In the Muslim world, cryptocurrencies are not Sharia-compliant by default. In fact, most cryptocurrency-related activities are somewhat of a hot topic when it comes to religious practice. It seems things are slowly changing in a positive manner, however. Several new gold-backed cryptocurrencies compliant with Sharia law have been launched in recent months.
Creating Sharia-compliant Cryptocurrencies
For people not well-versed in the Islamic faith, it is important to understand the concept of Sharia. More specifically, economic activity must not be based on hype and speculation. Instead, economic value can only be attributed to real and physical assets. It is evident that Bitcoin and other cryptocurrencies do not fall into this category, as they are intangible and speculative first and foremost.
Because of this religious hurdle, it is doubtful Bitcoin and other cryptocurrencies will ever be considered to be compliant with Sharia law. While there is no official ban on cryptocurrencies or the trading of this form of money in most Islamic countries, they can pose a fair few problems in the long run. Not too long ago, two imams were fired because of their involvement in Bitcoin and a few other cryptocurrencies.
As one would expect, Islamic governments have issued strong warnings on cryptocurrencies and their speculative aspect. Those warnings are nothing out of the ordinary, though, as we have seen them pop up in other countries as well. The speculative nature of Bitcoin and other cryptocurrencies will always remain a problem in the eyes of governments and religious leaders, but that won’t prevent people from investing in them whatsoever.
Interestingly enough, we’ve seen a new type of Sharia-compliant cryptocurrency make its way to Islamic countries. In Dubai, companies such as OneGram have created new digital currencies backed by physical assets. Rather than opt for a national currency, OneGram links the value of its tokens to gold. As every coin is backed by a physical asset, they are Sharia-compliant.
Whether or not this particular venture will be successful remains to be seen. There are a few other cryptocurrencies out there that are backed by gold or other physical assets. Even so, it is only normal that people living in Islamic countries prefer to deal with companies located in their region. As the price of gold has also been subject to some volatility, one could argue that it is not entirely Sharia-compliant either, although that will be a topic of debate.
It is evident that Sharia compliance is an important point to keep in mind when it comes to cryptocurrencies and other forms of money. Becoming compliant may prove quite difficult, although foreign companies involved in cryptocurrency have successfully achieved Sharia certification. All of this goes to show that the Islamic world shouldn’t be overlooked when it comes to cryptocurrency, even though it has its own set of rules which one must keep in mind at all times.