The National Ulema Council (MUI) has deemed cryptocurrency as haram, or banned, as it has elements of uncertainty, wagering and harm, and are in violation of state laws, head of religious decrees, after the council held an expert hearing.
If cryptocurrency as a commodity or digital asset can abide by Shariah tenets and can show a clear benefit, then it can be traded, the Council said.The Bloomberg had in a report said that the MUI holds the authority on shariah compliance in the country that is home to the world’s largest Muslim population, with the finance ministry and central bank consulting them on Islamic finance issues.While the decision from MUI doesn’t mean all cryptocurrency trading will be stopped in Indonesia, the decree could deter Muslims from investing in the assets and make local institutions reconsider issuing crypto assets. Bank Indonesia has been mulling a central bank digital currency, with no decision announced as yet.
Read also China’s Tencent Leads $48m Series B Round In South African Payments Startup Ozow
The decision to ban crypto comes after media outlets reported that Indonesia’s government was mulling a tax on the profits of crypto trading in order to bolster revenue amid the COVID-19 pandemic.The decree risks smothering Indonesia’s nascent crypto community and follows a recent crackdown on digital assets in China.However, the MUI allows trading of cryptocurrencies that meet Islamic rules, have an underlying asset and carry clear benefits. The MUI’s decree is not legally binding as it is not part of the government, but its ruling may affect investment decisions by some Muslims.While the country’s central bank declared crypto “not a legitimate instrument of payment” in January 2018, trading has been permitted allowing Indonesia’s crypto community to swell to around 4.5 million investors as of May.A recent survey by Coinformant found that Indonesia ranks as the world’s top “crypto hotspot.”In the Asian country, online engagement with crypto has grown by 1,772 per cent this year as more people than ever before read articles and searched for information about digital assets. Annual search volume jumped by 575.2 per cent, beaten only by Chile where search volume increased by 707 per cent in 2021.
Read also How Traditional Banks Can Gain an Edge in African Fintech Transformation
The total value of cryptocurrency trading in the commodity bourse has reached 370 trillion rupiah ($25.96 billion) this year to May, according to the trade ministry. The total trading at the end of 2020 was valued at 65 trillion rupiah. The number of traders has reached 6.5 million up from four million.Trading of cryptocurrencies as a commodity is also unlawful, with the MUI likening it to gambling, because it does not meet Islamic rules, such as for the goods to have a physical form, a clear value, and a known exact amount, among other reasons, he said.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry