Tarjih Muhammadiyah is the third Islamic organization in Indonesia to issue a fatwa against the use of cryptocurrencies.
Cryptocurrency and Fatwa
According to a report by CNBC Indonesia, Tajdeed, the central executive of the Tarjih Council and Muhammadiyah, issued a new fatwa against the use of cryptocurrency, deeming it haram or illegal for Muslims. The organization gave two reasons behind this move.
Firstly, it was observed that digital assets like bitcoin are speculative and highly volatile in nature. Additionally, cryptocurrencies are not backed by any other asset such as gold and are believed to be “obscure”, making them illegal under Islamic laws.
Secondly, the fatwa also states that digital currencies do not comply with Sharia principles for a barter system or medium of exchange laws, which require them to be legal tender and approved by the state, or in this case – Central bank.
Will the fatwa hinder crypto adoption in Indonesia?
Even though Tarajih Muhammadiyah is one of the largest non-governmental Islamic organizations in the country, the fatwa is not generally regarded as a binding decision. But this is not the first time an Islamic organization has considered cryptocurrencies “haram” in Indonesia, which means prohibited.
In November, Islamic scholars announced that all digital asset trading was prohibited for Muslims. The National Ulema Council (MUI) cited aspects such as uncertainty, staking and losses in cryptocurrency assets.
It is important to understand that decisions made by Islamic authorities are not official decrees, nor do they impose a complete ban on cryptocurrency trading. But in a country with the largest Muslim population, its far-reaching consequences cannot be completely ignored.
Having said that, the barriers to trade in Indonesia have never been lower. It recorded around $10 billion in crypto transactions in 2021. Furthermore, crypto giant Binance was in talks with some of the biggest companies in Indonesia to launch a crypto venture in the country.
The CZ-led exchange teamed up with a consortium led by Telecom Indonesia-backed MDI Ventures to expand the blockchain ecosystem in the country by establishing a new digital asset trading platform.
Despite initial reluctance, cryptocurrencies were legalized in September 2018. Indonesia’s Ministry of Trade approved trading of crypto assets in the form of commodities.
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