The Indonesian crypto space is currently concerned with a question of theological nature. Are cryptocurrencies “haram”?
In the still young crypto space, questions arise after questions. Often it is about regulatory issues: Is Ripple a security token? Should the tax holding period for staking be extended? Is BTC mining harmful to the environment? Now a message is circulating from Indonesia that adds a theological aspect to the spectrum of discussion about cryptocurrencies.
In the largest Muslim country in the world by population, there is a branch of the country’s largest Islamic organization, Nahdlatul Ulama (NU), in the province of Jawa Timur in a so-called Fatwa Cryptocurrencies are referred to as “haram” (sinful). That reported the Indonesian news portal tempo.
A fatwa is a kind of non-binding legal opinion in Islamic law (Sharia), which is part of a discussion group, the Bahtsul Masail, is created. NU chairman Kiai Azizi Chasbullah justified the judgment as follows:
The participants in the Bahtsul Masail are of the opinion that the government recognizes cryptocurrencies as a commodity, but cannot legalize them according to Islamic Sharia law.
NU chairman Kiai Azizi Chasbullah
According to the members of the panel, cryptocurrencies were a means of breaking the legality of transactions. Furthermore, the digital assets can also be used as a tool for fraud.
Islamic law: possession allowed, interest not
In fact, the question of the compatibility of cryptocurrencies and Sharia law is a hotly debated topic – also within circles of Muslim scholars. While some hold positions similar to those of the NU, others do not see any “breach of law” in action or behavior. In the neighboring state of Malaysia, for example blessed the Sharia Board of Directors of the National Securities and Exchange Commission stopped trading digital assets in July last year.
In general, somewhat different financial rules apply to Muslim countries than in the rest of the world. Such is generating interest (Riba) strictly forbidden, however, ownership of shares, for example, is not. Since the boundaries can easily become blurred here, there are projects that try to provide Muslim investors with guidelines to reconcile faith and financial interests. For example, an Australian development team is currently working on a DeFi platform that should be compatible with Sharia law.
Aside from the theological issue, the crypto market is booming in Indonesia. According to the national Ministry of Commerce, the archipelago had about 6.5 million crypto investors in May, more than the domestic stock market on the Indonesia Stock Exchange (5.7 million). A crypto law in February 2019 made trading in cryptocurrencies possible in Indonesia, to the chagrin of the national central bank. To this end, in May of this year, it started a pilot project on the usability of a digital central bank currency.