The International Union of Muslim Scholars released an opinion answering the question are cryptos haram?

If you understand Arabic, you can read the full opinion here (I'm assuming eventually they'll take it down so the link may not continue to work).

I've reviewed their opinion and will share with you why I think they're dead wrong!

First, what did they say:

A Bad Conclusion

لا يجوز التعامل بعملة البتكوين والعملات الرقمية الأخرى "غير الرسمية" بحالتها الراهنة؛ ولا تداولها، ولا تصنيعها،

It is prohibited to deal with Bitcoin and other unofficial cryptocurrencies in their current condition, trade them, or manufacture them, for the following reasons:

By unofficial cryptocurrencies, they are referring to cryptocurrencies that a state hasn’t issued.

So in case, a state does decide to issue a cryptocurrency in the future, they are not passing judgment on this. How convenient for states!

As of writing this, there are more than 21,000 cryptocurrencies that meet the definition of "unofficial cryptocurrency". 

The language of this opinion includes all of them regardless of their category: utility, payment, security, stablecoin, Defi, NFT, or asset-backed.

However, it makes sense that the different utilities of various cryptocurrencies and their different defining characteristics should bring about different opinions on their permissibility.

I find this lack of nuance in this recent opinion quite unbefitting for a body that claims the lofty name “The International Union of Muslim Scholars”.

If I’m going to be even blunter, this lack of nuance is irresponsible.

Most people who read this opinion think it is talking about all cryptocurrencies regardless of their utility. Yet the opinion itself seems to be referring specifically to Bitcoin and Bitcoin-like coins that are used to make payments and transfer value.

We at Practical Islamic Halal Finance will continue to take the time to analyze each individual crypto for what it is based on its own merits and determine our comfort level investing in them from a halal perspective which you can access for free here.

As their first reason for prohibition the opinion says the following:

Cryptos Are Not Currency

لا تتوافر فيها أركان العملات ولا شروط النقود عند الفقهاء والاقتصاديين وغيرهم، وأركان النقود والعملات: أن تكون حاكمة ومتوسطة بين سائر الأموال حتى تقدر الأموال بها، وأنها لا غرض في أعيانها، وأن نسبتها إلى سائر الأموال نسبة واحدة. وليس في البتكوين والعملات الرقمية الشبيهة شيء من ذلك، فلم تكن عملة حقيقية.

1- The pillars of currency and the conditions of money are not met according to jurists, economists, and others, and the pillars of money and currencies are: to be a means of measurement and a medium between other funds so that the funds are estimated by them, and that there is no purpose in their own objects, and that their ratio to other funds is one ratio. There is none of this in Bitcoin and similar digital currencies, and therefore it is not a real currency.

Let’s assume what they are saying regarding Bitcoin and similar cryptos not meeting the required conditions of currency and money is true.

Who said the only things you are allowed to deal with, trade in, or manufacture in Islam are forms of money and currency?

Fruits and vegetables are not forms of money, services are not money, and oil and gas are not money, yet all these things you are allowed to deal with, trade, and manufacture.

So how does proving cryptocurrencies are not money validate the opinion that they should be prohibited for Muslims to deal with??

This would be like when cars first came out, the authors of this opinion coming together and saying, we’ve reviewed the characteristics of automobiles and have concluded that because cars don’t have hearts, tongues, tails, and many other parts they do not meet the definition of a horse. Therefore Muslims are not allowed to deal with, trade, or manufacture cars.

Who cares if cryptocurrencies do not meet the definition of money according to these commenters? 

If you say, dealing with X is prohibited in Islam because it does not meet the definition of money, you are implying that the only things Islam allows you to deal in are forms of money.

This implication is of course, false.

So the first reason for this opinion can be very comfortably tossed out for being completely irrelevant to the topic of prohibition.

Cryptos Can't Fill the Functions of Currency

 ليس فيها شيءٌ من وظائف النقود والعملات، ووظائفها، والتي من أهمها: أن تكون وسيطاً عاماً  للتبادل، ومقياساً للقيم، ومخزوناً للثروة، ومعياراً للمدفوعات الآجلة من الديون.

