and other scholars that I have taken knowledge from, again, with the hopes that we all find benefit from it.We'll fill in the text later
Also, another thing I would like to add is, you know, in Islamic Sciences when we study a particular topic, we know that there are always differences of opinion, right? So it maybe that what I study from my teacher or some of these scholars I’ve taken knowledge from, it might be that, you know, they say one thing but you look at another scholar and they have a difference of opinion. And alhamdulillah, it’s all good. This is the nature of things within the Islamic Sciences so nothing wrong with that. I just wanted to put that out there to make sure that we’re all on the same page moving forward.
So, with this, first blog post, right? We’re going to take a look at currency. Now, why currency? The reason why we’re going to look at currency first is because this will lay the foundation for us as we move further into the Is Bitcoin Halal Series, right? So we’re going to look at things at Bitcoin mining, trade, investing and at the heart of it, at the foundation of it is money. So that’s why we’re going to talk about it first.
Now, when people think of Bitcoin, what do they think of? They think of money, right? They either think of spending Bitcoin as money. They think of trading Bitcoin to make money or again investing in Bitcoin at the end, to do what? To make money. So money is the reason why a lot of people are really interested in Bitcoin. So, this first blog post, we’re going to look at currency and money and what Islam has to say about money and then take a look at how it all relates to Bitcoin. See… or rather see, how Bitcoin relates to the sharia.
Now, with that being said, when it comes to currency, there are three questions that we’re going to cover today. Three questions that people normally ask when it comes to money as it relates to the sharia. I’m going to highlight those questions, right? I’m going to highlight those questions. We’re going to look at it, explore it to some degree, and at the end of this blog post, at the end of this video here, we’re going to wrap things up and see how this will help us move forward when it comes to understanding Bitcoin as it relates to the sharia. Our hope is to now start delving in a little bit deeper in understanding this new technology as it relates to sharia.
So, without further ado, as they say, let’s take a look at the first question right now. Let me pull up my notes as we hop in to the first question. Here we go, all right. So let’s take a look at the first question, right now.
How does the sharia define what is a currency and if that currency is permissible to use?
OK, so let’s take a look at the first question here, again, going back to my notes. The first question being, “How does the sharia define what is a currency and if that currency is permissible to use?
Well, it’s really easy. The fuqaha (body of scholars) define money as the following- They say money is a means. Money is a means used to purchase an object of sale. Again, money is simply a means used to purchase an object of sale. How do they define currency? Again, really simple, they say currency… currency is what is commonly used amongst the people to purchase an object of sale.
So now we have to look at Bitcoin and we have to ask our self to follow a question. When we look across the world, is Bitcoin commonly being used, is it commonly being used by the people to purchase an object of sale? And the answer is yes. Yes, it is. We can clearly see that Bitcoin is being used to purchase things like airline tickets. It’s being used to purchase coffee. It’s being used to purchase pizza. Some people even get paid their salary in Bitcoin and depending on what country you live in, people are even paying their bills in Bitcoin. So we can see that, yes, people across the world are using Bitcoin to purchase an object of sale.
Now, somebody might say, well, that’s great. That’s great Andre but what I want to know is when is currency or money haram? How does the fuqaha define money that is haram? How do they view haram currency or haram money? Well, it’s really easy. The fuqaha, what they do is they take a look at the object, right? They take a look at the object that is being used for money, that is being used for currency. Now, let’s just say in your marketplace where you live, people are using a bottle of wine, alcohol, khamr (literally means covering. Commonly referred to as wine or intoxicants), khamr meaning alcohol, right? If where you live people are using a bottle of wine, the fuqaha would say that this is haram. It’s haram. You cannot use a bottle of wine as currency. So what does this mean for Bitcoin? Bitcoin is clearly not a bottle of wine.
But what is Bitcoin exactly? Bitcoin is nothing more than digital characters. Bitcoin is nothing more than digital characters and digital characters in and of itself is not haram. We can’t say that digital characters is haram, right? So right now, again, we’re seeing that Bitcoin seems to be falling in line with the sharia and the fuqaha defined as being money. But wait, let’s not jump to conclusions just yet. There was one other aspect that we need to explore in order to see where Bitcoin falls into this whole definition of money as it relates to the sharia.
