In a recent research paper, Mufti Faraz Adam has considered whether Bitcoin is Islamic-compliant. This is an important area of interest given the growing Islamic finance market which is expected to be worth more than US$6.5 trillion by 2020. The paper examines whether Bitcoin is money, a commodity or something else entirely.
In his research, the Mufti analyses the primary and secondary sources of Islamic law to identify the principles of defining money under the Shariah. Although the opinion that Bitcoin is not Māl (asset) at all has some weight, the Mufti concludes that there seems to be a difference between Bitcoin and other derivatives. This paper reasons that Bitcoin does seem to be Māl with Taqawwum (legal value), however, it does not possess Thamaniyyah (currency attributes). Furthermore, regarding the associated risks with Bitcoin, the Maqāṣid al-Sharia (five foundational goals) are considered to determine whether Bitcoin fulfils the Islamic ideals of an Islamic-compliant economic function. The Mufti concludes that Bitcoin falls short of fulfilling the principles of the preservation of wealth in Shariah.
Bitcoin is further assessed in terms of the principles of Islamic moral economy. A key theme and objective of such economy is embedding financing and investments that are linked to the real economy. Bitcoin and cryptocurrency investments do not prima facie serve the real economy and do not promote real economic growth. Thus, the Mufti concludes that Bitcoin is not ideal as a long-term investment and neither should the Islamic finance industry consider its use in exchange unless there is a specific need to until a regulated and transparent framework is established. At this current time, Bitcoin is solely an investment for profit maximisation.