Abstract
The development of electronic means of payment has shown a new perspective: it is now possible to think about financial processes without the need for a traditional, trusted intermediary, e.g. a bank or an online payment service. As part of the new technology, there is an emergence of privately developed digital currencies so-called a cryptocurrency using new decentralized technologies. The terms cryptocurrencies, virtual currencies and digital currencies are often used interchangeable, but they are different. Fundamental to these cryptocurrencies is the establishment of a new asset, the unit of the cryptocurrencies, i.e. a Bitcoin and a new record-keeping and transfer mechanism that enables users to store and trade those units, i.e. a blockchain, often without reliance on traditional financial institutions.
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Notes
- 1.
The terms cryptocurrencies, virtual currencies and digital currencies are often used interchangeable, but they are different. However, in this chapter, we use these terms interchangeably.
- 2.
Listed on coinmarketcap.com.
- 3.
According to Dwyer (2015), Bitcoin and similar digital currencies are called cryptocurrencies by some because the underlying algorithms and security are intimately related to digital cryptographic algorithms.
- 4.
Similar to commodity currencies, which are made of the commodity, i.e. a gold coin is made of gold.
- 5.
Bay al-Sarf is a contract of exchange of money for money. The rules of bay al-Sarf derive largely from the well-known Hadith: “Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt - like for like, equal for equal, payment being made on the spot. If the species differ, sell as you wish provided that payment is made on the spot” (Hadith Muslim).
- 6.
At the time of the Prophet, Muslims used raw metal or Byzantine coins as money. Three sorts of metal were used for economic transactions: gold ( Dinar ), silver ( Dirham ) and copper (fals, pl.: fulus).
- 7.
Islamic Fiqh Academy in its 5th session held in the city of Makkah Al-Mukarramah issued a ruling on paper money have decided that the paper currency is a stand-alone currency, which takes all the laws of gold and silver. That includes the legal prohibition of the riba al-fadl and riba al-nasiah, the compulsory zakat and other laws. This is based on qiyas (analogy) of the existing currency against gold and silver. Paper money has replaced gold and silver and serves as a store of value and a medium of exchange in the market. The rules of riba, zakat , and sarf (currency exchange) apply to it equally.
- 8.
For example, Diyanet, the Turkish religious authority; Shawki Allam, Grand Mufti of Egypt; Sheikh Assim al Hakeem, a Saudi scholar; Dr. Daud Bakar, Malaysia scholar in Islamic banking; Sheikh Dr. Haitham al-Haddad, UK-based Islamic scholar.
- 9.
Once money supply reaches its maximum potential then prices will naturally begin to fall.
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Zulkhibri, M. (2019). Halal Cryptocurrency and Financial Stability. In: Billah, M. (eds) Halal Cryptocurrency Management. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-10749-9_4
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