In Indonesia, a provincial branch of one the largest Islamic organizations has declared cryptocurrency “haram,” i.e., forbidden under religious law. The decision came as a result of heated discussions with an invited crypto expert. However, the Indonesian government indicated that the country is not planning to follow in China’s footsteps imposing a wide ban on cryptocurrencies.
The provincial branch of the Indonesian religious organization Nahdlatul Ulama in East Java has recently issued a fatwa on the status of crypto under Islamic law.
According to this nonbinding opinion, digital currencies secured by cryptography and used as a transaction instrument are to be considered “haram,” which means forbidden.
As the Indonesian news portal Tempo reported, the decision came after “bahtsul masail,” a discussion held by the organization on October 24. Members involved in the “dynamic” and “heated” debate concluded that the use of crypto could undermine the legality of financial transactions.
Another cause that was mentioned during the discussion is that crypto could serve as a tool for committing fraud.
“Participants of the bahtsul masail formed a view, despite crypto already being acknowledged by the government as a commodity, that it cannot be legalized under the [Islamic sharia],” said Kiai Azizi Chasbullah, the “discussion’s certifier,” in an announcement, published on the website of the East Java Nahdlatul Ulama branch.
At the meeting, they also decided that “cryptocurrency lacks any benefit from the sharia point of view, as mentioned in fiqh,” or the Islamic jurisprudence. This position 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 Indonesian publication said.
However, shortly before the Islamic organization’s fatwa, the government in Jakarta stated that Indonesia is not planning to impose a wide ban on crypto.
Muhammad Luthfi, the country’s Minister of Trade, stated to local media that the authorities would not follow China, which banned all crypto transactions this year and launched a crackdown on Bitcoin mining and trading.
Indonesia – the nation with the world’s largest Muslim population – has been facing the soaring popularity of cryptocurrencies this year. Data from the 13 domestic exchanges, authorized by the country’s Futures Exchange Supervisory Board, shows a 40% increase in transactions for the first five months of 2021. Last year, the total crypto trade volume reached 65 trillion rupiahs ($4.5 billion).
Opinions regarding decentralized digital money have varied among Islamic scholars, experts, and ordinary Muslims through the years. In May, the decision by a prominent religious body in the Russian republic of Ingushetia to prohibit dealings with cryptocurrency provoked negative reactions on social media. Last October, a leading sharia compliance expert in Malaysia said that crypto assets are a legit commodity.
Meanwhile, the Middle East and North Africa regions are relatively new to discovering crypto trading and blockchain technology, but adoption is underway. The adoption of these technologies by companies and the public in the region is growing exponentially, especially with the acceptance of digital money trading and cryptocurrencies by Islamic governments and sharia-compliant financial companies.