Bitcoin's Sharia Legitimacy: Strength and Implications as a Financial Tool
https://journal.iain-manado.ac.id/index.php/TJEBI/article/view/3232/1731
Abstract
This study reconciles conflicting viewpoints on Bitcoin by offering a Shariah-based perspective. It utilizes contemporary interpretations of Quranic verses, fiqh principles, and hadith to demonstrate Bitcoin's potential as a currency. A qualitative approach, combined with normative analysis, interdisciplinary perspectives (economics and Islamic law), and a descriptive-comparative method based on David Ricardo's theory of comparative advantage, was employed to assess Bitcoin's legitimacy as a medium of exchange in Islamic economic contexts.
The findings indicate that Bitcoin shares attributes with gold, such as scarcity, divisibility, mobility, and durability, making it a suitable store of value. While institutions like MUI and LBM NU East Java classify Bitcoin as haram due to ambiguity, harm, and speculation, this study contends that a correct understanding reveals Bitcoin's compliance with fiqh principles. Blockchain transparency reduces dharar (harm) and manipulation, offering an ethical alternative to fiat currency. Bitcoin's intrinsic worth aligns with Islamic financial principles, unlike fiat currency, which is prone to inflation and value depreciation.
By understanding Bitcoin's foundations, consumers can minimize gharar (uncertainty), dharar, and speculation. Blockchain technology ensures transparency, prevents manipulation and abuse, and allows for price formation based on supply and demand, akin to traditional currencies. These attributes highlight Bitcoin's potential as a Sharia-compliant medium of exchange that addresses the limitations of fiat currency while providing inflation protection.
Introduction
In the age of globalization and digitalization, the need for efficient payment systems has spurred financial innovations, including credit cards and cashless societies. The emergence of cryptocurrency, particularly Bitcoin, represents a significant advancement in financial technology. Bitcoin stands out for its ease of use, decentralized system, and independence from intermediaries like banks.
Powered by blockchain technology, Bitcoin is a digital currency without a physical form, relying on hashed data blocks for secure and transparent transaction validation. Since its inception in 2009, Bitcoin has experienced remarkable growth, attracting attention from investors, economists, and policymakers. By 2024, Bitcoin ranks ninth among the top ten global financial assets, trailing only gold in market capitalization. Its deflationary tendencies, divisibility, and resistance to centralized control position it as a potential alternative to fiat currencies. However, its adoption remains challenging, particularly in Islamic finance contexts.
In Indonesia, the world's most populous Muslim-majority country, concerns about Bitcoin's Sharia legitimacy are especially significant. Divergent legal interpretations, including fatwas from the Indonesian Ulema Council (MUI) and LBM NU East Java, raise concerns about gharar (uncertainty), dharar (damage), and speculative elements in Bitcoin transactions. These issues have created uncertainty among Indonesian Muslims regarding Bitcoin's permissibility as a financial tool.
The development of Bitcoin has provoked significant debates within the Indonesian Muslim community, influencing economic, ethical, and religious perspectives. Economically, Bitcoin attracts younger investors and promotes financial inclusion for the unbanked, though its volatility raises concerns about risk-sharing in Islam. Religiously, fatwas declaring Bitcoin haram emphasize issues of gharar, dharar, and speculation, while proponents highlight blockchain's transparency and alignment with Islamic principles. Ethically, Bitcoin challenges perceptions of gambling-like activities while offering opportunities to promote riba-free and inclusive financial practices.
Despite being recognized as a commodity in Indonesia, the lack of Islamic banking norms limits its adoption. Bitcoin's impact underscores the need for clear guidance that integrates Islamic principles with modern financial innovations. This study addresses these dissenting views by providing a Sharia-based perspective, utilizing interpretations of Quranic verses, fiqh principles, and hadith.
It also examines Bitcoin’s comparative advantages over fiat currencies through David Ricardo’s theory of comparative advantage, which emphasizes economic superiority through unique, hard-to-imitate attributes like innovation and efficiency. Bitcoin's decentralized structure, resistance to inflation, and potential to enhance financial inclusivity exemplify these attributes, making it a subject of significant interest.
This study's novelty lies in its focus and interdisciplinary methodology. Previous research often concentrated on Bitcoin's technical aspects, risks, and market volatility, or critiqued its compliance with Sharia principles without offering practical solutions. In contrast, this research combines Islamic jurisprudence, economics, and blockchain technology to evaluate Bitcoin’s legitimacy.
Focusing on Indonesia, it analyzes cultural, legal, and religious factors influencing Bitcoin adoption. It explores how blockchain technology can address Islamic finance challenges such as gharar and dharar while assessing Bitcoin’s potential as a Sharia-compliant, inflation-resistant medium of exchange. This study provides a practical Sharia framework for cryptocurrencies in the Indonesian context, contributing uniquely to the fields of Islamic and digital finance.
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Bitcoin's Sharia Legitimacy: Strength and Implications as a Financial Tool \ stacker news
Abstract This study reconciles conflicting viewpoints on Bitcoin by offering a Shariah-based perspective. It utilizes contemporary interpretations ...