وعملة البتكوين والعملات الرقمية الأخرى الشبيهة لا تقوم بشيء من هذه الوظائف، فلم تكن عملة معتبرة بالحقيقة ولا بالوظيفة

2- It has none of the functions of money and currencies, the most important of which are: being a general medium of exchange, a measure of values, a store of wealth, and a standard for future payments of debts.

Bitcoin and other similar digital currencies do not perform any of these functions.

Frankly, It’s hard to distinguish between the first and second reasons. They seem largely redundant. If I’m being generous I’ll say the second reason is saying that not only are cryptocurrencies not valid forms of money or currency, but they’re also unable to fulfill any of the functions of money or currency.

From this, we’re supposed to make the rather acrobatic jump in logic to say: this is a reason why Muslims are not allowed to deal with, trade, or manufacture them.

Sorry, this is not valid reasoning for prohibition in Islam. 

Valid reasoning for prohibition in Islam is to say Allah SWT says... or the prophet PBUH said... so and so is haram and this new thing is that prohibited thing or it is very similar to it in its impact and therefore it’s prohibited.

I’ve heard none of this so far.

Let’s keep going because believe it or not it gets even worse.

Cryptocurrencies Aren't Like Anything We're Familiar With

العملات الرقمية ليست سلعاً؛ لأن المقصود بها التبادل وليست مقصودة لذاتها؛ كما هو الحال في السلع. كما أنها ليست أصلاً مالياً؛ فليست هي موجودات أو أصولاً عينية أو خدمات ونحو ذلك، فلا ينطبق عليها أي نوع من أنواع الأموال المعتبرة من السهم أو النقد أو العين أو الحق أو المنفعة.

3- Cryptocurrencies are not goods; Because they are meant to be exchanged and not intended for themselves; as are goods. Nor are they financial assets; They are not any type of asset, in-kind assets, services, or something similar, and are not considered as shares, cash, holding intrinsic value, a right, or benefit.

So this argument is basically saying, we’re trying to fit cryptocurrencies into a bucket that we’re familiar with and it's not really fitting neatly into any of these buckets.

Since it isn’t like anything we’re familiar with, therefore it’s haram.

This is the exact opposite of the Islamic approach.

This is because in Islam the default for everything, with the exception of rituals of worship, is permissibility.

Therefore the proper sequence is to start with the list of things that are prohibited and if the matter in question does not meet the definition of anything on this list, it is permissible.

The opinion fails to mention which prohibition cryptocurrencies actually violate.

Their erroneous approach aside, the claims they made about cryptocurrencies, are false.

Cryptocurrencies are a type of asset, namely, a digital asset.

Assets are anything that is useful or valuable.

One can argue about a particular cryptocurrency's usefulness. Indeed many are completely useless.

However, you can’t argue about Bitcoin and other cryptos' values since the price is readily verifiable at any point in time and there often exists a highly liquid market for holders to realize this price at any time.

If you have any doubt that Bitcoin is an asset, just ask yourself, who is richer all else being equal, someone with 0 Bitcoin or someone with 10?

Which would you rather be?

Cryptos Don't Exist and Aren't Issued by a State

عملة البتكوين والعملات الرقمية الشبيهة لا تمثّل أي موجود حقيقي، ولا أصدرتها جهة ضامنة لها من دولة تقرّها أو بنك مركزي يضمنها، والنقود شرطها الضروري أنْ تكون مضمونة القيمة على من أصدرها. وقد تنبّه الفقهاء منذ قرون إلى خطورة هذا الصنيع، فحصروا  حق ضرب النقود في واجبات الدولة والسلطان، فقال الإمام أحمد رحمه الله: " لا يصلح ضرب الدراهم إلا في دار الضرب بإذن السلطان، لأنّ الناس إنْ رُخّص لهم ركبوا العظائم". (الأحكام السلطانية" ص 281) ويقول الرافعي رحمه الله: " ويكره للرعية ضرب الدراهم وإنْ كانت خالصة، فإنه من شأن الإمام". (الشرح الكبير للرافعي 6/ 13)

