Malaysian religious authorities announced the permissibility of cryptocurrency as Halal. Not long after they made the historical decision, many religious scholars in Malaysia say that crypto is a venture worth investing in. The landmark judgment may have global implications as Muslims make up 26% of the world’s population. Now, Islamic economists have been talking about crypto Sukuk.
The Chairman of the Securities Commission of the Shariah Advisory Council, Dr. Mohd. Daud Bakar said that the crypto sector had great potential. But, its adoption in the country faced many challenges due to a lack of know-how about this new asset class.
“Only about 2% of the people in the country had knowledge about cryptocurrencies. The digital asset was not considered as a legal tender according to Shariah up until recently. Potential traders could treat it as a currency. However, it could only be allowed if it was not backed by “ribawi items,” things that could be traded the same as silver and gold”.
He also stated that it was a legal tender. The government could not stop individuals from using it as a medium of exchange.
“By accepting digital currencies, many new sectors in Malaysia would experience bullish trends. We should consider it as an investment resource that people can use to buy and hold for trading purposes. He further noted that trading in cryptocurrencies will help Malaysia grow its digital economy.
Is Tokenize Technology Also Halal?
The Securities Commission of the Shariah Advisory Council also approved Tokenize Technology as a Shariah-compliant currency. As a result of the approval, it has experienced massive growth in the country. CEO ofTokenize Malaysia told the media that his foundation was experiencing a 30% to 40% increase in trading volumes on daily basis.
For months crypto was not approved because of its use in betting online to avoid the prying eyes of the regulators. In Malaysia, esports is becoming more mainstream than it used to be. The government allocated huge funds to grow the esports industry, leading to the rapid development of the sector and the great potential of cryptos. The esports sector has experienced a boom together with the growth of crypto exchanges. The audience of esports in Malaysia has grown steadily over the past five years.
Dr. Bakar said that the approval has opened more investment opportunities for potential corporate or individual investors. Just like in many countries, enthusiasm for digital currencies has grown in Malaysia. As a result of the COVID-19-related lockdown limiting travel, the country lost about 2.4 billion ringgit, an equivalent of $553 million. Despite the economic crisis which affected every part of the world, the use of digital currency as a medium of exchange in Malaysia has shown solid development, as per two government-affirmed crypto trades.
With more than 60% of the people in Malaysia practicing Islam, fintech firms have the chance of welcoming new Muslim traders into the digital market sector. The nation has about three authorized trades at the moment, which include Luno Malaysia, Synergy Technologies, and Tokenize Malaysia. Binance has not been approved to operate in the region, yet, it supports the Malaysian local currency, the Ringgit.
The manager of Luno clarified that a few financial specialists are utilizing digital forms of money, like Bitcoin, to enhance their portfolios since they are stressed that large stimulus bundles and economic crises worldwide could prompt inflation in the country and elsewhere.
What do Other Religious Scholars say About Cryptocurrencies?
The simple answer to the question is that cryptocurrencies are generally halal. However, it has to fulfill a number of criteria to be fully permissible by Shariah.
Criteria For Permissibility of Cryptocurrencies
According to Shariah scholars, everything is halal unless proven otherwise. the same principle applies to cryptocurrencies.
What Is The Final Verdict On The Permissibility of Cryptocurrencies?
Religious scholars around the world seem to have differing opinions on the permissibility of cryptocurrencies. In 2018, an Indonesian advisor to a local fintech organization said that Bitcoin was acceptable in Islam. Before the ruling, Matthew Martin, the CEO of the firm, told Cointelegraph that there was a possibility that crypto could be permissible according to Shariah as it is based on proof of work instead of debt.
The Sharia Advisory Councils are the major authorities that control the enacting of Islamic laws in the function of Islamic financial institutions. Malaysia’s advisory body declared that digital asset trading was allowed in Islam.
The speculative nature of cryptocurrencies has triggered debate among Islamic scholars over whether cryptocurrencies are halal. Cryptocurrency companies seek to sway the debate by launching instruments based on physical assets and certified as valid by Islamic advisors in the past.
To limit speculation, some companies are already backing cryptocurrency units with physical gold as collateral.
As there are more than 1.8 billion Muslims living in the world, the verdict by Malaysian religious scholars will have global implications.
But, Are Cryptocurrencies Safe?
Recently, the UK`s financial watchdog banned the largest cryptocurrency exchange, Binance from performing any business activities in the country. An article published on The Financial Times website stated that Japan`s Financial Services Agency had also complained about Binance for conducting unauthorized trade in cryptocurrencies with the Japanese citizens.
Germany had similar concerns about the cryptocurrency exchange, Binance stating that it had violated securities rules over its launch of trading in stock tokens.
Why Are Financial Regulators Cracking Down On Cryptocurrency Industry?
Financial regulators have serious about trading in cryptocurrencies due to the following reasons.
- The industry could become a source of money laundering and fraud
- The individual assets controlled by consumers could be jeopardized
What Should the Muslims Do?
There is no doubt Muslim scholars in various countries have declared cryptocurrencies as Halal. But, it may be just one side of the story. Consumers may want to be careful while trading in these currencies due to the concerns raised by financial watchdogs in different countries. So, the best strategy would be to act wisely. But, make no mistake. Cryptocurrencies are here to stay for a long time to come.