Leading Islamic finance scholars are debating whether cryptocurrencies can be deemed Sharia compliant, during the annual Sharia conference of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) being held in Bahrain this week.
The world's top Muslim finance experts are attempting to determine the validity of the fast emerging financial tools, questioning whether Islamic financial firms can invest in the cryptocurrencies alongside the rest of the world.
The discussions will revisit Islamic finance concepts and how they have evolved over time, Ebrahim Bin Khalifa Al Khalifa, Chairman of the AAOIFI Board of Trustees, said in his opening remarks at the conference.
"This specifically relates to riba (usury) in cryptocurrencies, such as Bitcoin, among others. Today, the floor is open to tackle this recent breakthrough in the monetary sphere from a sharia perspective."
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Among the many points to be discussed is whether the new currencies - like gold and silver - fall under the "ribawi" category.
According to Islamic law, items falling under the ribawi category must be exchanged in equal measure and with immediate transfer of possession, otherwise transactions may involve riba or usury, a major prohibition in Islam, Reuters reported.
In January, Egypt's Grand Mufti issued a fatwa ruling the trading of Bitcoin as against Islamic Sharia, following an earlier ban on Bitcoin trading issued by the Egyptian government.
Top cleric Sheikh Shawki Allam warned against the digital currency, citing its risky and unregulated nature which could lead to fraudulent transactions.
Allam told Egypt Today that he met with a group of economic experts to reach his final ruling. He clarified his findings on the cryptocurrency, stating that Bitcoin could allow for tax evasion, piracy, money laundering, fraud and corruption, and therefore is forbidden in Islamic Sharia law.
The Mufti's counsellor, Magdy Ashour, added in a separate ruling that Bitcoin was forbidden in Islam due to the possibility for it to be used to fund terrorism.
"This currency is used directly to fund terrorists," Ashour told Egypt Today, adding that its usage could cause major damage to the country's economy.
"It has no set rules, which is considered as a contract annulment in Islam, that is why it is forbidden," the counsellor said.
Weeks earlier, a popular Saudi cleric made a similar move, ruling that cryptocurrencies are prohibited under Islamic law because they are "ambiguous" and provide anonymity to criminals.
The cleric's ruling comes after Turkey's top religious body also decreed that Bitcoins were incompatible with Islam because their value is "open to speculation" and they can be used in "illegal activities".
Bitcoin's use on darknet marketplaces, where users can exchange the cryptocurrency for goods like drugs and guns, and among cybercriminals has raised suspicions about the virtual money.
Bitcoin was created about a decade ago as an alternative to government-issued currencies.
Transactions allow anonymity, which has made it popular with people who want to keep their financial activity, and their identities, private.
The digital coins are created by so-called "miners," who operate computer farms that verify other users' transactions by solving complex mathematical puzzles.
These miners receive bitcoin in exchange. Bitcoin can be converted to cash when deposited into accounts at prices set in online trading.
Whereas virtual currencies were initially used primarily as a method of payment, in recent months they have become a hot investment among speculators.
Copyright @ 2019 The New Arab.