In the Name of Allah, the Entirely Merciful, the Especially Merciful
All praise is due to Allah, Lord of the worlds, may the blessings and peace of Allah be upon our master Muhammad, the seal of prophets, on his family, and all his companions
Resolution No. 237 (8/24)
on
Electronic Currencies
The Council of the International Islamic Fiqh Academy of the Organization of Islamic Cooperation, held its twenty-fourth session in Dubai (United Arab Emirates), on 7-9 Rabi’ al-Awal 1440, corresponding to 4-6 November 2019,
After examining the recommendations of the scientific symposium on Electronic Currencies, held in Jeddah (Kingdom of Saudi Arabia), on 10-11 Muharam 1441, corresponding to 09-10 September 2019, and after listening to the debates regarding the subject,
Resolves the following
First: concept, dealing mechanisms and risks
- Given the generic meaning of the concept of electronic currencies, which includes credit cards, prepaid cards, electronic cheques and others, discussions concluded to use the term of “digital and coded (encrypted) currency”. Some of the most popular of these currencies include bitcoin, ethereum, and the ripple. Despite having notable differences, these currencies are characterized by being encrypted, having no tangible physical existence or presence. Its transaction might be negotiated between parties without intermediaries known as peer-to-peer system.
According to the research presented, these currencies are classified into three types: first, Coins, such as bitcoin; second, alternative currencies or altcoins such as light coin, bitcoin cash, ethereum and the ripple; third: tokens, which are tradable and exchangeable assets with goods and cryptocurrencies.
One of the most significant characteristics of coins mentioned in the first type is decentralization, which means that, unlike other types of currencies, no government or private entity supervises its issuance. Most cryptocurrencies function on blockchain technology, which produces the currency and maintains the full record of currency transactions. Another characteristic of Bitcoin is the controversy over the personality of its first user (inventor).
- Cryptocurrencies are directly dealt via platforms available online or through brokers. These platforms are chargeable, and the client should have a personal electronic wallet on his computer, to document his ownership of the cryptocurrency and its dealing possibilities.
One of the most distinctive characteristics of electronic platforms and wallets is the possibility of using pseudonyms on these platforms, also known as anonymity.
- Some countries, such as Malaysia, have made it mandatory to obtain a necessary license from the relevant authorities, to utilize these electronic platforms. These countries have also put in place regulations for users of these platforms; in particular, users should display their real identities.
- Although cryptocurrencies have spread in many countries, in thousands of retail stores, have taken the place of national currencies, and some government authorities have approved them, many studies indicate the risks of using cryptocurrencies, in particular, currency rates fluctuations.
Second: Shariah Ruling
- After reviewing the research presented and after listening to the debates on the subject, it turned out that other issues are affecting Shariah rulings on cryptocurrencies, which require more research and discussions, including the following questions:
- What is the accurate definition of the cryptocurrency; is it a product, a benefit, an investment asset or digital asset?
- Is cryptocurrency considered by Shariah, a real value and a tradable item?
Third: In light of the above and given the significant risks associated with this type of currencies and the instability of their transactions, the Council of the Academy recommends pursuing research and studies on issues affecting its ruling.
Allah Knows Best
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