On April 16, 2018 - Department of Muamalat KPIJ Marsah, represented by Mdm Siti Aishah Kasmon and Mdm Norafni @ Farlina Rahim has attended the Roundtable Discussion on Cryptocurrency: Issues & Solutions which was held at International Islamic University College of Selangor (KUIS, Bandar Seri Putera, Kajang, Selangor).
The first session was held at Auditorium Dr Zainuddin Jaafar, while the second session was held at Senate Hall of KUIS.
In between of the first and second session of Roundtable Discussion, the MOU has been signed between IRCIEF-KUIS and ISRA.
Among the notable points from the discussion are:
🖊 Cryptocurrency can be defined as a non-tangible digital "asset" and perceived to have value.
🖊 The discussion suggest that there are 4 types of cryptocurrency which are as follows:-
1) Backed by commodity (e.g.: backed by gold)
2) Issued by government/authority (e.g.: Dubai and Venezuela soon to issue their own cryptocurrency)
3) Not backed by commodity nor issued by authority (e.g.: bitcoin)
4) Equity-based cryptocurrency (e.g: security token commodity)
* no 3 was highlighted to be discussed
🖊 Cryptocurrency is community based commodity and it's not issued by central bank. So, it rely on the criteria such as strength of technology system, popularity, rules and regulatory and so on to be acceptable.
🖊 There are two purposes why people engaging with cryptocurrency:-
1) Medium of settlement
2) Investment
🖊 Cryptocurrency can become an alternative to bridge the issue of SRR by central bank in fiat money.
🖊 If the cryptocurrency come with high technology and solid system, then it is acceptable and still working until now. However, for those come with less technology system, then they cannot survive.
🖊 It is to be noted that the blockchain in cryptocurrency is a strong system and it is almost impossible to be hacked by people.
🖊 Cryptocurrency is not stand alone money. It still backed to fiat money.
🖊 It still difficult to determine in shariah point of view whether it is halal or haram. It depends on intention to deal with cryptocurrency. When "taradhi" is there, it can be consider as halal.
Among the issue raised in the roundtable discussion are:
- The issue of Blockchain - considered among the technology driven which is currently not hackable. Blockchain is the digital ledger, sort of database that records the transaction.
- There are two types of Blockchain - public Blockchain and private blockchain. The differences between two is based on protocols. Public blockchain is open to public while private blockchain verify only few people
- Blockchain accommodating smart contract whereas fullnodes download the history of the transaction
Prof Dr Rahim from USIM also raising the questions on
1) Is the cryptocurrency is safe and protected?
2) Is Blockchain system is fully-secured?
3) Is there any super-technology can supervise the whole system of cryptocurrency and blockchain?
There is also the issue of security of the whole system considering 1500 types of cryptocurrency. The hacking is not the Blockchain system but the system surrounding that.
Dr Arfah has also presenting how the fiat money and whole current economy system are creating money with money by reserve system.
Dr Azrul from USIM has raised the issue if cryptocurrency can be considered as real money, based on two issues:
1) That currency need to be stable
2) Currency are free from monopoly
However, cryptocurrency is not abide from the above rule.
Ustaz Mohd Noor also raising issue why we should move away from the real money as stated in Holy Quran - Gold and Silver? He stated that gold and silver never crashed, while other currency had crashed before. He also questioned if cryptocurrency have any warranty of not going to crash. The issue of rawaj of cryptocurrency - (means the circulation of the currency among people) also being raised.
There was also issue on the identity of the Bitcoin inventor, Satoshi Nakamoto as he is still remain anonymous.
The experts has agreed that this issue - hackablity and crash is based on how proper is the design of the system.
The chaiperson Dr Asyraf has asked the audiences if anyone has experiencing the trade of Bitcoin and cryptocurrencies.
Dr Azrul has a slight experience and according to him, the trade of Bitcoin is purely speculative.
Ustaz Maiz has argued that we tend to define Bitcoin as cryptocurrency as we define it technically. If we look into Shariah analysis, it doesn't escalate as currency. The people tend to call Bitcoin as currency in technical terms. Furthermore, cryptocurrency doesn't have intrinsic value.
If to put the issue of cryptocurrency is Shariah and fiqh perspective, the system need to retain strong demand, strong algorithm and strong support system.
Prof Kameel from IIUM on the other side, fully support the cryptocurrency and he is okay using cryptocurrency as currency. He support cryptocurrency as long as it is commodity-based such as oil or rice, and issued by government to ensure its regulation. However, the issue behind it is Muslim government can take wealth from people like in fiat money system?
Dr Farrukh on the other hand mentioned we define money based on the creation in economy as most of economist agree that the characteristic of money is medium of exchange. And we cannot deny that cryptocurrency is efficient.
Prof Kameel agreed that cryptocurency is similar as electronic money. He argued that in literature review he read, he not found any literature mentioning Bitcoin and other cryptocurrency having legal tender.
The discussion also noted that Japan is one of the country that recognize Bitcoin and regulate it as medium of settlement.
However, it raise the issue if the Bitcoin is used as medium of investment -- as it exposed to the speculation and price volatility.
Thus, legal tender give more stability and less price volatility.
There are many issues raised in this roundtable discussion. The discussion conclude that there are different types of cryptocurrencies. Currently, there are news stated that Dubai and Venezuala will issued cryptocurrency. The roundtable discussion has agreed that Japan is one of the countries that regulate and accept Bitcoin, as many supermarkets accept Bitcoin as medium of exchange. Anyway, Bitcoin is still backed by fiat money and its value is still on fiat-money based.
