Professor Abdulrazaq Alaro, Head Department of Islamic Law, University of Ilorin, Kwara

State

In his conclusion, he explained that it is Haram (illegal) to trade in cryptocurrency as

it has no intrinsic value, there is high volatility culminating in excessive uncertainty
and high risk that is akin to gambling, no link to the real economy, and trading in
cryptocurrencies is just like a bubble that had the potential of bursting. 
Also, according to him, cryptos are used for illicit activities, are plagued by ambiguity
and anonymity, and cryptocurrencies are not issued/regulated by any government or
constituted Shariah authority.

View Mufti Shaikh Shawki Alam

it is against Islamic values where money laundering, bribery and terrorist funding are
feasible, and it has not set any rules which make it void contract [ CITATION Har19 \l 17417 ].

no government regulatory bodies across the globe to stabilize the digital currency and
secure trade from detrimental consequences (Ibrahim, Fauzan, & Mohadis, 2019; Feng,
Wang, & Zhang, 2017).

Alzubaidi and Abdullah (2017) said that the cryptocurrency's speculation nature
exposes the flaw throughout its financial where it does not follow the parameters of the ideals
of the shariah principles.
 According to Dr Ziyaad Mahomed as an associate dean of executive education and e-
learning at the International Centre for Education in Islamic Finance (INCEIF),

It shows that cryptocurrency is considered as money laundering because of the

transparency is low and easy to do the illegal activities since the central bank cannot traced.

Due to Bitcoin’s elusive features or characteristics, some economists have explained Bitcoin
and other digital currencies’ position as lying somewhere between currency, commodity and
financial asset; it is also defined as a speculative asset that can be used as a medium of exchange.7

Most countries are reported to be generally cautious about recognising Bitcoin as legal
tender. The United States, for instance, has declared that “Bitcoin, unlike a dollar, has no physical
form, is not legal tender, and is not backed by any government or any legal entity, and its supply is
not determined by a central bank.” The Danish central bank clearly stated that, “Bitcoins are not
money in a proper sense as there is no issuer behind them. Instead Bitcoins display the
characteristics of a commodity to which users attach value. Unlike precious metals such as gold and
silver, Bitcoins have no actual utility, bearing closer resemblance to glass bead s.”8 This declaration is
in sync with the main critiques of Bitcoin “that there appears to be nothing tangible backing the
currency.” But the proponents would say that in reality “Bitcoin is backed by its high production
cost.” was also released by the Central Bank of Malaysia (CBM) on 3 January, 2014 that “ The Bitcoin
is not recognised as legal tender in Malaysia. The Central Bank of Malaysia does not regulate the
operations of Bitcoin. The public is therefore advised to be cautious of the risks associated with the
usage of digital currency.”

It was reported that 47.4 percent of Malaysian cryptocurrency investors have bought
Bitcoins and other “altcoins,” against 52.6 percent who have only bought Bitcoins. Malaysian
investors cited investment (44.7 percent), followed by speed, affordability and convenience (16.3
percent), and trading/speculation (15.1 percent) as the main reasons for buying Bitcoins. Investors
are somewhat confident in Bitcoin as an investment tool, with 48.8 percent responding that they
trusted the digital currency, against 19.7 percent who said they did not

How bitcoin work

 First, a user can exchange conventional money (example dollars, yen and euros) for a fee on
an online exchange (example Okcoin, Coinbase and Kraken). The pricing of Bitcoin relative to other
currencies is determined by supply and demand. The exchange fee falls with the size of the
transaction, ranging from 0.5 percent for small transactions down to 0.2 percent for large
transactions. Second, the user can obtain Bitcoins in exchange for the sale of goods or services, as
when a merchant accepts Bitcoin from a buyer for the sale of his product. Third, the user can acquire
new Bitcoins by serving as a miner and applying his or her processing power to successfully verify the
validity of new network transactions.”16 The purchased or mined Bitcoins are thereafter stored in a
digital wallet on the user’s computer or at an online wallet service. However, there are risks involved
in digital storage, as cryptocurrency stored in digital wallets can be lost permanently due to malware
or data loss or even destruction of the physical media.

