Vital Issues for the Jurisprudential Adaptation of Cryptocurrencies

Abstract

Through inductive, deductive, and analytical methodologies this study aims at shedding light on some important issues to facilitate a sound Sharī’ah verdict on cryptocurrencies. The issues are: (1) definition, origin, and types of cryptocurrencies; (2) the intrinsic and exchange values of cryptocurrencies, (3) cryptocurrencies and the peculiarities of the monetary ecosystem in modern economies; and (4) the jurisprudential adaptation of these newly emerging currencies. In following this synthesis, this study drew attention to the crucial circumstances and development of the prevailing monetary and financial system. This study points out the fact that reaching a sound ruling on cryptocurrencies cannot be attained without taking into consideration the complexity, ambiguity, and far-reaching consequences and implications inherently associated with the dominant monetary system. Among the realities unveiled in this study is the fact that the majority (90%+) of the money supply, in most jurisdictions, is created ex-nihilo, as debt, by private commercial banks in digital form without the backing of any hard fiat money, let alone a tangible asset like gold. This study emphasizes these points having surveyed the extensive literature written on the subject, by jurists and other experts in Islamic economics and related domains on the reiteration of the digitalization and private issuance aspects, in order to consider the injunction of cryptocurrencies. This does not imply a validation of the current practices of cryptocurrencies, but ignoring and/or overlooking the complex and ambagious reality of the contemporary monetary and financial system, in dealing with the subject of cryptocurrencies in isolation, may lead to an improper jurisprudential ruling.