The Tarjih Council and the Central Executive Tajdid of Muhammadiyah, one of Indonesia’s major non-government Islamic organizations, have issued a new fatwa prohibiting Muslims from using cryptocurrencies, calling it haram (illegal).
The fatwa, or Islamic legal opinion, was issued on Tuesday, and it highlighted two key concerns with cryptocurrencies that make them illegal as an investment instrument and a medium of exchange under Islamic law:
- Cryptocurrencies are unsuitable as an investing tool due to their speculative character. The crypto tokens are thought to have “gharar” (obscurity), implying that they are not backed by something tangible, such as gold, and hence are illegal under Islamic law.
- Cryptocurrencies do not fit the requirements of Islamic barter or medium of exchange rules, which need legal cash to be accepted by both parties.
“This speculative nature and gharar is forbidden by the Shari’a as the word of God and the hadith of the Prophet SAW and does not meet the values and benchmarks of Business Ethics according to Muhammadiyah.”
Muhammadiyah is the third Islamic organization in Indonesia to issue a fatwa prohibiting the usage of bitcoin. Previously, the Indonesian Ulema Council (MUI), the country’s highest clerical organization, deemed crypto haram as a transactional tool in November 2021. It did say, though, that crypto assets can be utilized as an investing instrument if they follow sharia principles. Another important Islamic body, the Nahdlatul Ulama (NU), declared crypto haram in October 2021 because to its speculative nature.
Despite mounting requests from Islamic organizations in Indonesia to prohibit the use of cryptocurrency, the country has seen a massive increase in popularity. In 2021, the country had $9.8 billion in crypto transactions, up 1,222 percent from the previous year. Not just for investments and transactions, but also as a trading commodity, crypto has become the preferred currency of many worldwide crypto exchanges.