Bitcoin has been seen by some in the Islamic community as an attractive financial tool that allows them to protect and grow their wealth while adhering to Islamic values that seek to avoid usury and speculation. The news that Indonesia's national Islamic council has announced that cryptocurrency is to be considered "haram," or un-Islamic, cuts against this point of view. However, to understand the nuance of how cryptocurrencies do or do not adhere to Islamic values, it's important to realize that various cryptocurrencies have important differences.
Bitcoin is a decentralized, peer-to-peer version of electronic cash that allows bitcoin payments to be sent directly from one party to another without going through a financial institution. Bitcoin transactions can be verified by anyone in the network and are recorded in a publicly distributed ledger called the blockchain. This is not the case for all, or even most, cryptocurrencies. While bitcoin is the safest and most robust digital currency, others function more like shares in an underlying corporation or project. And unfortunately, the current hype associated with cryptocurrencies has prompted an uptick in immoral, and often even illegal, scams.
Just a few weeks ago, a cryptocurrency called SQUID that exploited the name recognition of the hit TV show Squid Games, attracted an enormous amount of money from unwitting "investors" looking to make a quick buck by speculating that SQUID tokens could be sold for more money at a later time. Then, it crashed 99.9%.
With all of the pain people feel when they are cheated out of their money, it's reasonable for role models and religious leaders who care about their followers to advise against becoming involved with crypto at all.
However, bitcoin could not have less in common with SQUID. Its supply is not controlled by any one party or group. Its code is open source, meaning anyone can audit it for themselves. And the size of the bitcoin network has now grown to become the most powerful computing network in the history of mankind.
Bitcoin was not designed with Islamic values or principles in mind, but its properties happen to overlap with many of the properties of 'halal' money. Because it is deflationary, it provides for a store of value across time that does not require interest to offset inflation.
At Coinbits, we are proud of our outreach activities with the American Islamic community. We have helped hundreds of Muslims access financial services utilizing the Bitcoin network, enabling them to take advantage of bitcoin's many benefits in an ethical manner.
As the mainstream becomes more educated about digital money, it will become increasingly apparent that lumping all "cryptocurrencies" together causes more confusion than clarity, and that bitcoin stands apart.