Q: I have a question on the impermissibility of Bitcoin: Only on the aspect of physical form and existence, how does Bitcoin differ from the Fiat monetary system which we use globally? One definition of ‘Fiat Money’ is: “Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material that the money is made of. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on the faith and credit of the economy.” (Source: Fiat Money, Investopedia. http://www.investopedia.com/terms/f/fiatmoney.asp)
Also: “Money which has no intrinsic value and cannot be redeemed for specie or any commodity, but is made legal tender through government decree. All modern paper currencies are fiat money, as are most modern coins. The value of fiat money depends on the strength of the issuing country’s economy.” (Source: Fiat Money, InvestorWords. http://www.investorwords.com/1928/fiat_money.html#ixzz4tFCpOxGO)
From these definitions, it seems that fiat money also does not have a physical form and existence (like Bitcoin). Please may the respected ‘Ulama explain this.
A: We do understand the nature of the Bitcoin and its ramifications. However, we are in the process of discussing this with various ulama to understand what is the shar`ee position.
And Allah Ta`ala knows best
Answered by:
Mufti Zakaria Makada