While the verdict of the religious body is not binding amongst Indonesia’s growing crypto investors, the position can certainly influence on how investors and institutions interact with the digital currency ecosystem moving forward.
Indonesia’s highest Islamic religious body, the Ulema Council (MUI) has prohibited digital currency trading for Muslims in the country, noting that the nascent crypto assets, despite their growing popularity, are against the tenets of Sharia. The proscription came following a Ljtime Ulama Forum conducted early on Thursday, with the council maintaining the position that cryptocurrencies are haram.
Speaking on the verdict, the MUI chairman Asrorun Niam Soleh said the decision was hinged on several factors:
“From the deliberations that have been determined, there are three legal dictums. Namely, the use of cryptocurrency as a legal currency is haram because it is gharar, dharar, and contrary to Law Number 7 of 2019 and BI Regulation Number 17 of 2015.”
Under the provisions of Islamic Finance, and dwelling on digital currencies as a case study, “gharar,” “dharar,” and “qimar” mean that cryptocurrency transactions inherently involve elements of uncertainty or risk, harm, and speculation, all of which are forbidden under Sharia law. In Soleh’s explanations, digital currencies like Bitcoin (BTC), Ethereum (ETH), as well as stablecoins used in transactions amongst others have no physical form or any real value, thus making them not to be in accordance with Sharia law.
While the verdict of the religious body is not binding amongst Indonesia’s growing crypto investors, the position can certainly influence on how investors and institutions interact with the digital currency ecosystem moving forward. Indonesia is home to some of the largest number of Muslims in the world, numbering about 237 million, roughly 12.7% of the world’s total.
Is Indonesia’s Religious Body Verdict a General Islamic Position?
Suffice to say that the Indonesian government has a somewhat different disposition when it comes to handling digital currencies. Earlier this year, the Indonesian government reportedly planned to tax gains emanating from digital currencies, a move that would have helped in cushioning the economic effects of the coronavirus pandemic.
There has also been very wide dissension amongst Islamic scholars around the world who see the new asset class as viable financial innovation in the 21st Century. Back in 2018, UK-based media platform, Independent reported that a London Mosque broke the record as the first to take donations in digital currencies, with the outfit declaring that the asset class is permissible under Sharia Law.
It is apparent that there is a pervasive diversity in the acceptance of crypto worldwide, and while other religions have never really spoken for or against the new asset class, the global ecosystem is watching keenly how the Ulama Council’s position will shape crypto development in the Asian country.