4- Bitcoin and similar digital currencies do not represent any real existence, nor are they issued by a guarantor of a state that approves it or a central bank that guarantees it, and money is a necessary condition that it is guaranteed in value to the one who issued it. For centuries, jurists have been aware of the danger of this deed, limiting the right to mint money to the duties of the state and the sultan. Imam Ahmad, may God have mercy on him, said: “It is not appropriate to strike dirhams except in the house of beating with the permission of the Sultan, because if people are permitted to ride great things.” (Al-Ahkam Al-Sultaniya” p. 281) Al-Rafi’i, may God have mercy on him, says: “It is disliked for the subjects to strike the dirhams, even if they are pure because it is the matter of the imam.” (Al-Sharh Al-Kabeer by Al-Rafe’i 6/13)

As for existence, Bitcoin and digital currencies are as real as any other software.

If the website of the International Union of Muslim Scholars is real, then cryptocurrencies are real as well.

As for being issued by a guarantor or state, in no instance is this mentioned as a requirement in either of the sources of truth in Islam: Allah SWT’s book or the sunnah of his prophet PBUH.

Citing what Imam Ahmad said more than 1000 years ago is frankly wrong and embarrassing.

It’s wrong because Imam Ahmad lived in a very different time with different technologies and what is possible today he probably never even imagined. It is therefore reasonable to suspect his opinion may have been very different today.

It’s embarrassing because Imam Ahmad was not divine, nor divinely guided, and yet he is being cited more than 1000 years after his death as if his words are revelation.

The fact that we are looking to imam Ahmad more than 1000 years after his death for guidance on a matter as modern as blockchain and cryptocurrency suggests the ummah suffers from intellectual laziness.

It’s no coincidence that you can trace the decline of the ummah and its leadership to about the time these commonly cited books stopped coming out.

Moreover, the necessity of stated-backed or state-issued currency has already been empirically proven false.

Money needs to be backed by the confidence of its users. Whether or not the issued currency is backed by a state will not save its value if it loses this trust.

Consider the Lebanese lira. It has the full support and backing of the Lebanese government but Lebanese people don’t trust its value.

As of writing this, 1 Bitcoin is valued at 26 million Lebanese Liras.

So the source cited is not qualified, and the claim is empirically false.

Next.

Cryptocurrencies Aren't Useful

إنّ التعامل بالبتكوين والعملات الرقمية الشبيهة وتداولها لا يحقّق أي نفعٍ معتبرٍ للمسلمين، ولا لبلدانهم، لا في الصناعة ، ولا في التقنيات ، ولا في التجارة الحقيقية، وإنما هو مجرد نوع جديد من المضاربات، مقصود منه مطلق الاسترباح دون ربطه بالعمل أو الإنتاج، وبالتالي فتداولها والتعامل بها مناقض لمقاصد الشرع في المال.

5- Dealing with Bitcoin and similar digital currencies and their circulation does not achieve any significant benefit for Muslims, nor for their countries, neither in industry, in technologies, or in real trade. Its circulation and dealing with it is contrary to the purposes of Sharia in money.

You are not allowed to prohibit a technology because you don’t see its potential. 

This is what caused some Muslim scholars to strongly oppose the printing press. According to some sources the prohibition was so serious that at one point it was punishable by death. This insanity persisted for about 300 years.

It is reasonable to believe that this prohibition contributed to Muslims falling behind other nations in scientific scholarship.

This was all made possible because prohibition did not rely on what Allah SWT says, or the prophet peace be upon said. Rather, a lack of critical interrogation and blind following is to blame.

We mustn’t make this same mistake again.

Moreover, the benefits of some cryptocurrencies are already demonstrably real.

Consider transaction costs. 

In the United States, it's not uncommon for a domestic money wire transfer to cost $25 or $30. Sending money internationally can be even more expensive.

Whereas, 16 million USD worth of Dogecoin was transferred for less than $1 earlier this year.

This reduction in transaction costs is a very real benefit that makes it easier for people to do business with one another.

Not to mention, there is no telling how the benefits of these cryptocurrencies evolve in the future.

Not only this but the opinion contradicts itself later when it says that

The committee excludes cases of necessity and urgent need from the prohibition on dealing with bitcoin and digital currencies, such as helping Muslims who are economically or politically besieged in countries or regions.

