Full Lecture Transcript (Cleaned)
Introduction and the Question — 0:00
Brother Tariq from Auckland, New Zealand emails and asks that recently a fatwa has been given by a national council of ulama in a particular Muslim land saying that Bitcoin is haram. He has heard me state in the past that Bitcoin is halal, so in light of this new fatwa, he is asking: can I comment on it and what are my thoughts about this?
The Two Scholarly Camps — 1:21
To respond to this question briefly without trying to rehash an entire lecture I gave about Bitcoin in the past: this fatwa has just been released by a particular Muslim country. To be honest, I read it and there's nothing new in it per se. The same arguments are hashed and rehashed about Bitcoin and about cryptocurrencies overall for the last six or seven years, and respected councils have spoken about this.
There are predominantly two main camps. The first of them — which includes this country and other great scholars — say that it is completely impermissible, it is haram, and they have a number of various evidences (five or six they mention). The second position — which is what I have advocated, and the Council of North America and many finance experts across the globe — say that it is halal. I have read a number of fatwas from scholars in England, from scholars in Malaysia, from scholars in France, from scholars in Saudi Arabia, who have written treatises and papers on Bitcoin in particular.
In the end of the day, dear brother, you will have to follow the authorities whom you trust because this is a new matter and both sides have respected ulama and scholars.
The Default Position of Permissibility — 3:06
The position of those who say that it is permissible — Bitcoin is permissible — and I'm one of them, and the Council of North America that I belong to also gave this fatwa, is basically the default. They don't need to bring any evidences. They say the default when it comes to all types of transactions is that they are permissible. Whoever bans it, whoever makes it haram, the burden of proof is on them.
All of the evidences that they bring to talk about Bitcoin being haram do not reach the level of making it haram. The maximum that they can say is that it is speculative and perhaps dangerous for an investment and perhaps not wise to do. But to make something haram based upon the arguments that they bring — we feel, many scholars feel, that they simply haven't done that. Because of this, Bitcoin remains upon its default, which is that it is halal.
Every single point that they bring to make Bitcoin haram — if you were to take that point, you could apply it to many other things that the same group makes halal. Whether it's speculation, whether it's the fact that we don't know the price, whether it's the fact that they believe it doesn't have tangible value — you can extrapolate it to other things that the same group will allow.
Cryptocurrencies Are a New and Evolving Market — 5:00
The issue of cryptocurrencies is overall a relatively new market — it's literally a decade old, eleven years literally. So there's a lot of controversies, and don't be surprised if people's fatwas change or are modified over time. A lot of scholars are not really understanding what Bitcoin is and cryptocurrencies in general. I advise those of you that are interested to basically do your own research. By the way, each cryptocurrency has a white paper authored by the people who have founded it, and the information is available online.
Bitcoin vs. Other Cryptocurrencies — 5:50
The issue of Bitcoin in particular — there have been quite a lot of fatwas given about Bitcoin specifically. Cryptocurrencies are broader than Bitcoin. Bitcoin is the first and the most famous, and as of today is the most expensive. But the fatwas that have been given are particularly about Bitcoin, and you can extrapolate them to Ethereum and to some of the more established coins.
The Problem of Ponzi Scheme Cryptocurrencies — 6:23
There's no question that because of the success of Bitcoin, a lot of cryptocurrencies have been formed that are completely useless. They are formed by unscrupulous people who basically want to enact a large Ponzi scheme — where you take the investment of the later group in order to pay off the earlier group so that it looks like a profit has been made. Then when you get a very large pool, all of a sudden somebody disappears, the Ponzi scheme collapses, and it turns out it was a huge fraud from the beginning.
However, just because some or many of these are Ponzi schemes, it doesn't mean that every one of them is. We don't throw out all of the apples in the barrel just because some are bad or corrupted.
The Fiqh Council has issued a fatwa naming Bitcoin only, and we did not talk about the rest of the cryptocurrencies. We can extrapolate to the stable and established currencies in the cryptocurrency market such as Ethereum, Cardano, and Tether. Basically, any established coin that has a legitimate purpose and that is based on blockchain technology — once it is established and people are actually using it in the real world — insha'Allah it will meet the same criteria as Bitcoin.
Responding to the Argument of Speculation — 8:17
These fatwas that make Bitcoin haram use generic matters that are not themselves applied consistently to other matters. For example, one of the biggest things mentioned is that the price is speculative — we do not know if it's going to go high or low. And of course, so are the prices of stocks, so are the prices of currency trade. We do not know if there's a crisis in Japan tomorrow — the exchange rate might change completely. It's very volatile. Just because it's speculative does not make it haram.
Responding to the Argument of No Government Backing — 9:13
Another issue raised is that Bitcoin is not backed by a government, hence it is not an established currency. This is a semi-valid point in that it is not backed by a government, but the claim that it is therefore not an established currency — that's where the big question mark comes. The Quran and Sunnah do not define what a currency is, and especially in our times when pretty much all currencies of the world are no longer linked to actual gold and silver. President Nixon in 1971 famously de-linked the US dollar from gold.
