This document discusses crypto-currencies from an Islamic finance perspective. It outlines how the objectives of Sharia are to protect human well-being and ensure fairness in financial transactions. Money plays an important role in Islam, and the characteristics of money according to Sharia are that it must be a medium of exchange, store of value, and unit of measurement. While some argue crypto-currencies are impermissible due to volatility, the document states that volatility exists in all currencies and is a human behavior not interfered with by Sharia. It concludes that regulatory standards could allow crypto-currencies to become an essential part of life consistently with Sharia.

1. Crypto-currency in Islamic Finance.
Crypto-currencies are a reality that we neither can ignore nor avoid. This
short article will not discuss the functionality of the digital currency but
provides a personal view from the sharia perspectives. To start with, few
people understand the role of Sharia in Islamic finance. In general, the
Sharia as a system of living has been revealed primarily to protect human
well-being (maslahah) and this being one of the general objectives that it
plans to realize, the Sharia therefore aims to facilitate the realization of
maslahah and the removal of hardship. For instance, in financial
transactions, it is realized by guaranteeing freedom of contract within an
atmosphere of fairness, equity, justice and high morality. In other words,
the Sharia is designed at ensuring equal and fair business transactions
and protects parties against exploitation, fraud, misrepresentation,
explicit or implicit harm and injustice to anyone in the contract. The
Quran (5:1), God says: “O ye who believe! Fulfill your undertakings.”
Hence, the Sharia regulates all aspect of life (social) and transactions
(economic). Notwithstanding, in any transaction, money is the main
consideration.
The history of money began well before the advent of Islam and Islamic
civilization. Gold, silver and copper coinages were commonly used in pre-
Islamic Arabia. Money while being widely discussed in Islam is a
determining factor to mitigate whether a transaction is void, lawful or
unlawful (Riba). Riba is also interpreted when money produces money,
work is hindered, unemployment spreads, prices go up, money becomes
monopolized by rich people, and the gap between the poor and the rich
becomes wider. Some examples of Money in the Quran are: God will ask
man about money; how he earned it, and how he spent it (Quran 3:186)
and God has made it clear that money is the essence of life and that
people’s lives depend thereon [Quran 4:5]. This means that a person lives
by it and if he loses it he will be lost. As life depends on it one should
preserve it in order to fulfill one’s needs. Hence, preservation of wealth is
strongly recommended in Islam (a topic which requires full research).
Having said that, Islam recognizes the importance of Money and prefers
the usage of money over barter system although it is permissible that
capital can be contributed in the form of fungible assets. The
characteristics of money therefore according to the Sharia (unanimously

2. agreed upon by majority of the Scholars) shall contain the following
conditions which are derived from the “ruling of currency trading”.
• Money is a medium of exchange
• Money has a store of value, and
• Money is a unit of measurement
Similarly, Money has no intrinsic value. Most currencies are issued by
Central Banks and thus become legal tender. However, legal tender is not
a Sharia requirement on the basis that a currency is generally accepted by
the public, fulfills the role of money irrespective of whether it is legal
tender or not to acquire goods and services. This argument is based on the
fact that there were many forms of unregulated currencies in the past and
during the time of the Prophet Muhammad (pbuh). In the present day, it
is argued by some scholars that the governments (central bankers) have a
role to play in managing the demand and supply of money. Some have also
claimed that crypto-currencies are not permissible due its volatility. The
issue of volatility is common to any currency and it is a human behavior.
The Sharia does not interfere in demand and supply.
In the case of crypto-currencies, the sum is digitally transferred. The
motivation of crypto-currency is about the shift from intermediaries and
regulated currencies. Being digital in nature, it has two significant
characteristics that our existing currency does not carry. First, crypto-
currencies are borderless and second they are costless in the long run. It is
clear that crypto-currencies issued by other than central bankers do not
have seigniorage value - the cost of printing them and owning it are
irrelevant in digital currency.
On top of the above, “Blockchain” is incomplete without digital currencies /
crypto-currencies. Blockchain has become a reality and a powerful digital
platform that can be quickly and easily accessed and shared by many. It
has various levels of transparency depending on application, immutable
(you can only add to it –you cannot alter history) and cryptographically
secured. Meaning to say that everything that we do in this world will be
block-chained for the hereafter. The Quran 99:7-8 mentioned that “Then
shall anyone who has done an atom's weight of good, see it and anyone
who has done an atom's weight of evil, shall see it”. This is an example of
the Quran does not only contain stories of the past, but speaks also about
the future.

3. Finally, the future of crypto-currencies depends on regulators. Once
regulatory standards are refined and adopted, crypto-currencies will play
an essential part in our life. This will be the end of counterfeit notes in the
market and transparency (enemy No.1) in the corporate world will be
more prevalent.
Lastly, in the Islamic finance arena, according to the Accounting and
Auditing Organization for Islamic Financial Institution (AAOIFI) first
Sharia standard is on “Trading in Currencies” and it has recently issued a
sharia standard on Gold. Both standards could consider having relevant
information on the sharia rulings relating to digital currencies.
Any currency which is acceptable to any community, is a currency. It may
be subject to the regulatory requirement but due diligence exercise of the
mining and the operations are pre-requisite for Sharia approval.
DR. MUNIRUDDEEN LALLMAHAMOOD