Now, remember I said that the fuqaha said that when it comes to currency, they say that currency is what is commonly used amongst the people in order to purchase an object of sale. Now, the fuqaha, when they say people, they define people as, government. They define people as government. So not like you and me, right? So you and I, we just can’t walk up into the marketplace and say, “Hey everybody! Today we’re going to use marbles and rocks. Marbles and rocks is currency. This is what we’re going to use today and let’s just call that, let’s call it a day.” The fuqaha will say “Hey, slow your roll, right? Pull back on those horses young man. That’s not what we mean here when we say people. We’re not talking about you. We are talking about the government.”
So the next question that we have to ask our self is the following. Is Bitcoin used across governments worldwide as money? Meaning is it legal in governments across the world to use Bitcoin? The answer is yes and no. Yes and no. So if you live in countries like the United States, Canada, UK, Germany and some other countries, then yes, it’s legal to use Bitcoin. But if you live in some other countries, there are some other countries where it is not legal to use Bitcoin.
Now, what I’m going to do is I’m going to share with you an article. I’m going to post it in this blog post, an article that I want you to take a look at. It is written by a Muslim sister. It’s a wonderful article (These Are the Top Countries Where Bitcoin Is Legal and Illegal) and I highly suggest that you check it out. This article- she highlights the countries where it is legal to use Bitcoin and illegal, meaning you cannot use Bitcoin in these countries. She has written a wonderful article on this and I highly suggest that you take a look at it. I mean it would help you begin to see where you live, right, where you live if Bitcoin is legal or illegal to use. All right?
But what is Bitcoin exactly? Bitcoin is nothing more than digital characters. Bitcoin is nothing more than digital characters and digital characters in and of itself is not haram.
Does the sharia require that currency needs to be backed by a commodity such as gold, silver, oil, etc.?
All right so question number two that people normally ask is, “Does the sharia require that currency needs to be backed by a commodity such as gold, silver, oil, etcetera in order for it to be permissible, right, in order for it to be permissible to use?” The simple answer is, no. No, it does not. Now, this is something that I find fascinating because you read– I saw– I’ve seen articles out there where people sincerely and do believe that money has to be backed by a commodity. “It’s got to be backed by gold, brother. It’s got to be backed by gold. If it’s not, it’s not considered legitimate. It’s considered haram.”
Well, according to my teacher who I’ve studied with and other scholars who I’ve taken knowledge from, they said this is actually not the case. Money doesn’t need to be backed by gold, silver or any commodity whatsoever. Money is simply an object. It’s simply a means used to purchase an object of sale. It doesn’t need to have any intrinsic value. It doesn’t need to be backed by anything, right?
There’s a really good article and again, I’m going to include this in the blog post it’s called, The Concept of Money in Islamic Finance, (correction: The Concept of Money in Islamic Economics) written by a brother and I do highly suggest that you check it out. But you know short answer is does money need to be backed by any commodities such as gold and silver and the like? The answer is no. Is Bitcoin backed by anything? No, but it doesn’t need to be so we don’t necessarily need to factor that in when we are looking at Bitcoin and other digital currencies like it, looking at it to see if it qualifies as money according to the sharia. So again, simple answer is, no, it does not need to be backed by any commodity whatsoever.
Now let’s take a look at the third question because there’s still yet another question that comes up where people are like well… well, what about this question? What about this? Right? So let’s take a look at our third and final question right now.
Does the fuqaha place importance on how currency is produced in order to determine whether it is permissible or not?
All right. So our third and final question that we’re going to look at in this first blog post is the following- Does the fuqaha place importance on how the currency is produced in order to determine whether it is permissible or not? Meaning, does the fuqaha look at whether the money comes off of a printing press, or do they look to see whether the money was created by physical labor or do they look to see if the currency or the money was produced by a computer? Do they look at all of these factors to determine whether it is permissible or not? And the answer is, no. According to who, again, my teacher who I have taken my knowledge from, the answer is, no. Again, they simply look at the object.
