Tarjih Muhammadiyah is the third Islamic organization to issue a fatwa against the use of cryptocurrencies in Indonesia.
Cryptocurrencies аnd Fatwas
According to a report by CNBC Indonesia, the Tarjih Council and the Central Executive Tajdid of Muhammadiyah issued a new fatwa against cryptocurrency use, deeming it haram, or unlawful, for Muslims. The organization detailed two reasons behind the move.
Firstly, it observed that digital assets such as Bitcoin are speculative and highly volatile in nature. Additionally, cryptocurrencies are not backed by any other assets such as gold and are believed to be “obscure,” thereby making them unlawful under Islamic laws.
Secondly, the fatwa also stated that digital currencies do not follow Sharia tenets for barter system or medium of exchange laws which need them to be legal tender and approved by the state, or in this case – the central bank.
Will Fatwa Impede Crypto Adoption In Indonesia
Even though Tarjih Muhammadiyah happens to be one of the largest non-government Islamic organizations in the country, fatwas are typically not treated as binding judgments. But this isn’t the first time that an Islamic organization deemed cryptocurrencies “haram,” which means forbidden, in Indonesia.
In November, the Islamic scholars declared that all digital asset trading is forbidden for Muslims. The National Ulema Council (MUI) cited aspects such as uncertainty, wagering, and harm in cryptocurrency assets.
It is important to understand that the decisions made by the Islamic authorities are not an official decree, nor do they imply an outright prohibition on cryptocurrency trading. But its far-reaching consequences, in a country that houses the largest Muslim population, cannot be ignored entirely.
Having said that, the barriers of trading have never been lower in Indonesia. It recorded almost $10 billion in crypto transactions in 2021. Moreover, the crypto giant Binance was in talks with some of Indonesia’s biggest companies to launch a crypto venture in the country.
The CZ-led exchange also teamed up with a consortium led by telecom Indonesia-backed MDI Ventures to expand the blockchain ecosystem in the country by setting up a new digital asset trading platform.
Despite the initial reluctance, cryptocurrencies were legalized in September 2018. Indonesia’s Ministry of Trade approved the trading of crypto assets as commodities.