The Tarjih Council, together with the Central Executive Tajdid Muhammadiyah, one the largest non-governmental Islamic organizations in Indonesia issued a fatwa against cryptocurrency usage, declaring it illegal for Muslims.
On Tuesday, the fatwa, which is a ruling on Islamic law, pointed out two key issues regarding cryptocurrencies, making them illegal as investment tools and mediums of exchange under Islamic law.
Due to their speculative nature, cryptocurrencies are not suitable as an investment tool. The crypto tokens are believed to contain “gharar” (obscurity) which means they are not backed by anything like gold, which makes them unlawful under Islamic laws.Cryptocurrencies don’t meet the standards of Islamic barter or medium of exchange laws which require them to be legal tender and accepted by both parties.
The fatwa said:
“Speculative nature and gharar are forbidden by Shari’a, the word of God, and the hadiths of the Prophet SAW. They do not conform to the benchmarks and values of Business Ethics as defined by Muhammadiyah.”
Muhammadiyah was the third Indonesian Islamic organisation to issue a fatwa against cryptocurrency usage. In November 2021, Indonesia’s Ulema Council (MUI), which is the highest clerical authority in the country, declared cryptocurrency haram as a means of transacting. It did however note that crypto assets could be used as an investment tool provided they adhere to sharia tenets. A major Islamic organization, the Nahdlatul Ulama in October 2021, also declared crypto haram for its speculative nature.
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Despite calls for an Indonesian ban on crypto use by Islamic groups, there has been a huge rise in adoption. In 2021, the country had $9.8 billion in cryptocurrency transactions. This is a 1,222% increase over 2020. It is not just an investment and transaction platform, but crypto has been recognized as a trading commodity making it the preferred choice for many international crypto exchanges.