The Grand Mufti of Egypt Imam Sheikh Shawki Allam has released a statement declaring that transacting in Cryptocurrencies is haram (forbidden) under the Islamic Sharia law.
A formal fatwa was issued on Monday January 1st 2018 in which the Imam stressed that trading in Cryptocurrencies such as Bitcoin is “forbidden in Sharia, as it causes harm to individuals, groups and institutions”.
The Grand Mufti further said that transacting in Bitcoin is similar to gambling and therefore “Haram” as it causes financial loss for individuals. In addition, he also pointed that Cryptocurrencies pose challenges to users namely through fraudulence, lack of knowledge, and cheating.
Bitcoin like other Cryptocurrencies is a type of digital currency that is not controlled by any central bank or any formal institution. Cryptocurrencies are not physical but are produced by extensive mathematical computations and secured by numerous computer operators known as “miners”.
Bitcoin works through a system of blockchains in which a public ledger is available to miners and Cryptocurrency investors. The ledger is a real time database of all Bitcoin transactions.
For each transaction, Bitcoins are sent accompanied by security details such as the location, time/ date of delivery and final destination called a “block”. The receiver deciphers, verifies and confirms this “block”. After confirming the validity of the “block” the receiver gains access to those Bitcoins.This block is then linked to the public ledger portraying the transaction as successfully completed for all users to see.
However, trading in Bitcoins is purely governed by the law of demand and supply with no regulation from any formal body thus making it difficult to lay complains when fraudulent activities occur.
Bitcoin is the first Cryptocurrency to garner wide public appeal. It came into existence in 2009-starting at a mere $1000 and reaching a peak of about $20,000 in late 2017 before losing 25 % of its value within a week. The Cryptocurrency was valued at $13,915 as of Tuesday afternoon January 2nd, 2018.
Grand Mufti Allam further argues that digital currencies lack centralize control and supervision thus making them more risky. He also holds the view that the high risks and high profits associated with Cryptocurrencies pose a danger to the Egyptian Pound.
A consultation with economic experts was carried out leading to the fatwa, this according to the Imam. Magdy Ashour, adviser to the Grand Mufti stated that digital currencies are “used directly to fund terrorists”. An Egyptian organization called Dar al-Ifra is also calling on people to stop using all virtual currencies so as to prevent the funding of terror groups.
Due to the fact that there is no centralized supervision and control of Cryptocurrencies, it is alleged that digital currencies give extremist groups the chance to access financing for their criminal activities.
Just last month extremist groups were said to be receiving funding from a New Yorker through Bitcoin and other virtual currency transactions. It is feared that Cryptocurrencies will now make it easier to launder money and transfer funds to the Islamic State militant group (ISIS) and other similar groups.
Morocco, Bolivia and Bangladesh are some of the few countries in the world that have made the trading of Cryptocurrencies illegal. The Egyptian government has tried tirelessly to discourage the use of Cryptocurrencies but it is yet to take the giant step to completely ban the use of Bitcoin and other virtual currencies in the country.