ISLAMIC FINANCE AND DIGITAL CURRENCIES: SHARIAH PERSPECTIVES ON CRYPTOCURRENCY AND BLOCKCHAIN TECHNOLOGY

Abstract

The emergence of digital currencies and blockchain technology has introduced profound transformations in global finance. Among the most debated innovations is cryptocurrency, which challenges traditional conceptions of money, value storage, and financial exchange. From the perspective of Islamic finance—a system grounded in ethical and legal principles derived from the Shariah—these developments necessitate careful scrutiny. This paper explores the intersection between Islamic finance and digital currencies, with a particular focus on cryptocurrencies like Bitcoin and Ethereum, and the underlying blockchain technology. It aims to provide a comprehensive analysis of whether these technologies comply with Islamic principles such as the prohibition of riba (interest), gharar (excessive uncertainty), and maysir (speculation).

While proponents argue that cryptocurrencies align with Islamic finance by offering decentralized, interest-free alternatives, critics raise concerns regarding volatility, speculative trading, lack of intrinsic value, and regulatory uncertainty. Additionally, blockchain’s ability to support transparency, trustless transactions, and smart contracts may provide new pathways for Shariah-compliant innovation in sectors such as zakat distribution, waqf management, and Islamic crowdfunding. By critically reviewing classical Islamic jurisprudence alongside modern fatwas and financial theory, this study identifies areas of consensus, divergence, and emerging interpretations.

This paper argues that while cryptocurrencies present significant ethical and technical challenges, there is a growing scholarly trend toward conditional permissibility based on usage, asset backing, and regulatory oversight. The integration of blockchain technology into Islamic finance, when guided by Shariah principles, holds promise for fostering inclusive, ethical, and efficient financial systems. The study concludes by offering policy recommendations for regulators, scholars, and fintech developers working at the intersection of Islam and digital finance.