Know Why Cryptocurrency is Haram in Indonesia

Indonesian Ulama Council (Majelis Ulama Indonesia) has issued a legal fatwa for cryptocurrency. The fatwa stipulates that the use of cryptocurrency is haram. The fatwa was ratified in the 7th Ijtima Ulema Forum in Indonesia back in November 2021.

What is cryptocurrency?

A cryptocurrency is a digital currency. It is designed to allow users to make online payments anywhere. A transaction using cryptocurrency does not involve any banking activities. It has a security system called cryptography that is able to protect it from counterfeit or double-spend. Many types of cryptocurrencies apply decentralized networks using blockchain. As cryptocurrency is not issued by any government, theoretically it can avoid government interference or manipulation. 

Bitcoin is the first blockchain-based cryptocurrency. It has been the most popular and valuable digital currency today. Many other cryptocurrencies appear in the market such as Ethereum, Tether, Shiba, Cardano, etc. Accordingly, people praise cryptocurrency for its transparency, portability, or inflation resistance. However, it also draws some criticism, such as exchange rate volatility and its use for illegal actions.

Reasons why the cryptocurrency is haram by Indonesian Ulama Council

Based on the ijtima, the use of cryptocurrency as a currency is haram. Because it contains gharar (uncertainty), dharar (to inflict harm), and against Indonesian Laws No.7 of 2011 and Central Bank (Bank Indonesia) regulations No. 17 of 2015 about currency.

As a digital asset, cryptocurrency is also haram or unlawful to trade. It is because cryptocurrency contains gharar, dharar, and qimar (betting and wagering). Besides, it does not meet the Shariah requirements of the commodity (sil’ah), such as possessing a physical form, holding a value, knowing for specific amounts, ownership right, and people can hand it over to a buyer. In other words, it potentially becomes similar to gambling.

Nevertheless, cryptocurrency becomes lawful to trade if it fulfils the requirements as a commodity (sil’ah) from Shariah’s perspective. The requirements include the existence of a physical form, possessing underlying resources (assets) and evident benefits, ownership, and deliverability.

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