Islamic organisation issues Fatwa against cryptocurrencies in Indonesia

*Indonesian stakeholders in a ‘heated discussion’ have argued and concluded that the use of cryptocurrencies could undermine the legality of financial transactions in the country

Alexander Davis | ConsumerConnect

Citing a religious injunction against the concept of virtual currency, a provincial branch of one of the largest Islamic organisations in Indonesia has declared cryptocurrencies “haram,” or forbidden under religious law.

Fatwa is a formal legal opinion, or religious decree issued by an Islamic leader.

ConsumerConnect reports cryptocurrencies are digital assets that can be used to buy certain products and services without an intermediary like a bank.

Bitcoin is largely considered the first decentralised, peer-to-peer payment network powered by its users, though many cryptocurrencies exist.

Cryptocurrencies

Currently, Bitcoin, Ethereum and Dogecoin are legalised assets and commodities in Indonesia, which can be traded by the citizens; however, they cannot be used as a means of payment, according to report.

It was learnt that the religious body’s far-reaching decision came after a “heated discussion” joined by a crypto expert, who was invited to explain in detail the practice of using digital coins in the financial ecosystem Sunday, October 24, 2021.

The local branch of the Indonesian religious organisation Nahdlatul Ulama in East Java recently issued a fatwa on the status of cryptocurrencies under Islamic law, local news portal Tempo report said.

According to the non-binding opinion, digital currencies secured by cryptography and used as a transaction instrument are to be considered “haram,” which means forbidden, according to report.

The decision came as a result of “bahtsul masail,” a discussion held by the organisation last Sunday.

Members involved in the debate, which the article describes as “dynamic” and “heated,” concluded that the use of cryptocurrency could undermine the legality of financial transactions.

ConsumerConnect gathered yet another point of of discussion raised during the meeting is that crypto could serve as a tool for committing frauds.

An announcement published on the Web site of the East Java Nahdlatul Ulama branch quotes Kiai Azizi Chasbullah, the “discussion’s certifier,” as saying that “participants of the bahtsul masail formed a view, despite crypto already being acknowledged by the government as a commodity, that it cannot be legalised under the [Islamic sharia].”

During the meeting, report indicated that they also decided that “cryptocurrency lacks any benefit from the sharia point of view, as mentioned in fiqh,” or the Islamic jurisprudence. This position, according to Indonesian Tempo, has been confirmed by a “cryptocurrency expert” who took part in the religious debate to explain “the proper practice in the digital currency’s use.”

The Islamic organisation’s fatwa reportedly comes after the government in Jakarta recently indicated that Indonesia is not planning to impose a wide ban on cryptocurrencies.

The country’s Minister of Trade Muhammad Luthfi in a chat with the local media, had stated that the Executive power would not follow in the footsteps of China, which this year reiterated a ban on all crypto transactions and launched a crackdown on Bitcoin mining and trading.

Further still, the popularity of cryptocurrencies has been growing in Indonesia, which is the country with the largest Muslim population in the world, report stated.

Crypto trade has been soaring this year and data from the 13 domestic exchanges authorized by the country’s Futures Exchange Supervisory Board shows a 40 percent increase in transactions during the first five months of 2021.

The total volume reached 65 trillion rupiah ($4.5 billion) in 2020.

Meanwhile, opinions regarding decentralised digital money have varied among Islamic scholars, experts, and ordinary Muslims through the years.

In May 2021, the decision by a prominent religious body in the Russian Republic of Ingushetia to prohibit dealings with cryptocurrency provoked negative reactions on social media.

However, in October last year, a leading sharia compliance expert in Malaysia was quoted to have said that crypto assets are a legit commodity.

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