Sharia Analysis of Fiat Money and Cryptocurrency
Loading...
Date
2020-09
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
UMT, Lahore
Abstract
The world has witnessed the time where different goods were used as medium of exchange and
then finally currency came into the existence in different kinds. The most commonly used currency
today is fiat money which can be found in shape of coins and banknotes. There was a time when
fiat money was backed by gold and represented its true value. Now, it is nothing but a piece of
paper and its real value is far less than face value. Currently, there is another emerging currency
which is being called and known as ‘cryptocurrency’. It is being considered a type of digital
currency which is not being issued by the central authorities and has no physical existence and
totally based on cryptographic technology. These advancements and development of monetary
system led us to the door of new researches especially from the Sharia perspective. Therefore there
was a dire need to conduct a research on these currencies from the Islamic point of view. The focal
point of this study is to analyze and determine the Sharia status of fiat money and especially
cryptocurrency. When fiat money lost its intrinsic value it became debatable among Sharia
Scholars and a number of opinions and Fatawa have been issued by the institutions and individuals
about its legality and status in Islam. The case of Cryptocurrency is not different, its complex
nature and mechanism is the reason that it is one of the most debatable topics nowadays. On the
basis of Islamic rules we have analyzed four famous Sharia opinions regarding fiat money and
their effects. We found that only two type of opinions are acceptable and are currently implemented
in Islamic Financial matters. As far as Cryptocurrency is concerned, in consideration of the facts
about Cryptocurrency and analysis of different opinions, Sharia rules, requirements and parameters,
this study established that Cryptocurrency in its current state cannot be considered as a legal
currency or asset (Mal) in Islamic Sharia.