Cryptocurrencies have been declared haram by the Tarjih Council and the Central Executive Tajdid of Muhammadiyah.
The Islamic group claimed that cryptocurrencies violated Islamic law on two counts.
It would be the third time an Islamic organization has spoken out against the industry, which shows no signs of slowing down in Indonesia.
An Islamic group in Indonesia has declared cryptocurrencies haram, or unlawful for use by Muslims. The organization came up with this ruling this week, outlining its reasons.
Crypto Is Haram
According to the Tarjih Council and the Central Executive Tajdid of Muhammadiyah of Indonesia, cryptocurrencies do not fit in with Islamic law and will be seen as haram, or forbidden by God. The sect came up with their ruling, or fatwa early this week and cited two reasons why the asset class could not be legitimate investment instruments or payment solutions according to Islamic law.
Firstly, the group points to the high risk and volatile nature of the market, identifying it as “gharar.” Secondly, they claim that cryptocurrencies do not comply with Islamic laws governing barter and exchange, implying that they cannot be recognized as currency or exchanged by both parties.
“This speculative and gharar nature is forbidden by Sharia as the Word of God and the hadith of the Prophet SAW and does not meet the values and benchmarks of Business Ethics according to Muhammadiyah, in particular these two points, namely: there should be no gharar (HR. Muslim) and there should be no maisir.”
The Tarjih Council and the Central Executive Tajdid of Muhammadiyah became the third Muslim group to issue a ruling according to Islamic law against the use of crypto. Most recently, in November last year, the most respected clerical body in Indonesia, the Indonesia Ulema Council, proclaimed crypto forbidden for transactions. When it came to investments, the body had a less rigid stance as it said they could be used as investments if they complied with Islamic law.
Indonesia’s Crypto Adoption Yet To Slow Down
Despite three separate rulings from three different Islamic groups in October, November, and this week, the adoption of cryptocurrencies in Indonesia is on the rise. According to available data, it is one of the largest crypto markets in Southeast Asia.
It is believed that the country has more people trading cryptocurrencies than traditional stocks. Data shows that the country recorded about $9.8 billion in crypto transactions last year, a 1,222% spike compared to 2020. The rising adoption of cryptocurrencies in the country has not gone unnoticed by crypto exchanges.
Several exchanges, including Binance, have revealed plans to set up in the Asian nation. CZ in December said, “Our ambition at Binance is to grow the blockchain and cryptocurrency ecosystem globally, and this initiative in Indonesia is a significant step in that direction. With fast technology adoption and strong economic potential, Indonesia could become one of the leading centers of the blockchain and crypto ecosystem in Southeast Asia.”