This post does not seek to make Bitcoin or any other cryptocurrencies “halal” (or permissible) by any means but rather to challenge the man-made law imposed by Sheikh Assim Al-Hakeem on Bitcoin and any other cryptocurrencies as “haram” through the use cases of the technology. This post was written during the Pizza Buffet hour from 1-to-8, sorry in advance for the lack of direct Al-Quran quotes as to make it fair with Sheikh Assim who did not recite any Quran verse to back his argument (which is quite nice in order to reach to a wider audience). The video posted on YouTube shows the Mecca Imam answering a question of the Bitcoin compliance with Sharia Law. His points against Bitcoin are as follow:
- Anonymous Creator
Not quite sure the relevance of this point because Bitcoin source codes and whitepaper are open to public and almost all other cryptocurrencies are with known creators - High volatility
- Virtual/Intangible
Money has to be sent hand-to-hand/simultaneous & physical - haram if transaction takes more than 4 hours - Not backed by asset, people, government
- Uncertainties or "gharar"
Limited supply of Bitcoin (21M supply, then what?) - Anonymous - haven for criminal activities
Two of the points which I agree with but not to a point of making it completely impermissible:
- Ponzi Scheme
- No Governance or Authoritative Figure
The irony of his arguments can easily be questioned by applying the concept of “qiyas” which is by comparing his arguments with the existence permissible rulings on fiat (or paper) currencies because any fiat currencies or even tangible assets like gold have their ups-and-downs (volatility), uncertainty or “gharar” (nobody knows how many gold left in this world), criminality through anonymity (drug transactions and black market transactions are also being conducted over paper money) and slow transaction (SWIFT interbank transactions settle at least in 1 business day).
The question of intangibility, meanwhile, can be answered with this version of qiyas instead, why is it permissible for a person to buy any digital content in this world such as buying a virtual Al-Quran app in the App Store using intangible credit card money which is not under possession of the payee and only processed and posted on your statement by the bank after one business day and received by the seller after 3 days? Of course the response would be that there are banks acting as the intermediaries ensuring the money securely moves from one end to the other which is no different to the network of miners who process and verify all the transactions in the blockchain network.
On the matter of ponzi scheme or get rich quick aspect to it, the argument is valid as this is the main rationale why newcomers in the cryptocurrency space willing to trade their fiat currency for the cryptocurrency hoping for 1000% gains overnight. The Imam later discusses that this will lead to bubble burst which is not wrong at all. The recent example of Ponzi scheme ran through blockchain network is Bitconnect that guaranteed extremely high interest returns through its ‘Volatility Software.’ There are numerous numbers of individuals in the space that keep promoting special coins that will make you rich quickly such as John McAfee with his Coin of the Week twitter posts. The pump-and-dump scheme has been everywhere beyond cryptocurrency from brokers recommending buying certain Sharia compliant stocks to your uncle holding a pot of silver speculating the price of these assets will rise. To make things even scarier, most of these newcomers who I have come across with never really understand the technical aspects of any other cryptocurrencies and the only things they know are the buzzwords: “democratization”; “decentralization”; “P2P”; “private”; “blockchain”. None of these newcomers I have talked with can tell me what is the Bitcoin consensus let alone discuss the PoS vs. PoW debate. To tie this back to the questions of Islamic ruling in cryptocurrency, it should not be “haram” if the individuals understand the risk involved with the investment and have conducted their due diligence on the cryptocurrency or any other assets for that matters.
The Politics of Currency
On the question of the governance, after being in the cryptocurrency world for more than 2 years and witnessing first-hand people losing money due to phishing attacks and scams, I completely agree that despite the benefits of having complete P2P feature in the blockchain network without government intervention, the safety or the harmony of the cryptocurrency is the main responsible of the people in the network itself. If someone wants to rob you through digital currency or any other method, there will do so regardless the medium of the attack. Instead of simply banning the cryptocurrency, more governments should allow the use of the cryptocurrency and act as the police in the market to make sure everyone who is using the cryptocurrency is safe from malicious attacks without jeopardising the open peer-to-peer market. The pro-Bitcoin side would see the governance being in the code itself and the lack of governance from one actor are a thing of beauty especially when you see multiple accounts of government failures with the recent case of hyperinflation Venezuela leading the Venezuelans to use a non-government issued instrument which is Bitcoin as a medium of transaction. To this note, Muslims should be aware that by imposing this haram statement on decentralized blockchain network further reduces the power to the people in fighting against any tyrant and corrupt Islamic leaders who are able to manipulate the currency that they issued to maintain their wealth and power. This is where the issues of politics in Islam arise as the perception of Saudi being the most religious state by the global Muslims population is now being used to politicize the issue of intangibility in cryptocurrency in order to maintain the value of Saudi Riyal (SAR) currency, pegged to US Dollar, which is heavily relied on the price of oil, the country’s main export. If people in Saudi start to use cryptocurrency, the demand of the Riyal will be lower and may lead to further depreciation of the currency, hence lower oil revenue that can be earned by the oil company, Aramco, that are owned by the state, thence, the Saudi Prince family.
Notes to the Imam and Fellow Muslims
To the Imam, having the authoritative power to set the minds of Muslim in this world, you should not simply shut down any emerging technology simply due to “gharar” which mainly comes from your lack of understanding in the subject matter because this can easily be overcome with more time and efforts to research the subject. Each of the rulings set today will also be used as the future ruling through the use of qiyas. Shortcomings of the Imam’s argument are also apparent when the Imam miss the ‘hardcore’ haram coin such as the LUST coin (for prostitution), weed-related coin or even porn-related coin in his argument as well as misrepresenting the anonymity of Bitcoin since Bitcoin transactions are completely transparent and trackable on Blockchain Explorer. While for the rest of us, normal Muslims, stop relying on Saudi Imams or the country itself as being the true image of Islam as the country has never been faultless throughout time with its recent correction of finally allowing women to drive. This is essential as this matter of Bitcoin being deemed haram has been covered by multiple news agencies around the globe and individual Muslims should know how to distinguish the regressive man-made laws and the divine laws outlined by the Al-Quran and Hadith.
Progressive Islam
Instead of being regressive Muslim in any new technology, we should be more progressive and embrace the blockchain technology like creating a crowdsale through Initial Coin Offering by releasing MosqueCoin to build mosques in rural areas, deploying a smart contract with Decentralised Applications (Dapps) to connect Halal global food manufacturers directly with the consumers as a way to diversify the Muslim countries’ main exports beyond oil, or even using the P2P low fee blockchain network to decentralize Baitulmal, the Zakat collection center - allowing better transparency, efficiency and distribution of the Zakat to the Asnaf all around the world (a project I am currently working on, let me know if you’re interested).
At the end of this, the question of the use case of any technology really comes down to the individuals themselves. You can build immaculate mosques but if someone hosts a zina party in one of the mosque, would you ban all the mosques in this world? Or would you administer it and make it safer?
References
Sheikh Assim Al Hakeem’s Haram Statement - Youtube
Unknown Gold Left - Equities.com
Saudi Main Export - Atlas MIT
Saudi & Oil - Washington Post
John McAfee Twitter - Twitter
Credit Card Processing Time - The Balance
Women Driving Ban Lifted in Saudi Arabia - New York Times
Bitconnect Ponzi Scheme - TechCrunch
Further Islamic-related Argument for Halal Bitcoin by Global Shariah Scholar from Malaysia - LinkedIn Part 1 & LinkedIn Part 2 (Umar, the guy who posted the videos, also runs a cool Islamic Crowdfund VC)