Recently, I was shocked by a fatwa made by the Majlis Fatwa Wilayah Persekutuan that ruled the use of Bitcoin as haram in terms of syara’. Jabatan Mufti Wilayah is one of the few institutions I have respect for, especially the Mufti who has a good relationship with me. Before the fatwa was issued, my friend, Fdaus Ahmad (Pidomat) and I made a visit to the Mufti. I gifted him our book entitled “50 Dalil Why You Should Own Bitcoin”. (https://ifmal.com/…/50-dalil-kenapa-anda-wajib-memiliki-bi…/)
I was also introduced to the head of Bitcoin researcher from the fatwa unit, though I forgot the name of the ustaz. I realised that the Mufti had given full responsibility to the research team to give the best input in the fatwa issuance. While discussing with the ustaz, it’s clear that he fails to truly understand what is Bitcoin dan how the blockchain technology works. Even when we were on our way back, Pidomat stated that he has doubts about how they will issue the fatwa.
He said, “How on earth are they issuing the fatwa, it’s definitely not going to be credible…”
Not to mention that at the time the ustaz mentioned that they (group from JAKIM) are heading to Japan to research about Bitcoin. This matter became a joke between us.
Pidomat has asked me,
“What are they doing there? Trying to find Satoshi?”
According to someone we know, their big entourage went there to meet with companies operating exchanges. To me, if that was the purpose, it is a waste of the people’s money. You don’t have to go far to understand, blockhain technology is not rocket science!
Once I received the fatwa link, I called my friend who recently became one of the members of the fatwa council there. His answer was brief,
“I don’t agree with the decision of the fatwa, but that’s the majority…”
This matter proves that the fatwa did not achieve the consensus within the members of the fatwa council. There are differences (khilaf) among them. I expect that if I met with each of the members of the fatwa council, asked them about bitcoin and blockchain technology one by one, they will surely fail to answer correctly. If it was recorded I could even bring into question the credibility of the institution. But that is not my way.
We should call upon the members of the Wilayah fatwa council for an interrogation. Is that okay?
Isn’t difference (khilaf) among ummah a blessing? To those who wants to make Bitcoin haram, stand firm with the fatwa. For me who stands against it, stands with Dr. Zaharuddin, Dr. Daud Bakar and those who ruled it as harus. But here, I would like to assess the strength and integrity of the fatwa’s arguments. It can be seen clearly that they did not research in depth the arguments made my Dr. Zaharuddin and Dr. Daud Bakar as their arguments were taken from excerpts of videos without mulazamah face-to-face.
Do they know that Dr. Zaharuddin has criticized (radd) the opinion of Dr. Ali Qurrah when the ulama’ came to Malaysia? Dr. Zaharuddin’s argument was so strong that those who were there agreed with him and it seemed that Dr. Ali Qurrah could not move on against him. Did the fatwa council refer to Dr. Zaharuddin’s argument in depth?
In the national blockchain seminar, University Malaya had invited the mufti office. Unfortunately, there were no representative at all from the mufti office. I’m not trying to offend, but I know that most ustaz in the mufti’s office are not fluent in English including the mufti himself. Therefore, I thought the seminar held in Bahasa Melayu would be good for them. Alas, they chose not to attend.
The fatwa issued by the fatwa council is tarjih between two opinions of haram and mubah. Because this is a muamalat issue, they have to find an argument to rule it as haram because the methodoly states that,
َََََُِّّْ الت ْحريمِ َعلى ال َّدليل َي ُدل َحتى الإبا َحة الأش َياء في الأ ْصل
Therefore, it is better if I focus on the arguments of why they rule is as haram. The fundamental of
.)الذَّ َرائع سد( or Sadd Zara’i )الذريعة سد( the ruling is according to the methodology of Sadd Zari’ah
What does that mean?
انه من باب منع الوسا ئل المؤديةإلى الفا سد
Meaning: Closing the path that leads to destruction and evil.
In the fatwa it is stated that the benefits (maslahah) of using Bitcoin that I consider cliché, it is clear that even after coming back from Japan (learning from the research group) they still failed to understand the intrinsic value instilled in Bitcoin as well as the features that make Bitcoin trusted. I am still doubtful about who the expert that became their reference is. Are they really experts? Who are they? With this failure, Bitcoin to them seems to lack the benefits.
