Shariah compliance expert says cryptocurrencies are legitimate commodities

A sharia compliance expert, the current chairman of the Shariah Advisory Council at the Central Bank of Malaysia and a member of the sharia council at many financial companies, says cryptocurrency is a legitimate commodity that can be traded.

Cryptocurrency and Shariah Compliance

Cryptocurrency adoption and investment remain low in Muslim countries as people are still unsure of its compliance with Islamic law. At last week’s SCxSC Fintech Conference 2020, Datuk Dr. Mohd Daud Bakar, a sharia compliance expert, said investors need more time to understand cryptocurrency from a sharia perspective.

Bakar is currently chair of the Shariah Advisory Council at the Central Bank of Malaysia, the Securities Commission of Malaysia (SC) and the Labuan Financial Services Authorities. He is also a member of the sharia board of directors at numerous financial institutions, including the Accounting and Auditing Organization for Islamic Financial Institutions, Morgan Stanley (Dubai), Bank of London and Middle East (London), Noor Islamic Bank (Dubai), Jadwa – Russell Islamic Fund (Saudi Arabia) and Salama Islamic Insurance.

In Malaysia, the SC Shariah Advisory Council said Muslims are allowed to invest and trade cryptocurrencies, including bitcoin, on government-registered cryptocurrency exchanges.

Bakar explained that cryptocurrency is not considered legal tender, but is a legitimate commodity that can be traded within the market, as long as it is not backed by “ribawi items”, such as gold and silver, the Malaysian Reserve reported . The publication quoted him as saying:

It is a medium of exchange and we cannot prevent people from using goods as a medium of exchange. It’s as good as buying an e-ticket or commodity on the market.

“This new development can open up so many exciting areas in Malaysia where cryptocurrencies can be considered investment assets that people can buy and hold for trading,” he elaborated.

Bakar added that the Securities Commission of Malaysia has also allowed companies to issue coins as a method of raising capital, subject to certain restrictions through its fatwa resolution.

“Moving forward, the potential of this currency is great as it comes with the growing digital economy of the world,” he noted. “We can even develop our stablecoin quite easily without any difficulties from the government and the respective jurisdiction … We can have the currency backed by certain commodities, initiatives or projects.”

What do you think of cryptocurrency from a sharia perspective? Let us know in the comments section below.

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