Mu’aawiyah Tucker is a religious man. Because the Koran forbids the practice of earning interest on loans, Tucker has for years tried to avoid traditional banks. For a while, he became a self-described “gold bug,” putting savings into the precious metal. But then, Tucker, 40, discovered bitcoin.
“The whole ‘hodl’ mentality is actually in essence the same thing. We’re holding on to the thing and we’re waiting until the reward later on,” Tucker says.
Whether cryptocurrency is indeed permissible, however, is a matter of debate. In recent months, prominent religious authorities have issued fatwas warning followers to stay away from cryptocurrencies, arguing that their wild price fluctuations and shadowy origins make them more akin to gambling, which is also forbidden by the Koran.
“Cryptocurrencies as commodities or digital assets are unlawful for trading because they have elements of uncertainty, wagering and harm,” Asrorun Niam Sholeh, head of religious decrees for the Indonesian council of Islamic scholars, told reporters in November after issuing a fatwa against using crypto. “It’s like a gambling bet.”
Though no less devout, Tucker is part of a younger, tech-savvy vanguard arguing that crypto offers Muslims a viable alternative to the traditional financial system. Tucker studied Islamic law with internationally respected scholars in Medina, the city where the prophet Muhammad is buried, and now runs CryptoHashReview, a consulting firm that advises crypto projects on how to comply with Islamic law.
“If the system is this bad, how could I possibly justify staying in it if I have another avenue?” Tucker says.
Debates like this aren’t unusual for Islam. The religion has a rich history of scholarship on financial issues, and Islamic law, or sharia, has a robust financial component. For generations, religious leaders have debated the passages in the Koran that deal with money. Generally, Islamic finance seeks to set out rules for business and investing that ensure that one group does not take advantage of another or use money to oppress someone else.
Other financial innovations like currencies that aren’t backed up with gold reserves, credit cards and commodity options trading have all sparked debates in the past.
The stakes are high. As prices for bitcoin and other cryptocurrencies rose rapidly last year, millions of people in the Islamic world began investing in them, especially in Indonesia and the Persian Gulf states, which have large populations of digitally connected young people.
Proponents say the crypto space will produce the next wave of tech innovation, bringing wealth and opportunity to those who jump in. Skeptics argue that the crypto world is littered with scams and destined for a crash that could wipe out the savings of everyday investors who can least afford such losses.
Anas Amatayakul has spent his life studying Islamic law and history, speaking at conferences around the world and teaching at some of the top universities in Thailand, his home country. He speaks with the patience and persistence of a longtime teacher. Asked about his views on cryptocurrency, he says, “Do you have some time? I have to tell the background” and launches into the story of God creating Adam.
Amatayakul, who also has led the committee advising the Islamic Bank of Thailand on sharia, says that he’s not against technological change but that the world of cryptocurrency is moving so fast that he advises fellow Muslims to stay away from it for now.
“This is to safeguard people in matters of wealth,” Amatayakul says. Many people have sought his advice on cryptocurrency, he says. One of his former students, now studying in Cairo, even got into a dispute with his roommate because they were driving up the electricity bill by running energy-intensive software that “mines” or creates new crypto coins.
There is no central authority in Islam who can make a final ruling on crypto. Scholars write books, give lectures and gather together at universities or religious conferences to hash out new issues. Many Muslim-majority countries have sharia councils, made up of respected religious leaders, who issue fatwas and give explanations for their decisions. Though not binding, the councils can influence government policy, and religious Muslims often look to them for guidance.
Though cryptocurrencies have been around for years, they have soared in value recently. The value of cryptocurrencies taken together tripled from $770 billion at the beginning of 2021 to a high of $2.9 trillion in November, according to CoinMarketCap. A crash in January wiped out nearly half of that, but the prices for popular crypto coins are still exponentially higher than they were just a couple of years ago. A single bitcoin bought in 2013 for $30 or $40 is worth around $40,000 today.
According to a November report from Pew Research, one in six Americans have invested in or transacted with cryptocurrencies, although there are few practical uses for them beyond speculation and investment at the moment. A handful of companies, including Microsoft and Whole Foods, do accept cryptocurrency as payment, but usage is extremely limited.
Crypto is so different from other financial products because transactions are recorded using technology known as blockchain software that runs on many different computers around the world. Instead of a bank or government being the arbiter of who owns what, the blockchain allows transactions to be recorded without a central authority.