Therefore, all the harms (mafsadah) of using Bitcoin stated in the fatwa became arguments for the members of the fatwa council to consider. They chose the scale of mafsadah that is heavier than the scale of maslahah and the result of the choice made by the majority is that the use of Bitcoin is ruled as haram according to the method of Sadd Zara’i that is to close all the harms of Bitcoin.
Fine. I will go through their arguments of mafsadah one by one.
“Bitcoin is not backed by a value that is fixed and stable.”
1. This statement does not have a clear dalil from the Quran and Sunnah to rule something as haram. So I consider that this is their opinion. What about fiat currencies then, what are they backed by now?
2. They should know that the value of something comes from the supply and demand just like gold and silver. Who gives value to gold and silver? Humans right? Same with Bitcoin.
3. The argument of stability cannot rule something as haram just like the price of stocks, gold, silver and commodities such as coconut oil, rubber and cocoa.
4. For your information, to issue 1 Bitcoin, there is a mining cost to it. Mining costs include electricity and time. Is that not value?
“There are uncertainty (Gharar) elements in Bitcoin transaction, especially in exchanges.”
1. This is a proof of their failure to understand Bitcoin. Why is Bitcoin blamed if there are uncertainties in exchanges?
2. Gharar and even riba’ elements have existed since banks were established, does that mean money is haram because of the issues of banks?
3. What is the type of gharar that is happening? Alleging that a product of blockchain technology has Gharar elements is a fallacy or failure to understand the meaning of gharar.
4. The stock market is also said to have Gharar elements by some ulama’ because it can be manipulated by owners and players, and can be delisted at will. Eg: Listed at RM2 but delisted at RM0.60. In most delisted cases the price is lower than when it was listed.
“It can be manipulated for easy funding by criminals to finance terrorism and cyber attacks.”
1. Before Bitcoin even existed, how did Al-Qaedah, Taliban, Boko Haram, Abu Sayyaf, LTTE and all other terrorist movements acquire funding? Why is that instruments not ruled as haram?
2. Does the fatwa council know that Bitcoin is not anonymous? Refer here, an article in Malay.
3. Does the fatwa council know about Silk Road? How they were caught and shut it down? That’s why you need knowledge!
4. Like a knife that can be used to cut vegetables, it can also be used to kill. Will the knife be ruled as haram if it is used to kill?
“The security system in Bitcoin exchanges can be hazardous when they are hacked a few times resulting in million of dollar loss.”
1. Since the past, banks have been robbed, gold retailers broken into and even stock exchanges hacked. All of this has caused massive lossed that are more than the losses of Bitcoin exchanges combined.
2. Did the failure of the security systems in banks resulted in money or gold kept in banks ruled out as haram? No, instead the security system is improved on, right?
3. Similar with issues in Bitcoin exchanges, the weakness of a system is not the fault of Bitcoin. It’s the company’s security system that is at fault and must be improved.
4. Furthermore, robberies at banks and gold retailers are worse because they involve loss of lives. Is that the case with Bitcoin exchanges? If you scale the maslahah and mafsadah, banks are more dangerous as they involve real lives!
“Bitcoin is a currency that is not controlled or monitored by any authorities.”
1. Early on in the fatwa, Bitcoin is described as not fulfilling the features of currency in Islam. Therefore, it is clear that Bitcoin is not a currency. Then why should it still be defined as a currency?
2. That is why all ulama’ that ruled use of Bitcoin as harus do not define Bitcoin as a currency.
3. A seahorse is not a horse, a sea lion is not a lion. Similarly, cryptocurrency is not a currency.
4. Because the fatwa council has failed to provide a good definition, the confusion is clear. Dr. Zaharuddin considers Bitcoin as a digital asset, Dr. Daud considers Bitcoin as a medium of exchange but not a currency, and I define Bitcoin as a digital commodity.
5. In the national blockchain seminar, the definitions given by fikh ulama’, economist, and legal experts are different. The similarity is that they all reject Bitcoin as a currency.
6. Similarly with gold, who controls gold? Who owns gold? That’s why authorities are appointed to certify the authenticity of gold just like how the Japanese government that has acknowledge Bitcoin as legal tender. Investment institutions like Nasdaq and American Bank has also received licenses to invest in Bitcoin.
7. Do the fatwa council know that BNM has allowed registered exchanges in Malaysia? This is the start of regulations by BNM?
“Can become a threat to the country’s financial system.”
