Bitcoin in Islamic Banking and Finance

Islam is one of the fastest-growing religions in the world. As many as 1.6 billion Muslims, estimated to represent 23 percent of the entire human population, live over an area spread wide across Asia. Northern Africa has its own share.

Fintech as per the Shariah

Shariah lays down specific rules when it comes to banking and finance. It prohibits specific interest rates as well as investments in certain areas such as liquor. However, in spite of restrictions, major banking corporations have envisaged interest to enter this area. The International Monetary Fund did have its first-ever session on Islamic banking.

The rise of Bitcoin and the recent developments in fin-tech has taken the world by storm. Such advancement has not left the Islamic world untouched. Quite a few Muslim countries are making efforts to slowly open up their economies to these advancements.

UAE has already got its Bitcoin exchange calling it BitOasis and they also offer services Bitcoin wallet. BitOasis is not limited to UAE though but has spread its wings into the neighboring countries too. Qatar, Kuwait, Bahrain, and Saudi Arabia are some of the countries where BitOasis offers its services. Bitcoin Indonesia and Coinbox of Malaysia offer Bitcoin like services in the APAC region.

So is Bitcoin halal?

As per the Shariah Law, riba or usury is prohibited and maslaha its social benefits with positive external factors are encouraged. On both these counts, Bitcoin scores well. Cryptocurrencies by its nature is a positive activity adding benefits to its numerous users. It is also safe and free of cost, almost in a few cases.

So does this make Bitcoin halal?

The answer to this has been a unanimously Yes and one of the primary reasons why it is so is because Bitcoin can be considered as both a currency and a payment system. Shariah is quite comprehensive when it comes to the explanation of the financial structure of its followers.

Proponents of Islam argue that modern currencies are based on debt, something which is prohibited in Islam. Usury is a sin as per the book of religion. Bitcoin does not base itself as a vehicle of debt and hence can be considered more halal than most fiat currencies. Shariah talks about Gharar or uncertainty. Now while Bitcoin has had a tumultuous past, currently it is seen as an epitome of stability and that works in its favor too.