Muslim Scholars and Islamic financial advisers at Amanie Advisors have declared the usage of ‘Ethereum’ to be halal for making transactions, under certain guidelines.
Ethereum is a platform that utilizes blockchain technology to create decentralized digital applications to enable users to make agreements, transactions and trade without the involvement of any third-party dealer.
Previously, Ethereum and other cryptocurrencies were not considered permissible by Islamic scholars. This was because digital currency transactions are not backed by physical assets such as gold, but functions on a system of ‘usury’, which is forbidden according to Shari’ah Law.
Such platforms allow people to make continuous profits from interest, making this a massive cause of debate among the Muslim financial community.
However, in a whitepaper released by the Oman-based ‘Amanie Islamic Finance & Shariah Advisor’, Ethereum has been approved as being halal because it represents a ‘utility-token’, reports Decrypt.
Atif Yaqub, a Muslim blockchain enthusiast who has discussed Ethereum with Amanie Advisors said: “It is easier for Islamic finance houses to produce certified products. Individuals who are more faith conscious can now engage without any doubt that the emerging tech is fully permissible to use,”
However, the scholars continue to have some concerns about Ethereum. They argue that if specific tokens are used to make profits from interest, then it will not be Shari’ah compliant.
Also, if Ethereum were to be widely used as currency, it would need more work and thought, to ensure its functionality is entirely in line with Shari’ah principles.
Nevertheless, many Islamic scholars are unwilling to accept this decision.
Sheikh Dr. Haitham al-Haddad, who sits on the board of advisers of the Islamic Sharia Council and Islamic organizations in the UK, labeled cryptocurrency like Bitcoin as “money coming out of nothing” in his interview to Islam21c.
Giving a fatwa on the topic, he further advised: “Muslim countries should resist that as much, until it is strongly regulated.”
While crypto currencies are gaining popularity in the West, poorer countries have been left behind as they lack the resources to create and run this digital currency system.
Despite the recent update, this topic is still being debated at multiple Islamic institutions, especially after Saudia Arabia has shown a keen interest in using cryptocurrency.