Cryptocurrencies banned for Muslims in Indonesia

• Indonesia’s local Muslim authority has banned cryptocurrencies for Muslims in the country, citing alleged elements of “uncertainty, wagering, and harm.”
• The law is not legally binding but some sources say it may be used as a source of “legislative inspiration.”

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Cryptocurrencies are out of bounds for Muslims in Indonesia, according to The National Ulema Council (MUI). The local authority is Indonesia’s top Islamic scholarly body and it has now deemed all crypto assets as haram (banned) for Muslims in the country.

According to Asrorun Niam Sholeh, head of religious decrees, digital assets allegedly have elements of “uncertainty, wagering, and harm.” If cryptocurrencies as commodities or digital assets can abide by the Shariah principles and show clear benefit, then they can be traded, Sholeh noted at the Thursday expert hearing.

Previously, the MIU’s East Java branch issued a ‘fatwa’ (a formal ruling on Islamic law given by a qualified legal scholar) declaring cryptocurrencies haram in late October. The whole council now seems to have reached a consensus on the ruling.

Cryptocurrencies now Haram for Muslim Indonesians

Notably, Indonesia is not an Islamic country, but the majority of its population is Muslim. The Southeast Asian country plays host to the world’s largest Muslim population. MUI is a council of religious leaders that holds the authority on Shariah compliance in the country. The ministry of finance and the central bank consult this council on matters related to Islamic finances.

The Indonesian government itself partly supports the use of digital assets in the country. The law has it that cryptocurrencies should be treated as assets and commodities. Citizens can, therefore, trade them as an investment option alongside commodity futures. The nation also hopes to establish a crypto-focused exchange by the end of the year.

Moreover, the central bank, Bank Indonesia, has reportedly been considering launching a central bank digital currency (CBDC). In the first five months, Indonesia saw 370 trillion Rupiah ($35 billion) in crypto transactions. Nevertheless, using digital coins as a mode of payment is not permitted in the country since 2017. Rupiah remains the only legal tender for Indonesia.

The latest decree by MUI will not halt cryptocurrency trading in the country entirely. Only Muslims will be barred from investing in the assets, as some local institutions reconsider issuing crypto assets. Fatwa, is, therefore, not legally binding in Indonesia but some sources say it can be used as a source of “legislative inspiration.”

On the flipside

Indonesia’s stance differs from that of other Muslim-dominated countries. The United Arab Emirates, for instance, has permitted crypto trading in Dubai’s free zone. Bahrain, on the other hand, has been backing crypto assets since 2019.

Additionally, cryptocurrencies aligned to the Islam religion have been designed. They include Muslim Coin and Caizcoin, which tout themselves as Shariah-compliant (halal) currencies useable in the whole Ummah.