The topic requires a lengthy explanation, but I will try to summarize it:
– Is Bitcoin a real currency?
Looking at the nature and origin of Bitcoin, one can find that it is currently not suitable to be considered as money due to the absence of cash-like characteristics which are circulation and guarantees. A silver coin (dirham) is a guaranteed currency with a specific weight and purity, while a gold coin (dinar) is a guaranteed currency with a specific weight and purity as well. Paper currency is guaranteed by central banks that issue them based on the assets they hold, whether real or considered. These currencies also have acceptance in the local community where they are issued and may even be accepted beyond it, such as strong currencies.
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As for Bitcoin, it is the product of a process involving numbers, letters, codes, and mathematical steps, and it does not have a tangible existence or a specific value in terms of weight or type.
– This is in terms of its nature. As for its usage, it is only used within a narrow scope and has not gained widespread acceptance, which is a necessary condition for a currency. It is still in its early stages and is not recognized by any countries or international organizations.
– Additionally, it has a high level of risk due to the lack of price stability, as its value is subject to the whims of individuals rather than true market requirements.
– Moreover, preserving it requires a very high level of encryption and protection software, which is not readily available for many people, making it a high-risk investment.
– Another issue is that this currency is not suitable to be considered a type of mainstream asset that people regularly deal with.
For example, we can buy a car and pay for it in dollars or euros, depending on the prevailing exchange rate. However, it is difficult to buy a car with this currency because its value fluctuates rapidly, and it may increase or decrease during the signing of the contract, causing harm to one of the parties involved.
– Is there anything in old fiqh that can guide the ruling on this type of transaction?
Some may assume that old fiqh did not address this issue directly, and this is true if we are talking about the specific matter at hand. However, we find indications in the books of the schools of thought that discuss similar matters, such as the ruling on the sale of “goldsmith’s soil.”
“Goldsmith’s soil” refers to the residue that falls from the crucible during the production of gold and silver, which is mixed with other substances found in the shop, such as dust. Scholars have differed in their opinion regarding its ruling:
The majority opinion among the Maliki and Shafi’i schools, as well as the opinion of the Hanbali school and Ibn Hazm, is that it is not permissible to buy or trade in this type of soil. This is because one of the conditions for a valid sale is knowledge of the sold item, and goldsmith’s soil is not known whether it is gold, silver, or a mixture of both, and from other substances as well.
The Hanafi and Hanbali schools, on the other hand, allow the purchase of goldsmith’s soil, even if it is mixed with impurities, as long as it is not purchased at an equivalent value to gold or silver. If it is purchased with gold or silver, it is prohibited.
Here, we find that scholars prohibited this type of transaction due to ignorance, deception, possible fraud, lack of guarantee, and the possibility of losing money, all of which are possible in Bitcoin.
– Can Bitcoin be considered a commodity?
One of the conditions for a commodity is that it must be tangible and have a space and a benefit from holding it. If we look at Bitcoin, it does not have this meaning except in two aspects:
The first is through ownership rights, achieved through mining and access to highly secret codes, similar to copyrights. This type is bought and sold among people and has been a reason for many industries and inventions, as many of them are based on mathematical equations, such as the theory of relativity and others.
The second is through custom and convention, in which a convention is formed and circulated among people, giving Bitcoin a material value even though it does not have a tangible form.
We find similarities to this in some aspects, such as ancient statues and stones. For example, a statue from two thousand years ago can be sold for thousands or even millions of dollars, despite being just a stone in the end. It is not imaginable to sell stones in this way, but custom and convention have given value to old things and transformed them from their original meaning to another one that can be bought, sold, and collected.
Therefore, what I see in the issue of Bitcoin is that trading in it can be treated as a commodity transaction, not a currency transaction, as it lacks the conditions of currency, such as circulation and guarantee. Its permissibility comes with dislike (karaha) due to the possibility of losing money in the risks and rapid changes, but it is not prohibited due to the absence of a forbidding text.
And Allah knows best.
Fatwa by Dr. Khālid Naṣr