The enormous progress of cryptocurrencies in the fintech industry seems to put the newly invented money for regulators, economists, technologists and jurists all over the world to work hard. Increase gravity of the market capitalization for the cryptocurrency alarming the supervision bodies to contemplate many factors to regulate it. The apprehension is to ensure the ultimate objective of economic, social and political stability and its development for the advantage of the society.
Cryptocurrency is a digital asset designed to work as a medium of exchange using cryptography (in blockchain algorism) to secure a transaction and to control the creation of additional units of value throughout decentralized ledger. Cryptocurrencies like Bitcoin, Ethereum, Dogecoin, Monero and others are in a speculative wave and likely to become mainstream topic of many parties whether to support or oppose it. As of September 2017, there were over 1100 digital currencies in existence.
Cryptocurrencies are used primarily outside existing banking and governmental institutions and exchanged over the internet. The legal status of cryptocurrency varies substantially from country to country and is still undefined in many of them. Whiles some countries have explicitly allowed its use and trade, others have banned or restricted it. The position for Malaysia is expected to be announced by the Central Bank before the end of the year 2017. This is of course an importance announcement because it can affect the whole country and the future of fintech industry.
Some predicted that the cryptocurrency especially Bitcoin will back up of a particular country’s currency. Therefore, if a country hold strong position in cryptocurrency is likely to be strong in its local currency. In the latest development, control over local currency cornvertion to cryptocurrency has enticed international attention. The growing development of cryptocurrencies happen when new cryptocurrency created, mining of existing cryptocurrency by miners all over the world or local currency converted to cryptocurrency.
Increase demand for the cryptocurrency has reached to an unimaginary end. After about 8 years of its birth, Bitcoin for instance, the most prefered cryptocurrency has reached more than US$5,700/BTC. The rate continue to dramatically increase made up the market cap of over US$55 billion. Based on the total number of bitcoin token available (estimated to BTC21 million), BTC16 million are in circulation, four million more will be mined expected in the next 10 years. While on the methematical formula, it will take 100 years to mine the last one million Bitcoin, says the optimist of the cryptocurrency.
Money is an essential subject in economics and it is the lubricant of a financial system. From the Islamic point of view, money should be instrinsic in value, observed as a medium of exchange and a standard of measurement of an economic value. Money is consideration, not an item which can be traded or something that is likely to produce yields without economic undertakings. Money can possibly be anything that is of value but it is however neither a productive good nor a consumption good. Therefore, if money is to be traded with money, the Islamic ruling on transaction ribāwī (usurious) is exaggerated. Such transaction must take place in the form that it is on spot basis (hand to hand) and for an equal amount. These principles are very important to view the Shariah ruling of which cryptocurrency currently traded and exchanged.
It appears to the rest of the world to determine as to whether these currencies assume the role of legal tender and considered as a recognized medium of exchange. Will a country willing to give up control over the currency in circulation that directly affecting the money supply and liquidity? In recent observation on the cryptocurrency phenomena, it shows that many conventional control and monetary tools ceased to be applicable. Some miners are on a pyramid scheme which have been deemed to be objectionable by the jurists. Even if it is acceptable as a medium of exchange and not a commodity in itself, the jurists have not preferred such a medium of exchange be used as a means of one’s livelihood as it has not intended for trading with its own kind. In fact, jurists have mentioned that currency should only be traded with currency to the extent of necessity whilst fulfilling the prevailing rules pertaining to trading in currency.
One has to be very careful as far as Shariah compliance is concerned when trading on most of the web platforms and markets as the conditions of a valid trade are not generally adhered to. Transactions are very often speculative and hedge based which always cast away the Shariah compliance and governance. To establish the ultimate objective of the money as an economic lubricant, Shariah aspect should be put on its supremacy. Sound Shariah ruling is the best gatekeeper for the regulators, strategist, economist and technologist to uphold on.
