Does Sharia recognize the price of encrypted digital currencies?

Abstract

Undoubtedly, the emergence of cryptocurrencies and their successful performance recently has imposed upon Shari’a scholars the challenge of addressing related Shari’a issues and providing Muslims with clear answers as to whether or not they can deal with, or invest in, these currencies. The challenge, however, is in demystifying these currencies and understanding their technicalities and economic implications, because no Shari’a rule can be issued about something before having a complete and thorough understanding of its nature. Hence, it is necessary to first study the technicalities of these currencies in order to address their various Shari’a issues. Cryptocurrencies involve various Shari’a matters, including the very permissibility of their issuance in view of the fact that they are not backed by real valuable assets or supervised by governments or financial authorities, such that people dealing with them are vulnerable to possible fraud and manipulative fluctuations in their values. Other Shari’a issues also include trading in them and whether or not they are considered as interest-bearing (ribawi) commodities such that the injunctions pertaining to interest (riba) may apply to them, as they apply to conventional currencies. In addition, they have potentially negative implications for the market, such as their use in money laundering, drugs trafficking and other illegal dealings. This paper treats the Shari’a aspects of cryptocurrencies using both an Islamic jurisprudential (fiqh) approach as well as a ‘Higher Objectives of the Shari’a (maqasid al-shariah) approach - treating their Shari’a issues from a macro and philosophical perspective. It is hoped that this paper will provide solid .ground for future research to build on its findings.