Price volatility

. On the other hand, a number of scientists negatively perceive these trends, calling cryptocurrency a
gamble (Kurylenok 2019) or a bubble that has value only in the course of an exchange (Ushakova
2019)

the price volatility of Bitcoin itself discourages its use as a medium of exchange; and the uncertainty
of Bitcoin’s network security will discourage its wider use. Users will be exposed to a host of risks
since the creation, trading or usage of virtual currencies including Bitcoins are not authorised by
most central banks or monetary authorities (not a legal tender), and without any regulation and
insurance scheme.

The volatile price behaviour seems to suggest that the market for Bitcoin is currently being driven by
speculative investors. The perceived growing demand for Bitcoin may not be due to increased
transactions by traditional merchants and consumers but due to speculation. The value of Bitcoins is
also not tied to an underlying fundamental such as gold, or the perceived basic soundness and
stability of an economy and its governing institutions. Moreover, the low liquidity of Bitcoin makes it
a high risk investment. All these risks have yet to be managed and so far there is no effective way to
hedge the associated risks of volatility and low liquidity of Bitcoin

he value of cryptocurrencies fluctuates with the most flimsy of reasons such as technical glitch or
system hack. It is also described as gharar i.e uncertainty.

According to the bank, the main reason why bitcoin will not be able to become a means of payment,
is high volatility. Such a statement is entirely justified and applies not only to bitcoin but to other
cryptocurrencies as well. At the same time, Goldman Sachs was considering investing in the market
of digital assets and even creating its own cryptocurrency. However, this project is at the seed stage.

Of course, there is a grain of truth in his words, since the cryptocurrency's dynamics is extremely
unstable. The digital currency may hit an all-time high and then collapse by 40-50%. Such problems
of crypto money can be attributed to its brief period of existence in the financial market and its
certain isolation from other assets in the stock markets. https://www.fx.co/en/analysis/269890

Cryptocurrency is attractive as a tool for financial speculation and is characterized by rather sharp,
unpredictable “jumps/hikes” in the rate, usually caused by speculative demand. Even a single post
on the social network of someone powerful significantly increases the value of the cryptocurrency –
elon musk

Speculative

From a Shariah perspective, a currency whose value is technical and not intrinsic has to be properly
backed by real valuable assets or be supervised by a trustworthy financial authority, in order to
protect people dealing in it from possible fraud and excessive fluctuations in its value. The recent
popularity and success of Bitcoin is due to speculative trading rather than its genuine use as a
currency.

Most of those who buy it are speculators aiming to make a quick gain from quick trading without
taking the risk of holding it for long time. To them, Bitcoin is an investment opportunity that arose
rather than a currency to be treated and used as such. If this is the case, then quick-wealth seekers
may even desist from trading in it within a single day and turn to a more novel trading instrument,
especially given that modern technology has lifted all boundaries for engineering gambling-like
investments.

The gharar is the transactions with an uncertain or unclear outcomes due to the risky nature,
which makes the trade similar to gambling. In relating this to cryptocurrencies like Bitcoin, the
value can be speculative, it is unclear what a person is buying and what the result of the entire
bitcoin venture is going to be. No any authorities to blame if attackers get access to your account or
lose your wallet private key. This could be bad thing! Except the password is recovered, you have no
way to access your wallet, that currency is lost forever. All this kind of issues make the
cryptocurrencies as uncertainty. The Value which transfer from one account to another account in
the transaction is transparent, but who own the account is the major issue that raised the reason
behind gharar, we don’t know with whom the transaction and interaction within the system is/are
involved

There is an income stream associated with a financial asset. Granted, there are assets with a zero
yield such as commodities, but they are traded because they have a practical use (for production or
consumption). Cryptocurrencies have neither an income stream nor a practical use.

The fact that they command a price and are tradable suggests that speculation would be their single
most important ‘raison d’être’. Hence crypto prices are subject to violent and random movement.
This brings up the other problem, store of value.

For something to serve as a store of value, it has to be liquid, universally accepted, and have a stable
value.