So take for instance, this right here. What is this? This right here is a US bank note. It is a $10 United States bank note. And what is this? This is simply a piece of cotton paper. That’s all it is. It’s cotton paper. Cotton paper in and of itself is not haram. It’s not haram, right? This piece of paper has numbers on it. It’s the color green. It has a face on it. It has some writing on it. But in and of itself, all it is- it’s a piece of paper, cotton paper. And this in and of itself is not haram. It’s not haram, right? So what does this mean for Bitcoin? Remember, we talked about this already. What is Bitcoin? We said earlier that Bitcoin is nothing more than digital characters. Digital characters in and of itself is not haram, right?
So, when we take a look at these three questions, you know, this now is allowing us to see how Bitcoin falls into the definition of money according to the sharia. So let’s do a quick wrap up to put it all together, OK? Let’s do that right now.
All right, so someone is going to watch this and say, “All right, brother, I heard everything you just said so wrap it up for me. What does this all mean? Can I use it? Can’t I use it? What’s going on man? I just want to know, can I use it or not?”
All right, so as a wrap up, we understand that Bitcoin so far is being used as money. So we said in this blog post that Bitcoin is currently being used worldwide to purchase an object of sale which so far checks off one box in regards to permissibility in Islam. The second thing is we do know that some governments permit it to be used but some governments do not, right? So some governments, yes, other governments, no. All right? Third thing is we understand that Bitcoin does not need to be backed by any commodity in order for it to be legitimate.
And we also talked about saying that the fuqaha they do not look to see how the currency itself is being produced in order to determine whether the object that’s being used or that currency is haram or not, right? So generally speaking, we can say that Bitcoin is neatly falling into the package, right? Or falling in harmony into what we can consider money as defined by the sharia. But what did the fuqaha say about this? What did the fuqaha say? Because even though we can see this, we need to, we need to hear from our shuyukh (religious scholars), we need to hear from the fuqaha to see what is their take on this.
Believe it or not, even though we can see that Bitcoin, again, does fall in line, in harmony with you know, with what the sharia defines as being money, the fuqaha, across the board, I have not seen, I have not seen a consensus or a decision across the board where the fuqaha actually classify and define Bitcoin as money. So as it stands right now, the fuqaha have not classified Bitcoin as money. And if you find somewhere where there’s either one scholar or a shura (a consultative council), right? A council of scholars that classify Bitcoin as money, please let me know because I haven’t seen that. And what does that mean? Some people might be scratching their head and say, “Wait a minute. You just said that it does XY and Z. People spend it, it doesn’t need to backed by gold, you know some governments find it permissible to use, you don’t need to worry about how it was produced, they’re not looking at that. You just said all these things brother, so what do you mean that the fuqaha they don’t classify it as money? Why not?”
Well, here are some of the reasons why. Let’s talk about that right now. First and foremost, let me take a look at my notes again. OK, first and foremost, the reason why, again, goes back to the volatile nature of the pricing of Bitcoin. And the reason it is so volatile is because the fuqaha say that the market for Bitcoin is speculative. It’s highly speculative. It’s a highly speculative. And because of this, the prices just go up and down and so drastically and I would agree with this. I think there are many people who are looking at Bitcoin as a vehicle to make quick money, right?
So you got people coming in and out of it, how can I make like a quick buck, how can I make fast cash? How can I make money? I want to make quick money get in, get out and that’s all I want from it, right? There are some people out there who don’t care. They’re not looking at Bitcoin as the potential of how the technology of Bitcoin can be of benefit to humanity at large and there are people who don’t care; Muslims and non-Muslims alike. There are a lot of Muslims out there who are simply hopping in and out of Bitcoin to make money. There are a lot of Muslims who don’t care whether this can help humanity or not. They don’t care. They’re like, “I just want to make money. That’s all I’m concern about making money. If it benefits someone else, great, if not, whoopty doo, whatever, I want to make money.” Right?
So, the fuqaha say that right now it is highly speculative and they don’t really view it as something that is really stable right now. So therefore, they’re hesitant. They’re hesitant to make the ruling in classifying it and calling it money. Now, the second reason is because of the market capitalization of Bitcoin. Heck, the market capitalization of all digital currencies as a whole, right? Now, what do I mean by this? If we look at Bitcoin at today when this video was being made, the market capitalization of Bitcoin sits around $40 Billion plus. It’s $40 Billion plus. That’s just what it is right now.
