CEIF Talks- "Shariah Perspective on Cryptocurrencies" by Dr. Farrukh Habib



bismillah ar-rahman ar-rahim assalamualaikum warahmatullahi wabarakatuh I am fond of Habib dr. Farahani from Ezra international Sharia research Academy for Islamic finance and I'm going to talk about cryptocurrencies and share your insights on it so first of all we need to understand that what are cryptocurrencies the the phenomena of cryptocurrency is quite recent and we can see that everybody every con in every conference every gathering is talking about it they want to know more about it they want to learn things which is which are related to cryptocurrencies and it's not only for ordinary people that the interest has developed among them but I think that it it is a major concern for governments for authorities monetary authorities and financial institutions and other relevant stakeholders and if you look from surely your perspective on crypto currencies like Shariah needs to for your Shariah first asks that what is it in its nature what is its nature what is exactly the the features and what are the fundamental characteristics of this thing so if you look at cryptocurrencies in a very broad definition and in a very broad concept it's a digital representation of and cryptocurrencies they use in encryption methods that is why they are called cryptocurrency because these methods are used to secure the transaction and securely transfer the value from one party to another party and if you particularly talk about Bitcoin Bitcoin is similar to either is a class of cryptocurrency which is again digital representation of value some people have defined it as a currency system or money system or payment system but I think that it's too early to say that it's a currency or our money because we have certain criteria and is called money and but from Sharia perspective we need to look also that whether the nature of cryptocurrency or Bitcoin itself is is it involved in intrinsically impermissible element or not for example is there any element either in distribution or in mining or in issuance or the system itself or the Bitcoin itself is is involved in any kind of impermissible activity intrinsically informational activity or not that is the first issue if you look at Bitcoin basically it's a digital number it can be sick stored and it can be obtained from a system and it can be stored on that system itself or in any electronic device which is connected to the Internet and and using for example like mobile phone or laptops or at on any dedicated device designed for storing Bitcoin so you can use it and you can use these kind of devices for that but the problem is it does not have any physical appearance but from share your perspective it doesn't matter that it does not have a physical appearance or not but as long as it has permissible element and fundamental elements it has a fundamental fundamental permissible elements and there is because from shariah perspective we have seen that the researchers have shown that intangible assets are also recognized as an asset class in Sharia but the problem is not that that it is intangible or tangible the problem with Bitcoin or cryptocurrencies is that they they represent a specific project or a specific company or a specific commodity so we need to look into the fundamentals of those companies or and we need to see this nature of business which the cryptocurrencies are representing to to form a sharia open upon that another issue with the crypto currencies is that people are interested in crypto currencies due to the speculative factor it is very high it's very highly volatile and because of that people would people want to exploit this nature or factor and due to this factor they are buying it and that's why you can see that the value of Bitcoin is going every day every time every minute but that is a major concern another one another major concern is about risks there are so many risks because there is no government backing there is a very short track ability and there is a very short history of Bitcoin itself and the system of Bitcoin is is not perfect as well we can we have seen so many hard folks at the in the system and if you look at the security perspective there are so many security loopholes in the exchanges of cryptocurrencies and we have also see that transparent transparent transparency is there but anonymity has given some concerns has given some room for the concerns about about using bitcoins and cryptocurrency for illegal activities so that is another concern and we have also seen that because it is decentralized and assured by a non-government and authorized institutions we have to look from Sharia perspective there whether it is permissible or not as well and so if you look from the hierarchy perspectives so Sharia has to see that whether it's small or not if it is not then is it man with a column or column army is basically a finite asset or not and then Maru the cover means like if you can drive benefit from or not from Sharia perspective and then we have to see whether there is a commodity of a currency is it of there are so many countries right now which are which have categorized Bitcoin in different in different classes for example some countries they are saying that is a financial realize that some countries are saying that it's a property of venue some countries are saying that it's only commodity a good some countries are whole whole opie the opinion that it's it's a currency so we have the office now has not been established here to to issue or to form entity in Sharia opinion that's another issue and the fourth most important issue is basically uncertainty and foreign there is so much uncertainty inherent in Bitcoin right now maybe by the time this will fade away but right now it's summation percent so I think that from Sharia perspective we have to from all angles and also we have to look from a solution area perspective and from economic benefits and economic advantages and social advantages and benefits also and because it's not regulated yet and there is no universal and in standardized regulations and legal framework for for dealing in cryptocurrencies and how we can use them a payment system or in any other activity that's made any person so I think that Sharia has to also look into this one and surely I squadrons are looking into it I have seen so many researches and inshallah in the future there will be more researches on it and I am also working on one researcher where I am trying to find out the conclusive concrete Sharia Roli contra frequencies so inshallah once it is finished I will be more than happy to share it and other Sharia scholars will be coming up and joining this issue and topic and working on it and I think that we will have more comprehensive understanding of the issue with that I close by this small speech and thank you for listening

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