Why do we say that a digital currency is forbidden and when is it permissible?

Cryptocurrencies are a type of currency that relies on encryption technology and operates decentralized on the Internet without intermediaries or governments controlling them. The most famous of these currencies are "Bitcoin" and "Ethereum" and others. With the spread of digital currencies, questions have arisen about the ruling on dealing with them in Islam, and whether they are permissible or forbidden? To answer this question, we must study the subject from the perspective of Islamic law and analyze the nature of digital currencies and their impact on financial transactions.

First: Reasons that may make digital currencies forbidden

1. High risk and uncertainty (high uncertainty):

Islam emphasizes the need for clarity in contracts and financial transactions to avoid gharar (ignorance or risk). Cryptocurrencies are often considered high-risk due to their rapid and large market fluctuations, which is a type of gharar that can lead to large losses without a justified or clear reason.

Individuals may buy cryptocurrencies with the intention of making quick profits through speculation, which increases the potential for fraud.

2. Ignorance of the source and value:

Sometimes, the sources of cryptocurrencies may be unknown or unclear, raising doubts about their legitimacy. There may be opaque or unreliable transactions, such as dealing with darknets or websites that use cryptocurrencies for illegal purposes such as money laundering or financing illegal activities.

The lack of a central authority to control the currency increases the uncertainty, making it difficult to determine its true value and making dealing with it risky.

3. Using digital currencies in prohibited activities:

One of the main issues that could lead to the prohibition of cryptocurrencies is the possibility of their use in illegal activities, such as financing terrorism or drug trafficking. Cryptocurrencies are sometimes used to buy and sell illegal goods online because it is difficult to trace the source of the funds.

4. Gambling and speculation:

Excessive speculation on cryptocurrency prices is often similar to gambling. Many people enter the market without a deep understanding of the market, and rely on luck to make a profit, which can lead to huge losses. This type of financial transaction is considered close to gambling, and is forbidden in Islam.

Second: When are digital currencies halal?

On the other hand, it can be said that digital currencies may be permissible if they are dealt with according to certain conditions that ensure that there is no fraud or injustice in the transactions. Here are some of the conditions that must be met to make dealing with digital currencies permissible:

1. Clarity of the contract and transparency:

If the contract between the two parties is clear and there is no uncertainty or misunderstanding, dealing in digital currencies can be permissible. The contracting parties must be fully aware of the exact nature of the currency and its market value at the time of contracting.

2. Avoid speculation and gambling:

Trading in digital currencies should be for real investment and not speculation for quick profit or gambling. The intention should be to use the currency as a legitimate means of trade or long-term investment and not to make quick, unsustainable profits.

3. Not to deal in prohibited activities:

Cryptocurrency transactions must be legitimate and not be used for activities prohibited by Sharia law such as money laundering or financing illegal activities. It must be ensured that the funds used are invested in halal and lawful activities.

4. Avoid usury:

If the digital currency is used in transactions that involve usury, then this is considered forbidden. Therefore, it must be ensured that dealing with digital currencies does not include interest or unlawful increases.

There is no consensus among jurists on the ruling on digital currencies, but there are general trends that can be divided into the following opinions:

1. The first opinion (prohibiting dealing with it):

Some scholars consider cryptocurrencies to be haram due to the high risks and unreliable speculation, in addition to the possibility of their use in forbidden activities. This opinion is based on issues of uncertainty, ignorance, and instability.

2. The second opinion (permissibility of dealing with it under conditions):

Some jurists believe that cryptocurrencies can be permissible if certain conditions are met, such as clarity in contracts and avoidance of prohibited activities. These jurists consider that the technology itself is not forbidden, but the way it is used determines the legal ruling.

3. The third opinion (wait and watch):

There is a group of scholars and legitimate institutions that call for caution in issuing a final ruling on digital currencies until they are better regulated and their legal and economic nature is clarified.

conclusion

Ultimately, the ruling on cryptocurrencies in Islam depends on the nature of their use and the circumstances of dealing with them. If Sharia conditions such as transparency, no speculation, and avoidance of forbidden activities are adhered to, cryptocurrencies can be halal. However, if the transactions involve uncertainty, gambling, or ignorance, they may be haram. Therefore, Muslims are advised to verify the details of the transaction and seek reliable fatwas before dealing with cryptocurrencies.