A shariah compliance expert, the current chairman of the Shariah Advisory Council at Malaysia’s central bank and a shariah board member at many financial companies, says that cryptocurrency is a legit commodity that can be exchanged.

Cryptocurrency and Shariah Compliance

Cryptocurrency adoption and investments remain low in Muslim countries as people are nonetheless not sure of its compliance with Islamic law. At the SCxSC Fintech Conference 2020 remaining week, Datuk Dr. Mohd Daud Bakar, an specialist in shariah compliance, stated that traders want extra time to apprehend cryptocurrency from the shariah perspective.

Bakar is currently the chairman of the Shariah Advisory Council at the central bank of Malaysia, Securities Commission of Malaysia (SC), and the Labuan Financial Services Authorities. He is also a shariah board member at a number of financial institutions, including the Accounting and Auditing Organisation for Islamic Financial Institutions, Morgan Stanley (Dubai), Bank of London and Middle East (London), Noor Islamic Bank (Dubai), Jadwa-Russell Islamic Fund (Saudi Arabia), and Salama Islamic Insurance.

In Malaysia, the SC Shariah Advisory Council has declared that it is permissible for Muslims to make investments in and exchange cryptocurrencies, which includes bitcoin, on government-registered crypto exchanges.

Bakar explained that cryptocurrency is not considered as legal tender, but it is a legit commodity that can be exchanged within the market, as long as it is not backed by “ribawi items,” like gold and silver, the Malaysian Reserve reported. The booklet quoted him as saying:

“It is a medium of exchange, and we cannot stop people to use commodities as medium of exchange. It is as good as buying an e-ticket or commodities in the market.”

“This new development can open up so many interesting areas in Malaysia, in which crypto can be deemed as investment assets where people can buy and hold for trading,” he elaborated.

Bakar added that the Securities Commission of Malaysia has additionally made it viable for companies to issue coins as a method of raising capital, subject to certain restrictions thru its fatwa resolution.

“Moving forward, the potential of this currency is great as it comes with the growing digital economy of the world,” he noted. “We can even develop our own stablecoin quite easily without any difficulty by the government and respective jurisdiction … We can have the coin backed by certain commodities, ventures or projects.”