What exactly is a currency? What constitutes mal (wealth)? What can be used to exchange commodities? Is it only gold and silver? Some fuqaha said that, and there are people even today calling for a return of the gold standard and the gold dinar. But that's not how the world actually works. The American dollar and the British pound sterling and the Japanese yen are not linked to any actual commodity — they are quite literally printed by their governments and people give value to them because they trust their governments.
Because of this, quite a number of fuqaha even in early Islam said that mal (monetary currency) does not have to be tangible per se. Many of the Shafi'i scholars, Imam al-Suyuti and others, are of this opinion. Even some modern Hanafis — the Mufti is also of the opinion that if a non-tangible item such as rights and benefits attains value according to the custom of the people, then it can be treated as mal.
The Whole Point of Bitcoin Is Decentralization — 10:50
Those fuqaha who criticize Bitcoin by saying it's not backed up by a government — with utmost respect, it's as if they've kind of lost the whole point of Bitcoin. Because that is exactly what Satoshi, the founder of Bitcoin, actually intended. He wanted a currency that is decentralized, not linked to any government, because he felt that governments are manipulative, that governments are elitist, that governments themselves inflate the value of their own currency by printing or not printing. He wanted a currency that is truly global and that has no one entity or cabal that monitors it — a currency whose price would be decided by all of mankind.
The Amusement Park Token Analogy — 12:04
The claim that Bitcoin has imaginary value — to be cynical here, the same can be said of the American dollar, of the British pound. If you were to go to the jungles of some land that has no fiat currency and try to use this paper money, they would just look at you and say, "What is this?"
The example of Bitcoin is somewhat like when you go to an amusement park. You hand over some money and you get tokens. These tokens are used for rides inside the amusement park. Some rides have one coin, some rides have two coins. These coins have value inside of the amusement park — within that system, everybody understands this token has value. However, outside of the amusement park, if you were to take this token and try to buy food, people would say, "What is this?"
This token has value amongst a certain group of people and no value amongst another group. The fact that one group does not consider it to have value doesn't mean that it actually doesn't have value. A currency is only as strong as the people who believe in it, and the more people believe in it, the stronger it becomes.
Two Categories of Crypto Participants — 15:09
When it comes to cryptos and Bitcoin, there are two major categories of people who are actually involved. The first want to get rich off of it in dollars or in their currency — buy when it dips and sell when it rises. This is in and of itself halal, because it's like currency exchange. As long as it's done on the spot and the money exchanges immediately, it is halal.
The second group are called the HODLers (Hold On for Dear Life) — people who actually believe that Bitcoin and these other cryptocurrencies will eventually replace the dollar or at least become an actual bonafide global currency. That might seem far-fetched, but day by day news keeps coming out that seems to indicate that Bitcoin and Ethereum and these major brands really are situating themselves to become a de facto currency within maybe even a decade.
Responding to the Argument of Haram Usage — 16:24
Some people say Bitcoin is haram because it is used for haram purposes. With utmost respect, whoever says this — I really think they haven't studied the basics of the reality of how Bitcoin is being used. Of course Bitcoin is used for haram — is cash not used for haram? Currencies are neutral. Whether somebody uses them for good or evil, the currency itself remains neutral.
What this group says is that the anonymity of the user makes it haram. To respond to this: the anonymity of a cash giver can also exist. Wire transfers can also be used for haram — there have been elaborate scams involving billions of dollars wired through traditional banking. Where there's a will, there's a way. To make all of cryptos or Bitcoin haram because people buy drugs or do haram with it is not a legitimate reason to make the entire currency haram.
Conclusion and Practical Advice — 18:14
The fatwa of the Fiqh Council and others remains: all of these issues being raised about Bitcoin and others have been responded to quite easily. The fact that these councils say that it is halal — like the council — does not mean that they are endorsing you to actually use it. They're simply saying it's not haram. In fact, in our Fiqh Council fatwa, we actually said at the very last line that we caution people: just because it's halal doesn't mean it's wise. They're two different things.
The Sharia asks that you preserve your wealth, and therefore the advice I would give is what many people are giving: do not invest in cryptos and especially in Bitcoin more than you can afford to lose. Be cautious. If you want to avoid it completely, no doubt that would be the safest thing to do.
As for other cryptocurrencies, this is a case-by-case basis. No one can say that all cryptocurrencies are halal because some of them are clearly Ponzi schemes, some are meant to deceive, and some are specifically designed for haram purposes (drugs, alcohol, etc.). Clearly those cryptocurrencies are without question haram.
But any cryptocurrency that is based on standard blockchain technology and is established by large groups of people — such that it's realistically impossible for it to collapse or become a Ponzi scheme — generally speaking, the default of the Sharia would still be that these types of things are halal. Whether they're wise or not is up to you to decide.
Interestingly, the country that said it is haram last week — the neighboring country, another Muslim majority country, their council said it is halal. So you have two Muslim majority countries right next to each other, one council saying haram and the council next door saying halal. With utmost respect, you have to decide who you trust, whether the person you're listening to really understands what cryptocurrencies and Bitcoin are, and whether they've done the research and are qualified to issue the verdict. Follow what you think is the better opinion.