By Raha Rafii
Grand Muftī Shawky Ibrahim Allam of Egypt’s Dār al-Iftāʾ issued a fatwā in December 2017[1] stating that any and all uses of cryptocurrency was ḥarām, or forbidden—including purchasing, selling, and leasing. The al-Azhar-affiliated Dār al-Iftāʾ was established in 1895 with the Grand Muftī as its head; throughout its history it served a consultancy role for the Egyptian judiciary, despite recent attempts by the Egyptian government to bring it directly under state control.[2] Grand Muftī Allam, who received a PhD from the Faculty of Sharī‘a and Law at al-Azhar University, was elected in 2013 to replace Ali Gomaa.[3] He established the Fatwā Council of scholars which is assisted by a legal research team and maintains affiliations with several academic and scientific institutes.[4]
Like the later fatwās by the Syrian Islamic Council and al-Qaradaghi,[5] Allam, while acknowledging the existence of a variety of cryptocurrencies, used the example of bitcoin as the standard by which to define cryptocurrency. Similarly, he also prohibited its use based on cryptocurrency’s elements of uncertainty regarding its value as well as lack of clarity regarding its place of issue due to its digital-only existence. Allam’s declaration also shared with these other fatwās the concern for the lack of a regulatory body overseeing cryptocurrency transactions.
However, Allam was more explicit in his depiction of cryptocurrencies as fraudulent activity because of their high risk. He also went further in asserting that dealing in cryptocurrencies negatively impacted the economy in general as well as market equilibrium, in addition to the “concept of work (mafhūm al-ʿamal).” Although other financial markets also entail risk, Allam stated that, in comparison, cryptocurrencies entail a much higher risk by virtue of their value and prices being determined by unstable factors such as shifting user tastes and moods, leading to massive fluctuations; dealing in cryptocurrency is thus more similar to gambling. Since such high risk also provides the attraction of high profits, Allam argued, it would lead to an increase in the use of cryptocurrencies to the detriment of state-issued currency; this shift would negatively impact fiscal policy since the state would not be able to manage the circulation of cash or its supply. Furthermore, cryptocurrency, which Allam noted is not recognized by most states, can be used for tax evasion and money laundering, as well as funding for criminal and terrorist groups and the trafficking of weapons, drugs, and other illegal activities.
Allam pointed out that the digital nature of cryptocurrency requires encryption technology, multiple back-up copies, and protection from viruses that is not available to the majority of users. Since transaction sites, digital wallets, and accounts cannot be fully secured from hacking, they would lead to massive financial losses. Furthermore, such losses cannot be recovered since the lack of financial regulations in cryptocurrency means that no one is responsible to the user or would secure payments the way a bank would, thus endangering people’s livelihoods.
In his fatwā, Allam was particularly concerned about the lack of security measures in cryptocurrency against forgery and price manipulation. By labeling them as ghashsh (fraud), he asserted that the Prophetic statement “he who deceives us is not of us” applied, as well as the Islamic legal maxim la ḍarar wa lā ḍirār, which in this case means no harm should be inflicted upon oneself or others. Furthermore, Allam stated that currency and monetary policy are the prerogatives of a centralized authority, which in a modern context means the state. In addition to referring to unnamed contemporary economists and other “financial experts (khubarāʾ al-māl),” he cited scholars and jurists from the Shafīʿī and Mālikī schools from a variety of periods to support this argument. These scholars include Ottoman-era scholars Bujayramī, Shaykh Dardīr, and Munāwī. He also cited works of history and political theory by Ibn Rushd and his commentator, Shams al-Dīn Gharnāṭī, and 11th-century works of political theory by the Seljuk vizier Niẓām al-Mulk and Māwardī, as well as Sarakhsī’s legal work al-Mabsūṭ. Allam added that “the jurists” have accepted the ideas in this texts that only a centralized authority could prevent monetary fraud, which he stated translates into central banks and tight fiscal controls in a modern state.
Allam thus concluded that the lack of centralized state financial controls and user protections for cryptocurrency, along with the risk attributed to dramatic fluctuations in cryptocurrency values, produce great harm both on an individual and state level; it is thus an unacceptable monetary medium of exchange and its use forbidden. At the same time, Allam acknowledged that cryptocurrencies, including bitcoin, required further in-depth study, along with the ramifications of non-fungible tokens (NFTs), in order to determine the proper adjustments and regulations to render the cryptocurrency market acceptable from an Islamic legal point of view.
Notes:
[1] “Fatwā on Cryptocurrency by Grand Muftī Shawky Ibrahim Allam of Egypt’s Dār al-Iftā’,” SHARIAsource, April 13, 2022, https://beta.shariasource.com/documents/4450.
[2] Shahira Amin, “Egypt’s Al-Azhar in dispute with government over fatwa authority,” Al-Monitor, July 23, 2020, https://www.al-monitor.com/originals/2020/07/egypt-draft-law-control-al-azhar-dar-al-iftaa-religious.html; “Al-Azhar praises withdrawal of Egypt Dar Al-Ifta’s controversial draft law,” Daily News Egypt, August 25, 2020, https://dailynewsegypt.com/2020/08/25/al-azhar-praises-withdrawal-of-egypt-dar-al-iftas-controversial-draft-law/.
[3] “Egypt’s new Grand Mufti elected for first time ever,” Ahram Online, February 11, 2013, https://english.ahram.org.eg/NewsContent/1/64/64550/Egypt/Politics-/Egypts-new-Grand-Mufti-elected-for-first-time-ever.aspx.
[4] “Foundation of Dar al Iftaa al Misriyyah,” Dar Al-Ifta Missriyyah, n.d., https://www.dar-alifta.org/Foreign/Module.aspx?Name=aboutdar.
[5] Raha Rafii, “Fatwās on Cryptocurrency: The Syrian Islamic Council and the International Union of Muslim Scholars’ al-Qaradaghi,” Islamic Law Blog, April 29, 2022, https://islamiclaw.blog/2022/04/29/the-syrian-islamic-councils-cryptocurrency-fatwa/.
(Suggested Bluebook citation: Raha Rafii, Fatwās on Cryptocurrency: Egypt’s Dār al-Iftāʾ, Islamic Law Blog (May 5, 2022), https://islamiclaw.blog/2022/05/05/fatwas-on-cryptocurrency-egypts-dar-al-ifta%ca%be/)
(Suggested Chicago citation: Raha Rafii, “Fatwās on Cryptocurrency: Egypt’s Dār al-Iftāʾ,” Islamic Law Blog, May 5, 2022, https://islamiclaw.blog/2022/05/05/fatwas-on-cryptocurrency-egypts-dar-al-ifta%ca%be/)