The Messenger of Allah (blessings and peace of Allah be upon him) said: “Gold for gold, silver for silver, like for like, same for same, hand to hand. If any of these things are different, then sell however you like, so long as it is hand to hand.” Narrated by Muslim (2970).The scholars of the past, may Allah have mercy upon them, had done some qiyas and included to the list various products which I think is a different issue.

The scholars of our time have included the paper money/fiat currency to gold and silver using qiyas. Based on what I have researched, I believe this is not a right qiyas assuming the qiyas is a source of shariah. This neglects/misses the hikmah of the hadith and perhaps ironically serves as a tool against what is intended by the very hadith, Allahu A’lam.
This hadith should have been taken within its apparent meaning with no qiyas for shari’ rulings, but perhaps for an Islamic ruler the hikmah behind this hadith could have been helpful when he, for instance, had to decide to freeze/stop in the markets certain transactions for the benefit of the ummah on a temporary basis.

Gold and silver had historically been a medium of exchange. And what I have understood from the hadith and my own research is that it is permissible that gold/silver is exchanged for the purpose of loan but not as a transaction such as sale/purchase except when it is like for like, same for same and hand to hand. If we think about it, such sale/purchase transactions would be very rare in comparison with other transactions in the market except when someone needs to change his gold to silver or vice versa, and to convert into smaller silver/gold coins/parts, otherwise there is no much point in changing the same gold/silver to the same, like for like. So, why the Prophet peace be upon him would forbid this? Allah and His messenger know best.

I have the below points for clarification:
i. Current financial system which is based on riba
Paper money/fiat currencies (all that I am aware of) originated using the gold standard which is a monetary system where a country’s currency or paper money has a value directly linked to gold. At the beginning, people believed the paper they hold has value in gold so they had confidence and trust to use them as a medium of exchange. The trend continued until people started to see a value in papers they use (e.g. now), then the countries stopped backing their currencies by gold. As per the hadith, linking paper money to gold as a medium of exchange would have been haram. (?).
After abolishing the gold standard, now governments can print money as much as they want, and nowadays they don’t even have to print, it is just a number to add, although they use fancy words that ordinary people don’t understand such quantitative easing etc. when they refer to printing money. Moreover, releasing money to circulation is based on the riba in the west and other countries including Muslim majority countries.
The hadith indicates that we have to use gold/silver.
ii. Implications of using paper money/fiat currency
This has directly resulted in social injustice and unjust wealth distribution within the nations and across the nations. The value of the paper money can be controlled by the central banks on top of the demand and supply in the market. This is unlike gold/silver where only market conditions would determine the price/value.
In simple terms, even if the market conditions remained unchanged my 100 GBP would not have the same value in a year because the government would decrease its value by their so called “targeted inflation” policy. So, I have to either spend it, invest it or give it as a loan to a riba based bank. The list goes on…
Fiat currency has caused the prices for good/services higher as it is very easy to transact with – you may have billions in your card and you can go anywhere you want and spend in any way you want, which would not be the case with gold/silver. This has also given an opportunity to the greedy to collate more than they could. If they had 100kg of gold they would struggle to keep/preserve it, but with paper money, this is not an issue for them. Other impacts like this which are only known to Allah has created unjust wealth distribution in our times within society.

iii. Imbalance in international political landscape.
Now that governments do not follow the gold standard, they keep foreign currency reserves, in gold and other assets. The US dollar is apparently by far the most important currency in global reserves, accounting for some 66% of the total at the end of 2004 according to the IMF Annual Report 2005. Basically, other countries have to keep USD or other western currencies to take part in the international financial market. As we said these currencies are nothing but a promise for a monetary value (which decreases in value all the time) and can be “printed” as much as the owner government wants (such was the case during Covid in US/EU/UK). These governments may put any country into sanctions list if they want to.. This list goes on too…

As a conclusion, I think, the intention behind the hadith was to keep gold/silver as a medium of exchange. And we seem to have got it so wrong so much so we made something impermissible permissible and moreover put in in the same status as gold/silver unintentionally.
Now based on the above, please let me know if this qiyas – adding paper money to the list of gold/silver- was correct or not, what are the implications of this? I know it is not Muslims who invented the paper money, but we made it permissible for ourselves in the past and now? Muslim nations followed their method in introducing paper money and all of them keep their reserves in riba based western currencies, our central banks follow a monetary system which is again riba based.
Haven’t we got this wrong initially and created unfounded/unnecessary hardship to individual Muslims, although the challenge should be directed to Muslim nations’ leaders/governments for enforcing riba over the ummah? Individual Muslims get their salary/wages in an exchange to their work/products based on the custom now without full story, but if all were aware this issue, that would be the first step…