Role of digital currencies in Islamic Finance

For the past few years, there has been a significant increase in people’s interest in digital currencies. Some argue that it's good to have the liberty to the current financial system in which the predominant part is played by banks while the digital currency doesn't necessitate any bank account, imposition payment and auditing. Others dissent with these arguments and claim that any mode of payment other than traditionally known instruments parallel as cash payment, cheques etc. will open the door to avoid impost and auditing, which in turn will make serious trouble to government budget and the overall falloff in GDP.

This probation uses theoretical, descriptive, and sound systems of probation and so focuses on defining the place of digital currency in the fiscal system by determining the extent of its influence, comparing the characteristics of paper have and digital currencies. In this article we are trying to unveil the Shariah Perspective of Digital currency and the reality of digital currency trading in Islamic countries.

The Main Characteristics of Digital Currencies

The following are the main characteristics of digital currencies (using cryptocurrencies as an example):

• Decentralized nature.

• Absence of the control.

• They aren't backed by any asset.

• The maximum emission is limited and current volume is known to all user.

Digital Currencies from an Islamic Perspective

It can be stated presently that while academicians dispute whether digital currency is a secure currency or not, Muslim scholars view it from a different perspective, i.e. the extent to which digital currencies compose with Shari’ah principles. Multicolored opinions of noted experts of Islamic finance, both proponents and opponents of digital currencies, are available on the internet. The ensuing experts express their support for digital currencies and that they believe in compliance of digital currency with the Shari’ah law.

Dr. Adnan Al-Zahrani,ex-chairman of the Shari’ah Supervisory Board of Al-Jazeera Bank says "Digital currency is one of the types of currencies that arose as a result of the process of developing. In other words, it was an ordinary exchange similar to gold and silverware coins, and either paper money. And this is normal".

Mufti Abdul Qadir Barkatullah, a member of the Sharia Committee in Al-Ryan Bank, formerly the Islamic Bank of Great Britain says: "I'm convinced that digital currencies can be an effective tool for the additional development of Islamic finance". In addition, he recalls the rule among Muslim scholars that any commodity that's perceived by society as a means that can play the function of means of payment must be perceived as Money.

On the other hand, there are experts who oppose digital currencies. For example, Sheikh Imran Hussain, one of the famed Muslim scholars, believes that any currency that doesn't have essential value cannot be considered as valid Money. Therefore-in his opinion-only gold Money can meet the criteria of the Shari’ah.

Currency in Islamic shari'ah ordinarily should be touchable, which implies one can view it as a plutocrat (Mal), it must be variable, and either it must be licit. Investigators of shari'ah have three suppositions the first opinion, Crypto isn’t (Mal) and the venture has not complained of Islamic shari'ah on the grounds that it's simply academic. All together for the Money to perform, the coexistent conditions must be met so as to be open acknowledgement, as opposed to the unique, to meet the debts and fiscal arrears.

So as to "fund any game", you should know the prerequisite of Islamic finance. There are many prerequisites that every entity that manages Islamic banks or Islamic financial institutions should place into advisement which are as the following:

1. Prohibition of interest rate: Interest must be banned on obligation and ought not to be approached to pay, to admit or promise to pay.

2. Giving a wrong idea or stamp (misdirecting): “Specialists shouldn't misdirect their exchange abettors. Exchange abettors are capable of comprehending what they buy, additional exchange abettors must have the option to take their own calls in chance".

3. Real substance: Offering products and services should be through real or true existent, not a virtual existent.

4. Islamic law (Shari'ah) is barred and prohibits Gambling.

5. Imperative to give a sum of Money to a charity or destitute people as a donation.

Conclusion

The reality of digital currency trading in Islamic countries can be summarized as; Bahrain, UAE and Sudan are the countries that allow digital currency to be traded legally and these countries; Egypt, Saudi Arabia, Jordan, Syrian Arab Republic, Oman and Palestine are the countries that have legally prohibited digital currencies but not legal treatment and these countries allow the trading of digital currencies legally, but Sharia prohibits the circulation of these currencies (and suspended the prohibition until further study, which may indicate the possibility of its approval later and that the circumvention is not conclusive). Qatar, Algeria, Morocco, Kuwait and Libya are the countries that legally prohibit the circulation of digital currencies and these countries legally prohibit the trading of digital currencies.

Finally, Somalia, Mauritania, Djibouti, Comoros and Tunisia are the countries that have not yet decided on digital currency trading and these countries are neutral and have not yet taken a decision regarding the trading of digital currencies legally or legally, and the matter is still under study, yet currencies are traded in them.