Islamic finance has adapted to changes in the past. Traditionally, investments and currencies had to be backed by physical assets such as gold, Amatayakul says. But when fiat currencies such as the U.S. dollar, which are not backed by gold, became more popular over the course of the 20th century, scholars studied and eventually incorporated them into Islamic finance. Today, fiat currencies are allowed because they are issued and guaranteed by a recognizable authority, in this case the U.S. government, Amatayakul says.
“But for cryptocurrencies, they are all unknowns. Who issues it?” Amatayakul says. The crypto world is littered with scams known as “rug pulls,” whereby a proponent of a new currency will collect real dollars from investors and then disappear.
Tucker concedes that crypto is still full of questionable investments, and that a lot of the interest in it, from Muslims and others alike, is driven by the potential of making money by speculating on it. Many people ask him whether particular cryptocurrencies are sharia-compliant, he says.
Recently, someone asked him if a coin called WifeDoge was compliant with Islamic law. Dogecoin, a cryptocurrency that started as a joke about the Internet meme featuring a Shina Ibu dog known as “doge,” shot up in value last year when Tesla chief executive Elon Musk began tweeting about it. But Tucker says he had never heard of WifeDoge. Perplexed, he looked it up.
“Lo and behold, there is a coin called WifeDoge,” he says. “It has a whole website, it has a picture of doge and the female version of doge in a wedding gown,” he says. “I said, ‘What are you doing?!’ ”
Tucker says such stories help him understand why Islamic scholars are pushing back against cryptocurrency. Still, he says he thinks the resistance arises mostly from a lack of understanding of the fast-moving technology.
“I’ve been in this space since 2017. I have a tech background. I’m technically young, so being young, it’s easier to understand these concepts,” Tucker says. He tells the story of meeting with a scholar and trying to explain how blockchain works.
“He was there for seven hours, seven long hours,” he says. “It was at that moment I realized we’ve got a long way to go because it is such a paradigm shift.”
Whether the Islamic world dives into crypto or avoids it could have an impact on the price of cryptocurrencies and the future of the technology. Four of the 10 biggest sovereign wealth funds are run by majority-Muslim countries in the Persian Gulf, together holding hundreds of billions of dollars, according to the Sovereign Wealth Fund Institute. Although those funds are not required to invest only in sharia-compliant assets, large portions of them are.
“I think it’s real,” Khaldoon Al Mubarak, head of one of the UAE’s sovereign wealth funds, said in a December interview with CNBC when asked about cryptocurrency. “While many people are skeptics, I do not fall in that category.”
Muneer Khan, head of Islamic finance and Middle East practices for the London-based law firm Simmons and Simmons, has worked in Islamic finance for 20 years, advising banks on how to craft financial products that adhere to sharia.
“There has always been an element of debate, especially around newer, less-well-understood forms of finance,” Khan says from his home in Dubai. “There are many sharia scholars around the world, but there are relatively few specialists in the area of finance, and there are even fewer scholars who understand modern-day finance.”
That creates a situation where spiritual leaders who may not fully understand cryptocurrency are making proclamations about it that are then followed by others. “For the average man on the street, it might be a big ‘I won’t do this anymore.’ It’s a warning they will rely on without understanding the nuances,” Khan says.
Still, some majority-Muslim countries, such as the United Arab Emirates and Saudi Arabia, are looking at creating their own digital currencies.
“The governments are looking at how they can diversify their economies away from hydrocarbons. Part of that is looking at fintech and part of fintech is digital assets,” Khan says. Young people in Muslim countries are also increasingly interested in crypto as a way to increase their opportunities.
“On the whole, there’s a divide between older generations and younger generations, and crypto is seen as a leveler, an equalizer, a fresh opportunity for a reset,” he says. “That is no different in the Muslim world.”
Khan expects adoption in the Muslim world to increase the same as elsewhere. Besides, he says, there are elements of cryptocurrencies that actually may appeal to conservative Muslims. “Not having interest and not having exorbitant fees and having the efficiency and less friction in terms of fees and costs — these are all inherently sharia-compliant aspects,” he says.
But for now, many Islamic scholars aren’t convinced. The raft of scams, the highly speculative nature of crypto, the connection with money laundering and crime, and the difficulty in understanding who exactly is behind certain projects all add up to a situation where most people should avoid cryptocurrencies, says Amatayakul.
“Cryptocurrencies and bitcoin is in the age of childhood,” he says. “We must allow it to grow up and become an adult.”