Following the financial crisis triggered by the COVID-19 pandemic, Indonesia’s commodity futures regulator considered taxing profits from the cryptocurrency market to generate revenue for the state through increased adoption. However, Islam’s position has changed the game dramatically.
The National Ulema Council (MUI) is a body that brings together Islamic scholars. The body recently took a stand on cryptocurrencies such as Bitcoin (BTC) and altcoins, calling them “haram,” a term used in Islam to refer to anything that is forbidden or considered sinful.
The MUI cited Shariya law, which is based on the Quran, to justify its decision. Although the government recognizes digital assets such as cryptocurrencies as commodities, it still does not consider them legitimate.
In other words, the MUI considers the use of cryptocurrencies to be prohibited under Shariya law due to their specific nature that does not correspond to the principles of Islam. This decision could have consequences for the use of cryptocurrencies in Muslim-majority countries, particularly in the context of Islamic finance that is based on religious principles.
Asrorun Niam Soleh, head of religious decrees, said that cryptocurrencies are characterized by “uncertainty, gambling and evil”. However, not all doors seem to be closed to digital assets: the head of the MUI fatwa committee has suggested that they can be traded as long as they obey Islam and the benefit of such a transaction is obvious.
The influential Indonesian Ulema Council (MUI) has issued a fatwa – a religious decree – on bitcoin, which is increasingly used in the Southeast Asian nation as in other parts of the world.
Fetuas have no legal status in the country of 270 million people, but the move could deter Muslims from using cryptocurrencies.
“It’s like gambling,” he added, noting that cryptocurrencies are virtual means of payment and their value can fluctuate widely, making them against Islamic law.
In the wake of these rulings, some doubts remain about how the market will react in the coming days. Experts believe that this move will not break the strength that the price of bitcoin has gained above US$60,000, but they are particularly concerned about what could happen to investors in Indonesia.
The Asian country is currently home to more than 4.4 million cryptocurrency investors, and has more than 230 million Muslims, so their considerations have an almost direct impact on government decisions.
Cryptocurrency transactions reached the equivalent of 370 billion rupiah (about $26 billion) in the first five months of 2020, Trade Minister Muhamad Lutfi said in June.
Meanwhile, Indonesia’s central bank said it is considering creating its own cryptocurrency.
