When it comes to cryptocurrency, Islamic community’s stand is divided. This is due to the state of confusion and an on-going debate on whether to consider cryptocurrency as legitimate form of investment or not. Even though Shariah law emphasises on the usage of physical assets for any type of economic investment, world still has mixed views on the use of cryptocurrency. Because of this, whereas some groups allow the usage of digital currency, some advises caution whereas some have totally prohibited them.
Cryptocurrency companies on the other hand are trying to make the most out of this debate and trying to sway it by coming up with a model to back the cryptocurrency using the physical assets. A company, OneGram, founded on this theory, backs 1gram of OneGram cryptocurrency with 1 gram of gold. The idea is to curb the widespread speculations.
OneGram even received the ruling in their favour from a Dubai based consulting firm stating that OneGram CRYPTOCURRENCY confirms with Islamic principles. Such kind of firms are now available in sizable numbers.
Interestingly, even though global sharia bodies have not ruled on permissibility of the usage of cryptocurrency, they don’t have any authority to implement the standards in Islamic finance. Hence, many Islamic state banks have issued warnings to their customers on the usage of bitcoins but have not imposed any sort of ban at the same time. This whole state of confusion that arose due to the conflicting school of thoughts between financial institutions, academic schools and religious bodies has led investors to totally rely on their judgement while making investments in cryptocurrency.
The situation becomes even more complicated due to the presence of multiple cryptocurrency tokens in the market. The sharia law mostly revolves around the Bitcoins while keeping all the remaining cryptocurrency tokens under the same blanket. The problem with this approach is that it ignores the peculiar features related to mining and distribution that each cryptocurrency offers. Some believe that having a blanket rule for all of them is not appropriate, since cryptocurrency tokens are different in terms of their underlying projects, businesses and commodities.