The East Java branch of one of Indonesia’s largest Islamic organizations Nahdlatul Ulama (NU) released a fatwa considering the use of “haram”, or prohibited, cryptocurrency under Islamic law.
A fatwa is a non-binding legal opinion on Islamic law, which is reached through a discussion called a bahtsoul masail. Representatives of the leadership of the Nahdlatul Ulama branch and several Islamic boarding schools in East Java attended the bahtsoul masail.
Interest in cryptocurrency has increased in Indonesia over the past year. Earlier this month, a report by Coinformant reported that Indonesia saw a massive 1,772% increase in the number of people engaging in crypto articles in 2021.
Indonesia is home to the largest population of Muslims in the world and has a thriving crypto industry. According to the Indonesian Ministry of Commerce, the country had gained around 6.5 million crypto investors as of May of this year, eclipsing the 5.7 million retail investors registered with the Indonesian Stock Exchange.
An announcement posted on the East Java branch Nahdlatul Ulama website Sunday quotes President Kiai Azizi Chasbullah:
“Participants in the Bahtsul Masail are of the opinion that although the government recognizes cryptocurrency as a commodity, it cannot be legalized under Islamic Sharia law.”
The group came to the conclusion that the cryptocurrency was considered haram because it involves too much speculation and, therefore, cannot be used as a legitimate investment.
“Based on several considerations, including the prevalence of fraud, this is considered illegal,” said a representative from Lirboyo Islamic Boarding School Kediri.
Some Muslim scholars believe that cryptocurrency is similar to gambling, which is prohibited by Islamic religious law. However, opinions vary and other Islamic organizations around the world claim that Islamic law allows cryptocurrency.
Last year, the Malaysian authority that oversees compliance with Islamic financial law announced that it would allow trading in digital assets.
Efforts are also underway in Australia to create the world’s first Sharia-guided Decentralized Finance (DeFi) platform to navigate between the benefits of DeFi and Islamic finance beliefs.
Related: Report: Indonesia Leads Global Rise in Interest in Crypto
In September, Indonesian Commerce Minister Muhammad Lutfi told local media that Indonesia did not intend to follow in China’s footsteps and ban cryptocurrency transactions, mining or trade.