The fuqaha will say, you know, when you compare this to the money that circulates the market worldwide- you know we’re talking about trillions of dollars. Trillions! 40 Billion? They look at it like, 40 Billion? That’s nothing. So the fuqaha will look at this and say, “That’s nothing. That’s a drop in the bucket.” Heck, we can look at Forbes magazine and see that Bill Gates, you know, I think one time I looked and it said that Bill Gates, the net worth of Bill Gates was 52 Billion. So that means that one person in the world has more wealth than the entire marketplace of Bitcoin, right? Meaning the pool of money that sits in the marketplace, Bitcoin, right? The value of it only comes out to 40 plus Billion dollars. And the fuqaha, some of them will say, “Well, that’s just simply too small. It doesn’t really make a dent in the world economy. It’s not really making a dent in the marketplace right now.” So this is why they have been hesitant to give the thumbs up in saying that it is money, right?
The third reason that some of the fuqaha again, another reason why they’re hesitant to classify it as money is because some fuqaha will say, well, they don’t like the system in which Bitcoin is being used. And what do they mean by that? They mean that Bitcoin, they see it as being used for illegal activity. They may say, “Well, Bitcoin seems to be mostly used for crime, maybe buying drugs, maybe prostitution, a whole number of schemes that is just illegal and just flat out haram, right?” So we know when Bitcoin first came on to the scene, if any of you remember, there was this whole big thing about Silk Road and Silk Road was this one underground website where people were using Bitcoin for all these nefarious, shady criminal activities. Well, a lot of the fuqaha, I can’t say a lot of the fuqaha, but some of the fuqaha look at that and it makes them hesitant to classify this as money.
Now, with that being said though I think we are actually at a place now where I think Bitcoin is now sort of coming out of that negative image. Right? As we said earlier, people are using Bitcoins in buying airline tickets. People get paid their salary in Bitcoin. They’re buying their groceries. They’re buying candy out of a vending machine with Bitcoin. So, Bitcoin has now, I think Bitcoin has evolved to that place where people realize that people just don’t use Bitcoin for haram or illegal activities.
Bitcoin is used for very legitimate purposes and we can even take that a step further. We now see that there are governments out there. Let’s take a look at the United Arab Emirates, for example. Take a look at the Emirate of Dubai. The Emirate of Dubai is now utilizing the technology behind Bitcoin. They’re looking to implement this technology into their government agencies in order to make things more efficient with their government services.
We can take a look at places like China. China is now implementing Bitcoin technology or blockchain technology into their banking system. And we also see that this is being done worldwide. So I think the latter reason where some of the fuqaha will sort of look at Bitcoin as some kind of criminal tool for criminal activity, I think we can kind of say that you know that we’ve kind of moved beyond that right now. I think that’s safe to say, right? That’s safe to say.
So what does this mean? All in all it simply means that Bitcoin right now is not classified as money. Now, does it fit the guidelines according to the sharia as how the sharia would define money? Yes, it does. It actually does. And there may come a day when the fuqaha do categorize it as money. But as of today, they do not. So you might say well, OK well, is it permissible for me to use it or not? Well, one of the good things is this, the fuqaha have not said that Bitcoin is haram. Their approach tends to be more of caution. If you’re going to use this, be cautious. And if you’re going to use this, pay attention to the laws of the land where you live in. Pay attention to the laws of the country where you live in. So if you live in a country where Bitcoin is legal, OK, alhumdulilah, we’re not saying it’s haram. You can use it but be cautious.
However, if you live in a country where the law of the land says that Bitcoin is illegal, then leave it alone, leave it alone. I highly suggest to anyone if you’re looking to step into using Bitcoin, pay attention to the laws of the country where you live in. You don’t want to get yourself in trouble, right? You don’t want to get yourself in trouble.
But again, as a wrap up, the fuqaha have not classified Bitcoin as money, however they haven’t ruled it as being haram. They haven’t ruled is as being haram. It’s more of use it but with caution. Use it but with caution. So this is going to wrap up the first blog post we have in the series that we’re calling Is Bitcoin Halal? Series. And this first blog post dealing with currency now lays the foundation for us to explore and understand better how we look at things like Bitcoin mining, trade and investment. All right? So that is going to do it for today with this blog post.
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