In late 2020, the top 100 wallets were estimated to own 13% of total bitcoin supply (6) with most of
the owners’ identities not known. It would therefore only take a few whale wallets to manipulate
the bitcoin market, causing violent price moves. Huge price volatility has made bitcoin and
cryptocurrencies unsuitable as store of value vehicles

Speculation is a phenomenon of buying something at a low price in the hope of selling it in the
future at a high price. If the price of an object in the future is expected to be higher than the current
price, then a speculative buyer will buy it with the hope to sell it in the future. Likewise, if future
prices are expected to be higher than current prices, speculators will sell their goods now to avoid
selling at low prices in the future. This type of business is rejected by Islam (Karim, 2004).
Objectives

Objective – al jazeera bookmarks

When Cryptocurrency has fulfilled the criteria of a contract according to Islamic Law, then there
should be statements and regulations from the relevant government or national Sharia board so that
there is no imbalance and there are definite answers so as not to cause doubts to the public

Various kinds of answers and decisions emerged

Cryptocurrency trade is somehow taking the global market and in great popularity. People will
quickly find out about Cryptocurrency and participate in it. The speed of a country's government to
regulate and make regulations about this is urgently needed, because Cryptocurrency trade has the
risk of not having a guarantor who can protect users protection. Cryptocurrency is feared to be
prone to crime, money laundering, and black markets, so that regulations can be expected to
prevent these risks

Muslim scholars and Shari’ah experts have developed varied opinions, some considering it to be
permissible (halal) and others prohibited (haram). Among those scholars who consider it to be
legally impermissible put forward their reasons, some of them arguing that it violates the
constitutions of their governments. On the other hand, there are Muslim scholars who regard
cryptocurrency as permissible in principle. Furthermore, there are many uncertainties related to the
implementation of the cryptocurrency reported by many researchers and mentioned in the
respective fatwas. A number of empirical studies have acknowledged the fact that cryptocurrency,
from the Islamic perspective, constitutes the focus of most ongoing research work.

This lack of consensus on the issue of the permissibility of cryptocurrency is discussed by Zubaidi
and Abdullah (2017), Abu Bakar, Rosbi, and Uzaki (2017), Muhamed, Ariff and Radin, (2016) and
Nurhisam (2017). As a result, this paper investigates the legal uncertainties surrounding the use of
cryptocurrency from the Islamic perspective – Al-hussaini, A. I. S., Ibrahim, A. A., & Fauzan, M.
(2019 objectives
https://www.researchgate.net/publication/337007103_Users_Perception_of_Cryptocurrency_Syste
m_Application_from_the_Islamic_Views
Currently no standard fatwa or legal statement that support the using of cryptocurrency from sharia
point of view. Maybe after solving the issue from quran and sunnah or ijtimah this will lead us to get
sharia standard and allow the consumers to run their daily routine activities. Nevertheless Shariah
scope is vital because a lot of Muslims are keying in to the usage of this financial form without
understanding the Islamic ruling on it. Shariah as Islamic law is then obliged to provide a set of
guidelines on the Islamic legal ramifications of the use of cryptocurrencies.

Unfortunately, the Islamic perspective of this kind of transaction which cryptocurrency hosted is still
considers as either prohibited (haram) or impermissible (haram). This raised a lot of uncertainties
related to its implementation. That is why research is very important in this area. Hence, the
current paper present a qualitative interview research regarding Islamic perspectives of
cryptocurrency.

the Islamic interpretation of the cryptocurrency phenomenon boils down to the absence of a single,
consistent explanation of it from the perspective of Islam and Sharia as an object of permissibility (or
prohibition) of transactions with it Shovkhalov, S., & Idrisov, H. (2021).

