World’s Largest Islamic Country, Indonesia Bans Crypto Trading


This is not surprising to many, as Islamic society is known to label cryptocurrency transactions as a form of “holy land.” Many Islamic groups have denounced the trading of digital assets, such as cryptocurrencies, and even non-fungible tokens in the past.Recently, a similar memorandum was issued by the Tarji and Taldi Committee of Muhammadiyah, stating that “the Tarji’s decree Making cryptocurrencies illegal both as an investment vehicle and as a medium of exchange,” the fatwa means the currency is marked as illegal to the community.

Tajdid, the central executive of specific Islamic organizations, the Tarjih Council and Muhammadiyah, accurately provided some arguments to validate this particular decision. The Islamic Council said the use of cryptocurrencies is illegal or illegal as it interprets “gharar” and “dharar”. The above two terms basically refer to cryptocurrencies with a “speculative” element.Quoted Fatwa “This speculative nature and gharar is prohibited by Sharia law as the word of God and the hadith of the Prophet SAW and is not in line with Muhammadiyah’s business ethics values ​​and benchmarks.”

Illustrative arguments made in fatwa

Fatwas primarily offer two key points of contention, the most important being the speculative and volatile nature of the asset. Another problem with cryptocurrencies is that the asset does not meet the criteria for Islamic barter, a medium of exchange. Therefore, the unreliability of cryptocurrencies was condemned by the Islamic Council.

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Council also expressed concerns about the legality of the currency bitcoin and other cryptocurrencies are still not considered currencies or mediums of exchange backed by underlying assets such as gold. The Sharia order underscores these ideas that since crypto is a dynamic asset, it cannot be considered a viable investment.

Any asset prone to speculation and volatility would be considered a “Holy Land”. Other principles also point to illegal activities carried out with the help of cryptocurrencies. Digital assets also have a tendency to be used for gambling purposes, in addition, cryptocurrencies are not tangible assets, which is another reason why the Islamic community bans such assets.

The crypto industry's growth has attracted a lot of negative attention | Source: TOTAL-CRYPTOCAP on TradingView.com

How Fatwas Affect Crypto Trading in Indonesia

Indonesia’s Ulema Parliament (MUI) had upheld a similar ban in November last year. However, MUI is still willing to accept cryptocurrencies if the teachings of Islam are the same. Another Islamic group to declare cryptocurrencies a “holy place” is Nahdlatul Ulama, making Muhammadiyah the third Islamic group to tokenize assets as the same. Sharia law embraces the idea that digital assets must be a traded commodity and not just a form of investment and exchange. Therefore, the commodity futures trading regulator decided to investigate, suggesting that cryptocurrency exchanges will continue to operate in Indonesia.

Related reading | European market watchdog urges EU to ban proof-of-work bitcoin mining

Although the Indonesian market is optimistic about cryptocurrency adoption, Indonesia has dealt with several bans recently due to religious concerns. Cryptocurrency trading has expanded rapidly in the country, with assets trading close to $9.8 billion. This development shows a 1,222% increase in the 2021 figures compared to 2020.

According to the same, it is said There were 11.2 million crypto investors at the end of last year, another massive 180% increase compared to 2021. Therefore, it is safe to conclude that another fatwa will not diminish the popularity of the asset among Indonesians.

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