Bitcoin has recently surged, and there are many possible explanations as to what could have caused that sudden spike in value.
Some theorize that the move by many investors from long-term to short-term could be the cause.
Other think that because tax day in the Us is approaching, a lot of investors are selling off their Bitcoins in order to pay the tax man.
Then there is the news surrounding cryptocurrencies in the Islamic world.
Islamic banking and the economy
Islam is the fastest growing religion in the world, which has prompted the International Monetary Fund to start seriously discussing Islamic banking.
How is Islamic banking different? When Sharia is applied, only value-backed currency is considered halal.
This means that any currency backed by gold, for example, would be considered permissible.
Bitcoin, as it currently stands, is not backed by any such good with intrinsic value.
Therefore, there has for a long time been uncertainty as to whether practicing Muslims would be allowed to trade in cryptocurrencies like Bitcoin.
The uncertainty stems from understanding what cryptocurrencies actually are: are they currencies, commodities, or both?
Since the 1.6 billion Muslims account for almost a quarter of the world’s population, it would not be surprising if the opening of the Islamic market could have a significant impact on the value of Bitcoin.
Bitcoin is declared halal
The CEO of Blossom Finance, Matthew J. Martin, elaborated on why there had been confusion, and why it needed to be cleared up:
“Contrary to popular myth, Shariah law is not single set of rules; it’s is a scholarly field subject to differing interpretations and opinions on various matters. Several recent fatawah issued by prominent Muslim scholars offered incomplete or contradictory opinions on the topic. With all the confusion out there, we wanted to offer clear guidance supported by solid research that benefits both laypeople and practitioners of Islamic finance”
As for the Islamic interpretation, the Mufti Muhammad Abu Bakar offers his opinion:
“Bitcoin and similar cryptocurrencies fulfill the economic roles of money – acting as medium of exchange, unit of account, and store of value – and also gain status as Islamic money by being “customary money”. Shariah recognizes customary money as being anything that gains monetary status through wide acceptance in society or by government mandate.”
It would thus seem that, according to Islamic interpretation, Bitcoin could be seen as permissible, depending on whether or not the country it is being used it regards it as legal tender.
ICOs not necessarily halal
When it comes to ICOs (Initial Coin Offerings) Mufti Muhammad Abu Bakar’s stance is a bit more careful:
“ICOs, or initial coin offerings, often lack clarity on a) what are investors actually buying, and b) what are the investors’ rights. Many such offerings likely fall afoul of having gharar, meaning, excessive uncertainty, and therefore do not qualify as permissible Islamic investments.”
However, NOORCOIN has branded itself as the “world’s first sharia-compliant utility token”. For Muslim investors uncertain about how permissible ICOs are, NOORCOIN would, therefore, seem to be a good bet.