"Islamic finance is now on the verge of either a major transformation or a period of frustration and
may have declined." (Vogel & Hayes, 1998) This expression reflects that fiqh seems to be limping
away from the rapidly developing dynamics of human life. The impact is that people feel confused
when they meet something new which has not yet received confirmation (legal standing) from the
religious side. This is positive news because Muslims still feel anxious or doubtful (syakk) if what is
done does not get legitimacy from religion.

adoption

These countries include (restricted): China, Saudi Arabia, Egypt, Zambia, and Mexico; (illegal):
Bangladesh (jail), Vietnam, Morocco, Algeria, Bolivia (jail), Ecuador, and Nepal (jail).

regulations regarding Cryptocurrency in various countries are also getting tighter because many
countries are taking preventive measures against Cryptocurrency transactions. Cryptocurrency is not
handled by any country and it is individual, so many countries issue statements that Cryptocurrency
transactions are illegal and the government does not guarantee anything. But not all countries also
refuse to make regulations about Cryptocurrency. In Asia, Japan and Philippines have set up the
regulation for Cryptocurrency trade. In America, U.S and Canada also regulate Cryptocurrency trade
with warning that Cryptocurrency trade is considered high risk. But most of the countries stand in
grey area and just issue statements and warnings about cryptocurrency

The Countries are beginning to see this as a chance for people who have bad intentions, therefore
some countries are starting to regulate the anonymity of cryptocurrencies users by obtaining
customers prior to opening, and also verifying the identity of each customer within a reasonable
time before or after account opening

Malaysia ruling

The Mufti of the Federal Territory of Malaysia has provided an explanation on 15 Nov
2018 that Bitcoin does not fulfill the criteria as money and it can potentially endanger
the well-being of the community and financial system of a country. However, such
religious opinion may change, especially if the future generations of cryptocurrencies
have safeguards in place in mining and to counter against price fluctuations and
money laundering.

After considering both the benefits and negative externalities such virtual currencies
may entail, I took the wara’ and ihtiyat approach based on Sadd al-dhara’i to advise
the Muslim community to avoid all forms of cryptocurrencies (including its related
activity i.e. initial coin offerings) for now until there comes a time where it
predominantly replaces the traditional currencies (i.e. new cashless global monetary
system) and is generally acceptable by the international community as Al-Thaman al-
urfi’. https://www.halaluniverse.net/in-depth/forex-trading-and-crypto-currencies-a-
shariah-perspective

Chi Lo, senior economist for Greater China

cryptocurrencies such as bitcoin are not money despite what some people may
think. Money serves three functions: it is a medium of exchange, a unit of account
and a store of value.

Illegality

In the committee hearings, testimony about the anonymity of the digital currency brought about
additional concerns. Senator Chuck Schumer, for instance, compared Bitcoin to a form online money
laundering. Shortly after the congressional testimony, a forum was held in Washington D.C. where
additional concerns were raised about the how the anonymity could be used to purchase child
pornography. These concerns lead to the creation of a Senate task force that sought out the experts
regarding the digital currency, which ultimately found that Bitcoin had yet to replace more
traditional ways of funding criminal activity Blau, B. M. (2017

Regarding legal protection, including property, its basis is established in the Holy Quran: “And do not
devour one another’s property unjustly, nor give bribery to the judges that you may knowingly eat
up a part of the property of others sinfully” (verse 188 Section 2) 23 and in the Sunnah The
Messenger of Muhammad24 (peace and blessings of Allah be upon him): “Abdullah (ibn Mas’ud),
may Allah be pleased with him, narrates that the Messenger of Allah (peace and blessings of Allah be
upon him) said: ’‘Whoever takes a false oath in order to grab another man’s (or his brother’s)
property, then Allah will be angry with him” < . . . >25”

Vulnerable to be used for helping disobedience. Money laundering, embezzlement of funds and
other illegal activities are elements that are difficult to avoid in the use of bitcoin commodities. The
money used for investing in bitcoin assets comes from illegitimate money that was deliberately
removed so as not to be tracked by local authorities. The majority of Clerics agreed that it would be
forbidden if it was proven to lead to immoral acts

CONCLUSION

Conclusion al jazeera.

