Indonesian Muslim cryptocurrency enthusiasts find a way around Islamic fatwa

Baca dalam Bahasa Indonesia

Trading of cryptocurrencies like Bitcoin has been declared forbidden for Muslims by the national council of Islamic scholars in Indonesia, as the popularity of digital currencies grows in the world’s largest Muslim-majority country.

During a recent online forum, Indonesia’s quasi-governmental Ulama Council declared a fatwa, or a non-binding religious ruling, that cryptocurrency is haram — forbidden under Islamic law.

An Ulama is a Muslim scholar who is recognised as having specialised knowledge in Islam.

According to Islamic law, a transaction should follow certain requirements, such as having a physical form and definite value.


“Cryptocurrency as currency is forbidden because it has elements of uncertainty, harm and doesn’t meet the Islamic requirement according to Shariah [law],” KH Asrorun Niam Sholeh, the council’s head of religious decrees, said in the forum.

However, Mr Sholeh added that although cryptocurrencies as a currency is forbidden, it could be traded as a commodity or digital assets if they meet requirements.

The council has served as an authority on Shariah compliance in Indonesia, but they have been criticised for other controversial fatwa.

In 2018, it issued a fatwa raising concerns about a measles-rubella vaccine due to it containing traces of pork and human cells.

The council also issues halal certificates — the opposite of haram — for food and other consumed products in the country.

Nahdlatul Ulama (NU) is one of the world’s biggest Islamic organisations with around 90 million members and followers.

In October, its East Java branch also issued a fatwa declaring cryptocurrencies haram.

Deputy Chairman of the East Java NU, Ahmad Fahrur Rozi, known as Gus Fahrur, told the ABC the fatwa was based on the results from a forum discussion of issues on Islamic jurisprudence.

a group of people bring a big flag with arabic letters
Nahdlatul Ulama is Indonesia’s largest Muslim organisation, with at least 90 million members.(Reuters: Supri)

One of the conclusions that came from the discussion, attended by both crypto and Islamic legal experts, was that crypto trading tends to involve “fraudulent practices and gambling”.

“Just like it’s not allowed for a person to buy indistinct objects, like ‘fishes in the sea’ or ‘birds in the air’,” Gus Fahrur told the ABC.

He said cryptocurrencies was also similar to gambling because people speculate about the value without knowing the cause.

Practices such as gambling are not allowed in Islam, since the value and price are indefinite and could financially and physiologically harm those involved.

In comparison, he said stocks had a clear value and the price increased or decreased depending on the company’s performance.

Because of the huge elements of speculation over the value of cryptocurrencies, they considered it “inappropriate to be used as an investment instrument”, he said.

The booming trend of crypto in Indonesia

a woman sitting with a laptop on her table
Putri Madarina hopes there will be more robust discussions about cryptocurrencies from an Islamic perspective that may change the fatwa.(Supplied)

According to Indonesia’s Ministry of Trade data, the number of crypto investors in the country had grown from 4 million people at the end of 2020, to 6.5 million people by the end of May 2021. 

It has exceeded the number of investors in the share market, which is around 2.4 million according to Bank Indonesia — the central bank.

Putri Madarina, a certified financial planner and founder of Halal Vestor, a Shariah financial planner and education service in Jakarta, said the flourishing interest in crypto investing in Indonesia was partly due to social media, especially TikTok.

“It is even booming during the COVID-19 pandemic, we are actually in the second wave of the crypto trend,” Ms Madarina told the ABC, referring to the crypto boom three years ago.

Ms Madarina has been investing in crypto since 2017 and said the Islamic decree hadn’t deterred her from continuing to invest in crypto.

“What we bought is a digital commodity, like a collection that we consider valuable,” she said.

She also considered crypto as a ‘mal’ — an Islamic term for property — which can take in many forms.

“So, as a medium of exchange, I think it’s not a problem,” said Ms Madarina, who is also a treasurer of an Islamic fintech association in Indonesia.

“As a property, I don’t see any Islamic ruling being violated, unless it was made to be a means of deception, which is also an external factor that we can’t control.”

‘I am a Muslim, I follow the fatwa’

A man wearing a black skullcap poses in front of the Sydney Opera House.
Ainun Najib followed the fatwa and released all his bitcoin assets.(Supplied)

Ainun Najib is an Indonesian NU member based in Singapore who works in IT.

He only started investing in cryptocurrencies in January 2021.

He said he knew about the halal and haram controversy, but there was no official fatwa from any religious organisations at that time.

He considered buying Bitcoin just like buying land or gold, but in a digital form which was protected by “mathematically impenetrable encryption”.

“I initially intended [to keep bitcoin] as an asset, as my long-term savings. By long term, I’m talking about 10 to 20 years.”

But in less than a year Mr Najib decided to release all his bitcoin assets worth $45,000 in total. 

“Because of the fatwa [from NU East Java],” he said, explaining the reasons behind his decision.

interior of a stock exchange building with a big circle on the ceiling and moving electronic graphic on the walls
The number of crypto investors has surpassed the number of investors in Indonesia’s stock exchange.(Kompas: Garry Andrew Lutolung)

He said although he understood the blockchain technology used in cryptocurrencies, for him the fatwa was an “expert recommendation”, like how doctors recommend a patient with a high risk of cancer to quit smoking and drinking alcohol.

He feels that given he has no knowledge on religious law, he needs to hand those decisions over to experts in the field, like the Kyai — an expert in Islam — or religious scholars.

“I am a Muslim. In the context of Islam, I follow the fatwa,” he said. 

“[But] it’s our choice whether to follow it or not. But I think the right decision would be to follow it.”

Fatwas may change in the future

Cryptocurrency is still being discussed widely among Islamic scholars and institutions around the globe.

In 2018, the Grand Mufti of Egypt banned Bitcoin trading as it was prone to risks for the traders due to the price fluctuations. 

Haitham al-Haddad, a British Muslim scholar, also considered cryptocurrencies not halal since it is a virtual currency with “no tangible worth”.

Similar views have also shared by individual Muslim scholars in countries such as Turkey, Malaysia, and Saudi Arabia.

But others have taken the opposite view, including South Africa’s Darul Uloom Zakariyya, Pakistan-based Shariah Adisory Muhammad Abu Bakar, and other Muslim scholars in Qatar and United Arab Emirates.

Ms Madarina said cryptocurrency was such a “hot topic” in the Muslim world.

She added the new Islamic decree would less likely impact the decisions of cryptocurrency investors, and instead be an “an eye-opener” for investors or those who are about to enter the market.

“And I haven’t seen yet a drop in numbers of interest.”

A man in a hat and glasses leans against a tree posing in front of a historic building.
KH Ahmad Fahrur Rozi says if there are developments regarding cryptocurrencies the fatwa could change.(Supplied)

Gus Fahrur said fatwa were not rigid and the views of Islamic scholars on crypto trading may change.

“The fatwa is dynamic. If [cryptocurrencies] no longer contain an element of speculation and … if there is an official regulation from the state which protects it from speculators, then we will have no issues.”

He emphasised the fatwa at the moment was aimed at protecting the community.

“Everyone wants to make a profit, right? But please don’t speculate,” he said.

“What if cryptocurrencies collapse because they were not built on a valid and strong foundation, what will happen?

And for Mr Najib there is a possibility for him to get back into investing in cryptocurrencies in the future.

“When the expert changes [their] view, it’s fine, we can also follow it again … if there is an updated fatwa, then I will follow it again.”