Bitcoin Embraces Islamic Finance: A New Chapter in Saudi Arabia (2024)

FAQs

Bitcoin Embraces Islamic Finance: A New Chapter in Saudi Arabia? ›

In a groundbreaking development, Bitcoin has been recognized as halal under Islamic law in Saudi Arabia. This recognition opens new doors for the integration of cryptocurrency into Islamic finance, aligning digital currency investments with Sharia principles.

Bitcoin is legal in Saudi Arabia and there are no restrictions on individuals purchasing or spending Bitcoin. Banks, on the other hand, are banned from dealing with the cryptocurrency. The Saudi Arabian Monetary Authority has warned against Bitcoin as it is not monitored or supported by any regulatory body.

In the Muslim world, practicing Muslims do not invest in banking products that pay returns via interest. As a result, practicing Muslims do not consider Bitcoin, Ethereum, and other crypto currencies to be compliant with Islamic Shari-ah.

Crypto has quasi-legal status in Saudi Arabia. In 2018, the government restricted banks from assisting with any cryptocurrency-related transactions. Authorities have repeatedly stated that people who trade cryptocurrencies have no financial protections and could be risking their investments.

Mufti Taqi Usmani, a former judge of the supreme court of Pakistan, is representative of this side of the debate. “Currencies are originally a medium of exchange, and making them a tradable commodity for profit earning is against the philosophy of Islamic economics,” Mufti Usmani said.

The UAE Takes the Top Spot

The United Arab Emirates (UAE) boasts the highest rates of crypto ownership globally.

Bitcoin is legal in the U.S. But it is not “legal tender.” This means that unlike the U.S. Dollar, which must be accepted for “All Debts Public and Private,” nobody is required to accept Bitcoin as payment.

Example of halal trading: Spot transactions with an immediate cash settlement and those with a clear and legitimate purpose, such as exchanging goods and services, are generally permissible.

Crypto futures trading can be considered halal if certain conditions are met. They argue that futures contracts can serve as a hedging tool to manage risk and protect against price volatility.

Is Bitcoin safe? Bitcoin is the most recognized cryptocurrency, so it's generally viewed as one of the safer investments within the crypto world. As with all cryptocurrencies, however, Bitcoin's price can change dramatically within a short time period.

Is Bitcoin halal in Saudi Arabia? ›

It reflects a growing understanding and acceptance of digital currencies in the Islamic world. The recognition of Bitcoin as halal in Saudi Arabia marks a significant moment in both the world of cryptocurrency and Islamic finance.

It's easiest to name the countries where crypto is outright illegal. According to the U.S. Library of Congress, as of November 2021, a total of nine countries have banned cryptocurrency completely. These countries are Algeria, Bangladesh, China, Egypt, Iraq, Morocco, Nepal, Qatar and Tunisia.

Qatar's regulatory stance and the country's recent financial commitments suggest that a $500 billion investment in Bitcoin in the short term is unlikely and feasibly impossible.

What do Islamic scholars say about crypto? Many Islamic scholars seem to agree that, as it stands, cryptocurrency is haram, and should be avoided by Muslims. Indonesia, the world's largest Muslim-majority country, has banned cryptocurrency trading.

“I don't spend a lot of time thinking about cryptocurrency—hardly any at all,” he said. Musk went on to laud the current monetary system, saying that money is essentially just a “database for resource allocation” and that fiat currency worked fine for this purpose as long as governments didn't meddle too much.

Islamic banking laws are also anti-interest so the technology, pricing, and buying and selling of cryptocurrency money is deemed halal by many Islamic scholars who rely on the teachings of Prophet Muhammad PBUH when seeking guidance about permissibility (ultimately, only Allah knows best).

The ability to bypass the existing financial infrastructure of a country is a blessing in disguise for criminals because it enables them to camouflage their involvement in such activities. Bitcoin's network is pseudonymous, meaning users are identified only by their addresses on the network.