So the committee actually recognizes that Bitcoin and cryptocurrencies have real utility and can be used for good.

This directly contradicts their statement that they do not achieve any significant benefit for Muslims or their countries.

I will also mention that the potential for cryptocurrencies and their utilities is evolving all the time and therefore making an argument for prohibition based on today’s utility is extremely shortsighted.

Prohibiting today means waiting for non-Muslims to develop the space and for Muslims to have no role in developing this technology and only act as consumers later on if non-Muslims make the technology even more beneficial. This consumer role is unbefitting Muslims and we should not accept it.

Cryptocurrencies Cause Crime

إن التعامل بها وتداولها يفضي إلى مفاسد عظيمة ومضار جسيمة على الأفراد والمجتمع والدولة، من عمليات غسيل الأموال، وسداد قيمة تجارة المخدرات والأسلحة الممنوعة، وتحويل كثير من الأموال الناتجة عن العمليات الإجرامية، وبالتالي تساهم في زيادة الأنشطة الإجرامية وعمليات النصب والاحتيال المالي، وهذه مآلات فاسدة ضارة يجب صيانة الأمة ودُوَلها منها بسدّ الذريعة إليها وهو المنع من التعامل والتداول في هذه العملات؛ لحديث:" لا ضرر ولا إضرار" أخرجه مالك في الموطأ.

6- Dealing with it and circulating it leads to great evils and great harm to individuals, society, and the state, from money laundering operations, drug trade, weapons trade, and transferring a lot of money resulting from criminal operations, and thus contribute to an increase in criminal activities and financial fraud, and these are harmful consequences, the nation and its states must be preserved from it by blocking the pretext to it, which is the prevention of dealing and trading in these currencies; For the hadith: “There should be neither harming (darar) nor reciprocating harm (dirar). ” which was included by Malik in Al-Muwatta.

Of course, we want to minimize harm in society. Of course, sometimes cryptocurrencies are used for harm.

Other things that are sometimes used for haram include the internet, mobile phones, cars, and cash. 

Should we prohibit all these too?

Are all these things prohibited now because they can be used for crime?

Or is it more accurate to say it is prohibited to engage in crime regardless of the technology used?

Further, there are more than 20,000 different cryptocurrencies each with different characteristics and use cases. Some are meant to provide file storage, others to connect the blockchain to real-world data, and others for payments. Is the opinion arguing that all of these cryptos are used for crime most of the time? 

Certainly, this opinion seems to be suggesting that this is the case without providing any evidence.

Depending on the source, one finds wildly varying estimates of how much cryptocurrency is used in crime. Estimates vary from 1% to half of all activity.

According to The European Union Agency for Law Enforcement Cooperation (Europol), Crypto may be ‘Key’ to Cracking Down on Crime since blockchain networks allow investigators to easily follow illicit funds and recover stolen assets converted into crypto.

Europol stated that the money laundering schemes detected are largely characterized by cash movements, rather than any form of virtual currency.

“Although not all use of cash is criminal, all criminals use cash at some stage in the money laundering process… While the world is looking with concern at the possible misuse of virtual currencies by criminals, this report may seem somewhat unusual in that it is not highlighting a new phenomenon or an emerging risk… Money laundering schemes detected by law enforcement are still largely characterized by traditional techniques, in particular, the use of cash.”

So it would appear cash is more prevalent in crime than cryptocurrencies are.

So is cash prohibited?

The opinion makes a link between crypto and crime and then refers to zero sources to back up their claim!

There is no evidence that suggests that crypto is more prevalent in crime than cash or traditional currency and therefore this reason, like the 5 before it, doesn't stand the test of critical interrogation.

A Better Conclusion

I find none of the reasons cited in this opinion for prohibiting cryptocurrencies valid in any way.

I find the opinion to lack the type of rigorous scholarship and cogent arguments I would expect from a body that chose the very lofty name of "The International Union of Muslim Scholars".

We at Practical Islamic Halal Finance will continue to take the time to analyze each individual crypto based on its own merits to determine our comfort level investing in them from a halal perspective which you can access for free here.

Note, this article should not be considered an indictment of the authors of the opinion as people rather it is an indictment of the opinion itself.