1. I this this issue shouldn’t be discussed by the fatwa council, since this is not their expertise.
2. Has the Japan economy been affected negatively since they endorsed Bitcoin as a legal tender?
3. Has the Singapore economy been worse because their country became friendlier to crypto?
4. Enough, this point is very weak. Why haven’t they question money notes that can be counterfeited and distributed illegally? That have caused bigger losses and affected the country’s financial system negatively. Should the notes be ruled as haram?
“The rise of multiple Bitcoin investment schemes that are mostly ponzi schemes (scam).”
1. I’ve been wondering before the existence of Bitcoin, are these type of schemes non-existent? Did Pak Man Telo start with Bitcoin?
2. Did Tok Belagak, Boy Iman, Swiss Cash and Pengiran Adultery use Bitcoin to scam people?
3. There was a time when cats are used as assets for Ponzi schemes, should cats be ruled as haram too?
“The highlighted conclusion is based on observation of current behaviours, Bitcoin is seen as an investment asset, and it does not fulfill the original purpose of Bitcoin, which is as an alternative currency to the current fiat currency system.”
1. It cannot be denied that the original purpose of Bitcoin is to become a digital currency that is not controlled by banks or countries.
2. Unfortunately, the purpose, intention and goal are not fulfilled because majority of the users all over the world reject Bitcoin as a currency.
3. But does it make it haram in terms of syara’? Surely not.
4. Fiqh methodology states that لا والمكان الزمان الحكم تغير ينكر that means a change of ruling cannot be denied as a consequence of change in time and places. Therefore, the changes on Bitcoin must be ruled according to the time and place, not by the situation, time and place that are not related anymore.
“Therefore the current design of Bitcoin is not syar’iy because it does not fulfill the features of a currency stated by Islam, and it can bring many threats to the good of society. However, this ruling can change if improvements are made on Bitcoin in terms of issuance, price control, security systems in exchanges and regulations to prevent it from being exploited by irresponsible parties.”
1. Can you see the messiness of this fatwa, in previous paragraphs Bitcoin is considered as an investment instrument but in this paragraph Bitcoin is not syar’iy because it does not fulfill the requirements of currency in Islam. Does it not mean it is not a currency then? Simple.
2. What? Improvement on distribution? Can you see how idiotic this argument is. Clearly their failure in understanding the technology makes this fatwa lack sense.
3. Price control is not a dalil in terms syara’ because the ruling of buying and selling is open market, just as in Hadeeth where the Prophet refuse to intervene in matters related to the price of goods. To control price, the government has to intervene, and if the ruling is haram, how can the government control it?
4. The security system is not an argument, which has been explained above. It has nothing to do with Bitcoin.
5. Of course there must be regulations, that is what governments all over the world are trying to do.
“According to this argument, the WP Syara’ Ruling Consultation has ruled that the Bitcoin in its current form does not fulfil the requirement of a currency set by Islam, and Bitcoin can bring harm to the country’s financial system. Therefore, use of Bitcoin in current times as a currency is forbidden to preserve the welfare of society.”
1. If the Bitcoin is not a currency, and despite that is ruled as haram, this fatwa makes no sense.
2. If Bitcoin is ruled as haram because it is used as a currency, this fatwa is a waste of time because majority of the crypto users have already stated that it is nor a currency.
3. The statement that Bitcoin can destroy a country’s financial system is a very shallow opinion made by lack of knowledge about monetary economics. What about Ripple that is used by banks? Did they know that Ripple has its own cryptocurrency?
Therefore I conclude that this fatwa should be abandoned and forgotten by crypto owners as it seems ill-prepared and hastily made. The world of crypto cannot be stopped similar to how the Internet cannot be stopped. Islam will be seen as backward and behind the times if fatwas such as there are issued. Already there are headlines in mainstream news with heading such as “Islam forbids” use of Bitcoin when the one forbidding is only a few ustaz, and not Islam.
However, I think we can have difference in opinions considering this matter is in muamalat. If we can have khilaf in Ibadah such as how to make takbir, whether the hands or the arms to fall down first during sujud, and many more, what more with worldly matters. Only I feel that this fatwa will be used by schemes that have their own cryptocurrencies such as DDKoin, Foin and Lavida Coin because the only this that is forbidden is Bitcoin.
Will the fatwa council continue to issue fatwa for every cryptocurrency in existence? Ethereum, Ripple, NEM, Litecoin, Cardano , IOTA and others? Is the fatwa council aware of the different types of coins that exist including stacking, masternode and utilty? Personally I feel that they are out of their depth here. No knowledge whatsoever.
Director of Ifcon Technology
The Drone & IT Specialist