Behind the reason for the lack of regulation about Cryptocurrency, we can see that a country
needs time and strong evidence against the power of Cryptocurrency to be equated with currency in
general. The concept of digital money is still very unusual for some people, but it is very likely that
within a few years Cryptocurrency can dominate the global money market

Islam also instructs Muslims to avoid anything that is harmful or contains damage (dar'ul
mafasid) as stated in the methodology of reasoning (ushul fiqh) rules and means "avoiding damage
must take precedence over bringing goodness". The chances of damage and abuse of contract are
very high if there is no adequate regulation. It must be remembered that in Cryptocurrency trade
there is no party that can guarantee all transactions that occur.
 Accordingly, Cryptocurrency can be classified and acceptable as sharf in the Principles of
Islamic Banking Law because it fulfils the principles and criteria of contracts according to Islam
although there are weaknesses of

Cryptocurrency is classified and accepted as sharf because all of the characteristics of

Cryptocurrencies are almost similar with Islamic Foreign Exchange in Islamic Banking Law although it
has the weaknesses too about the regulation and also the anonymity of the users. Despite its
weaknesses, the criteria of selling and buying in Islamic Banking Law already fulfilled; there are seller
and buyer, the price and goods, and also ijab and kabul
 Gharar

According to Bank Negara Malaysia, it stated that why most of the fuqaha’ are not
supporting cryptocurrency is because of “gharar” uncertainty. For example, if you have
crypto in your wallet, then someone attack your wallet and steal some amount of fund in the
wallet, no one to be blame,

who is responsible for that.” This specify that, the Fuqaha’ don’t agreed with the
cryptocurrency due to the gharar (uncertainty) within the transaction.

In addition, from the Islamic perspective, money is exclusively used for an exchange
not for speculation or trading to gain profit purposely.
 This also taking profit from money trading on purpose can be categorized as usury
(riba) (Sanusi, 2002). On the other hand, referring to the phenomenon’s above, people would
keep “good” money rather than to use for transaction what is “bad” money. Regarding from
Quran (2:283, 4:58) Amanah or mandate also is part of transparency which is all the details is
being expose to the third parties or client.

According to Nurhisam, (2017), Bitcoin is not permissible as money because it is not

under government regulation and the risks and weaknesses are greater than the benefits.

He was concerned with the legality of money issuances by government and

uncontrollable issues. Furthermore, Oziev and Yandiev, (2018) have identify the conformity
of Bitcoin to Islamic teaching and found that it has no emitter, monetary control, or
transparency.

While, The Shariah Review Bureau, (2018) identifies that cryptocurrency and tokens
are permissible as money as they meet habits of exchange transactions besides other
requirements such as mal (property), manfa'ah (usufruct), haqq (right), and dayn (liability).

Based on United Kingdom Scholars, Shaykh Haitam due to the fact that

cryptocurrency is not being backed by anything, and at the same time it is created out
of nothing.

There is another opinion from Professor Ahmed Kamel Midin Meera, where he stated
that, in order for digital currency to be accepted by Shariah, the value need to be measured
and at the same time it has to be a monetary commodity.

He also added that there need to be a standard of weight on paper notes or digital
currencies to be recognized. Besides that, it needs to be redeemable with a standard weight
like gold. If not, it is only fiat money [ CITATION Abu18 \l 17417 ].

However, Ahmad and Hassan (2006) have opined that in Islam, money is not to be
treated as a commodity. Having intrinsic value as commodities can have different qualities
while money is only having a measure of value or a medium of exchange as its quality. Hasan
(2011) also argues that fiat money derives its value from the general acceptability, not from
the value of what it is made of, and it is recognized as a medium of exchange in Islamic law
(Shariah). Furthermore, Shariah notices standard cash as whatever increases money related
status, it will be based on wide affirmation in the open eye or by government order, said by
Meera (2018) and Corbet (2019).

Although there is quite number of scholars who question and opposed cryptocurrency
as the new era of digital currencies, it is different from the point of view of Bank Negara
Malaysia’s Shariah Advisory Council chairman, Datuk Dr. Mohd Daud Abu Bakar as he
gives his opinion in a video regarding the adoption of cryptocurrency in Malaysia especially
in relation with Shariah. One of the points that can be highlighted is related to the major risks
in cryptocurrency which the religious leaders from Qatar, Egypt and Turkey declared it as
Haram. Datuk Mohd Daud stated that “from a fatwa standpoint, government can declare
something is haram because of the risk. However, in Shariah ruling, it can’t be said that
something is haram because there is risks.”. Which to relate, everything that we encounter in
life inclusive of risks, but it does not consider as Haram. Other than that, he also mentioned
that “Digital currency were merely based on feeling of trust or peer-to-peer (P2P). Similarly,
fiat money also is based on trust.”[ CITATION Ell18 \l 17417 ]. From this, it can be understood
that both fiat money and digital currencies are mainly based on trusts, which this trust turns
into value and the value are being considered as the intrinsic value.

