Cryptocurrencies and Blockchain Coding Technology from the Perspective of Islamic Law

Money as a concept has changed throughout history, depending on needs and advances in technology. After electronic money, currently the concept of cryptocurrency has come to dominate the agenda of all, be it small savers or states. The concept and the system of cryptocurrency needs to be studied on the basis of not only informatics and economics, but also religion and law. Instead of supporting or opposing the cryptocurrency system a priori, a multidimensional assessment of the subject is needed by taking into account the evolution of concepts and systems such as stock exchange, banking and credit. This article will try to address the subject from an Islamic law perspective by comparing different approaches.

In order to understand the concept of cryptocurrency, a hot topic of the recent period though with much older roots, certain terms, definitions and approaches should be known. The notion of money and its adventure throughout the history especially is of great importance in maturing our perspective on the concept of cryptocurrency. The article will outline the notions of money, cryptocurrency, and blockchain technology, and then will highlight the negative and positive aspects of cryptocurrencies under current circumstances from the perspective of Islamic law and economics.

I. Concept of Money

Money can be defined as a means of payment used in the exchange (barter) of goods and services, which can be stored (accumulated) depending on the situation, and which determines the value of the goods and services produced.1 Similarly, in definitions referring to state’s relation with the concept of money, it is underscored that any note or coin with a stated value printed on its surface, issued by state and used as a means of payment, is called money.2 It is also suggested that existence of a state authority is not a must for money to be adopted.3 Some economists describe money as anything that is accepted by the public for payment of debt.4 In Islamic history, sikke (coin), nakd (cash), tibr (unminted coin) have been used for money. In these definitions, there are four elements/functions that stand out: to be a measure of value, a medium of exchange, a store of value and a standard of postponed payment.6 The functions of predictability of value, being a means of authority and sovereignty can also be added to the list.7 According to the classical monetary theory, there are 5 characteristics of money: portability, durability, divisibility, uniformity, and inimitability.

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For German translation of the article, please click.

For the article on cryptocurrency, published in Swiss Journal, please click.