The future of cryptocurrencies in Indonesia, the world’s largest Muslim country, is now in question after the National Ulema Council (MUI) ruled that cryptocurrencies do not follow Sharia rules and should not be utilized by Muslims.
In a report by Bloomberg, MUI labelled cryptocurrency trading as haram because it contains elements of uncertainty, gambling or wagering, and harm. According to Asrorun Niam Sholeh, head of fatwa at MUI, cryptocurrencies as commodities or digital assets should follow Shariah rules and result in clear benefits before they allow trading.
Bloomberg notes that the MUI’s mandate is to ensure Shariah compliance in Indonesia, with the finance ministry and central bank consulting them on Islamic finance questions or issues. The decision is not yet an official decree and will not prevent all crypto trading in Indonesia, but it will probably discourage Muslims from participating and make local institutions reconsider issuing cryptocurrencies.
Furthermore, there has been a rise in religious conservatism in Indonesia, which may result in more Muslims adhering to religious tenets and requirements.
As early as 2018, the question of whether crypto is halal or not has been raised by governments and Muslims around the world. Islam frowns upon speculation, and cryptocurrencies have been known to be speculative in nature.
In response, cryptocurrency firms have attempted to influence the discussion by releasing products that are based on real assets and approved by Islamic authorities, according to a report by Al Jazeera.
The report also shows that religious permission is significant and may influence whether Islamic financial institutions and organizations, which are officially committed to Islamic law’s principles, engage in crypto transactions.
Despite these, the Indonesian government has been favourable to crypto-assets, allowing them to be traded in commodity futures and pushing for the establishment of a crypto-focused exchange by the end of 2021.
Over the last year, crypto trading in Indonesia has reached record highs. In the first five months of this year, total cryptocurrency transactions in 13 authorized crypto exchanges have risen 40%t to Rp 370 trillion or $26.1 billion, from Rp 65 trillion $4.5 billion for the whole year 2020.
Other Muslim-majority countries like the United Arab Emirates, Malaysia, and Bahrain have allowed crypto trading. The Fiqh Council of North America has also unanimously allowed bitcoin trading.
Shazia Hussain of Qardus believes that as long as bitcoin investments do not incorporate haram activities, bitcoin itself does not violate any Islamic finance rules that govern investments, money management, and currencies.
“Although many Muslim scholars have determined that investing in cryptocurrencies is halal, there will be some Muslims who will want to adopt a wait and see policy. What seems clear is that conceptually, bitcoin and cryptocurrency as a whole do not appear to be impermissible according to Sharia law rules. The growth of the Islamic cryptocurrency exchanges and coins does mean that there is more clarity and regulation than ever before for Muslims looking to invest in digital currencies,” she added.