According to Abdul Qadir Barakatullah, he is convinced that cryptocurrency can be

an effective tool for Islamic finance to further developed. He also added that any commodity
which can be used by the society as a means of payment can be perceived as money as this is
a famous principle among the Muslim scholars [ CITATION Abu18 \l 17417 ]. In the same
journal reference, Al-Zahrani stated that cryptocurrency is a type of currencies which
emerged from the result of creating and developing money. To be more detailed, from
ordinary barter, it then turns to gold and silver coins, then emerged to paper money and
currently the existence of virtual money, such as cryptocurrencies. Which he said this is
normal [ CITATION Abu18 \l 17417 ].
Adoption cryptocurrency in Malaysia

The Central Bank of Malaysia (CBM) earlier on adopted a hardline approach towards cryptocurrency.
In 2014 it explicitly said that Bitcoin is not recognised as legal tender in Malaysia.20 It also at that
time did not plan to regulate the operations of Bitcoin.21 It has further advised the public to be
cautious of the risks associated with the usage of such digital currency. However, it should be noted
here that the Malaysian regulator did not explicitly ban or outlaw its use nor say Bitcoin or
cryptocurrency is illegal. Upon analysis, the above statement by CBM on Bitcoin is open to various
interpretations. Does it imply CBM’s nonacceptance of Bitcoins altogether as an alternative currency
or is it open to other types of alternative currency using blockchain technology? Although Malaysia
does not recognise Bitcoin as legal tender, does it intend to relegate the status of Bitcoin to that of a
new payment settlement mode instead of new money? In Malaysia, cryptocurrency transactions are
currently tax free, as digital currencies are not considered assets or legal tender by the authorities.
By asserting that they do not have plans to regulate Bitcoins, can one assume that CBM is waiting to
see what other regulators will do before coming up with its own appropriate regulatory framework?
Perhaps one can anticipate more changes to be introduced by CBM “to rein in Cryptocurrencies.” At
the time of writing, a notable move was made by the Central Bank of Malaysia in November 2017 to
regulate Bitcoin exchanges in Malaysia, which appears to show a softened approach towards
cryptocurrency, recognising it to be the “new norm” and that the CBM “cannot be oblivious to these
developments.”22 The Governor of CBM has announced at the Third Counter-Terrorism Financing
Summit 2017 in Kuala Lumpur, that all parties acting as exchanges will be treated as “reporting
institutions”, requiring them to provide detailed information on buyers and sellers of such
currencies.23 This move is to prevent the abuse of the system for criminal and unlawful activities
and ensure both the stability and integrity of the financial system and consumer protection.24 These
preventive measures would include conducting risk assessments; application of customer due
diligence; submission of suspicious transaction reports (STR) and cash threshold reports; and
maintenance and retention of records of transactions.25 Industry players in fintech welcome the
move as a means to ensure that the technological developments in cryptocurrencies and their
underlying blockchain technology are not hampered. Malaysia’s most recent regulatory stance is
reported to be in step with Australia, China and Japan (although countries like Japan are issuing
licences for exchanges as well). In the same month, Malaysia’s securities SHEILA AINON AND
ABBDULLAH AL-HARTHY 61 ICR 9.1 Produced and distributed by IAIS Malaysia CRYPTOCURRENCY AS
AN ALTERNATIVE CURRENCY IN MALAYSIA regulator has revealed it is planning a regulatory
framework for cryptocurrencies and will work closely with the country’s central bank to craft
regulations for the secondary market trading of established cryptocurrency and digital assets.26 This
announcement has contradicted the central bank’s earlier decision to ban the trading of
cryptocurrencies, made a month ago