The man responsible for interpreting religious law in Egypt has banned Bitcoin. Grand Mufti Shawki Ibrahim Abdel-Karim Allam has issued a fatwa telling Muslims the world’s most famous cryptocurrency is haram – or forbidden. They are not allowed to sell, buy or rent using Bitcoin.
Whether his order applies to just Egypt’s Muslims – or the wider 23% percent of the world’s population (1.6 billion people) that follow Islam isn’t clear. However, if it’s the latter, he may have a problem, as other parts of the Muslim world aren’t nearly as hostile towards this new asset class.
Shawki Allam insists that minting and issuing currency is an “absolute right” of monetary institutions and “one of the most specific functions of the state”. He warns that Bitcoin could provide a “stable and secure financial resource for terrorists and criminal groups”. This is a crowd-pleaser of an argument – however, I would argue it is false.
You could make the same case against the dollar – or gold – or pretty much any other currency. And individual dollars and gold don’t have the traceability of the blockchain. I don’t pretend to be an expert on Islam – but a bit of research quickly finds people and organisations who take a very different view to the Grand Mufti.
Dubai – Global Blockchain Council
A good place to start is the Government of Dubai. It was the founder of the Global Blockchain Council – and has actually committed to putting all its documents in a blockchain database by 2020. More importantly, it oversees one of the biggest Bitcoin trading posts in the middle-east, Bitoasis, where anyone with enough Emirati dirhams can buy as many Bitcoin as they can afford. This does rather indicate that the religious authorities in Dubai are comfortable with the idea that trading in Bitcoin is halal – or permissible.
The white paper published on the OneGramCoin website (OneGramCoin is cryptocurrency specifically designed for Islamic finance) lists the six criteria that it believes any currency needs to meet in order to be Sharia compliant.
- Money is either precious metals or food.
- Money is abundant and widely available.
- Money is durable and does not spoil or corrode.
- Money has intrinsic value.
- Money exists in creation and is made valuable by God.
- Money functions as a medium of exchange.
It points out that the only one of these criteria that Bitcoin arguably falls foul of is the first – but if Bitcoin fails, so do almost all fiat currencies, including the US dollar. In fact, paper currency fails on a number of fronts – while Bitcoin is (relatively) abundant, durable, and a medium of exchange with intrinsic value.
Whether it is made valuable by God is above my pay grade – but I could see it being quite possible for a believer to make the case for this. Professor Charles W. Evans, in research published in the Journal of Islamic Banking and Finance, concluded that Bitcoin or a similar system might actually be a more appropriate medium of exchange in Islamic banking and finance than interest-bearing central bank fiat currency, especially among the unbanked and in small-scale cross-border trade.
It’s widely understood that any Sharia compliant investment should steer clear of armaments, pork, tobacco, drugs, alcohol or pornography and, of course, interest. Bitcoin need not fail on any of these grounds.
So why is the Grand Mufti so firm in his views? In the last two years, the Egyptian pound, minted and issued as an “absolute right” by the Egyptian central bank has lost more than half its value. Small wonder, perhaps, that Bitcoin might look rather attractive to Egyptian eyes.