Bitcoin declared ‘halal’ under Islamic law

An Islamic scholar has declared bitcoin ‘halal’ [permissible] under Sharia Law, contradicting earlier ‘edicts’ that insisted the popular cryptocurrency is forbidden in the religion.

The new statement has appeared in the publication of the study into whether bitcoin is halal or haram preceded unprecedented price gains for bitcoin, which saw it’s value surge by more than $1,000 in less than an hour. This has led some analysts to speculate that news of bitcoin’s Sharia law compliance may have contributed to the price surge.

The study, by Muhammad Abu-Bakar of Blossom Finance in Indonesia, explored the functionality of bitcoin and other cryptocurrencies to determine whether they fit with Islam’s strict definitions of money.

Read more: Egypt’s Grand Mufti issues Fatwa against Bitcoin

“Several recent fatawah issued by prominent Muslim scholars offered incomplete or contradictory opinions on the topic,” said Matthew Martin, CEO of Blossom Finance.

“With all the confusion out there, we wanted to offer clear guidance supported by solid research that benefits both laypeople and practitioners of Islamic finance.”

The study’s author points to the fact that bitcoin is recognised as a legal currency in Germany and therefore qualifies as Islamic money in that country.

“Bitcoin is permissible in principal as bitcoin is treated as valuable by market price on global exchanges and it is accepted for payment at a wide variety of merchants,” the study states.

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“Moreover, many private individuals accept bitcoin as a medium of exchange in their private transactions.”

Bitcoin’s dramatic price gains on Thursday, 12 April, have been largely attributed to a handful of actors who have significant holdings of the cryptocurrency.

In the space of an hour, more than a billion dollars worth of bitcoin trades were registered on exchanges – the largest one hour trade volume in history, reports said here.

Bitcoin is a virtual currency created from computer code. Unlike a real-world unit such as the US dollar or euro, it has no central bank and is not backed by any government.

Instead, Bitcoin’s community of users control and regulate it. Advocates say this makes it an efficient alternative to traditional currencies because it is not subject to the whims of a state that may devalue its money to boost exports, for example.

Just like other currencies, Bitcoins can be exchanged for goods and services — or for other currencies — provided the other party is willing to accept them.