Hei! Ini Bitcoin Bule dan saya MaJo.

Have you heard about Bitcoin? If you have, and if you live in Indonesia like me, you’ve
probably had people ask “Is bitcoin halal?” Is bitcoin halal? That is the question, ya. So,
what’s the answer?

Well, to understand halal and haram you need to know about the Islamic rules of
business and money. Wait wait, let’s not get too technical - that’s what you’re thinking.
OK sure let’s keep it simple.

First of all - don’t forget that by default, everything in the fiqh of business - any type of
contract you can imagine or invent - is halal by default unless someone can show proof
that would make it haram. So unless something involves reba (banks call it “flower”),
excessive uncertainty (that’s “gharar” in arabic), or harm to society (no porno!).

Plus in Islam, transactions need to be “hand to hand”. Hand to hand? Apa artinya itu
“hand to hand”? Hand to hand meaning you can only sell what you already own. What?
Of course MaJo, how can I sell something I don’t already own? OK sure - fair question.
But in modern business that is sometimes a common practice. And actually that’s the
way non-Islamic banks work. You probably think banks lend money from people who
deposit money. NO! Seriously no, that’s not how it works. Banks are allowed to loan
money they don’t have and that’s actually what creates the money. What?! You’re
saying - that’s completely crazy Majo I don’t believe you. OK fine but that’s according to
the Bank of England and it’s on their website.

In Indonesia banks can legally make loans with only 6.5% of the actually money they
lend out on deposit. This is called “fractional reserve banking”, and the 65% is called a
“reserve ratio” and it’s set by central banks of countries. That means if your friend
deposits 6.500jt the bank can lend out 93.500 jt to you with interest! Wow, sounds like a
great business, right? I wish I had that privilege! Imagine being able to create money
from thin air!. But yes - that’s how all modern non-Islamic banking works and that’s
basically how money is created. Money is created by debt. And debt has reba. And
banks loan money they don’t actually have.

So… wait a second, doesn’t that violate all the things we said about the Islamic rules of
business? Doesn’t that mean all money is haram? YES! But what about Bitcoin? OK
sorry, we’re getting off topic but sometimes it annoys me that people ask “Is Bitcoin
halal?” but nobody cares that all the money issued by governments (except gold and
silver coins) is completely 100% haram accordingly to Islam.
So what’s Islamic money then? Well real money in Islamic economy has to be things
with real value given by Allah. Traditionally these were gold, silver, and even durable
foods like barley, wheat, and even rice would be fine for an Islamic currency.

But what is money? Well if you’re imagining right now the blue paper in your wallet with
the handsome picture of Gusti Ngurah Rai and Bali on the back - sorry, that’s not
Islamic money. Jakarta calls it money and tells us we all have to use it. Sorry! But
Indonesia is a democracy and maybe we can change the laws yes? Well not me,
because I’m “bitcoin bule” not “bitcoin pribumi” and so I cannot vote.

But real money in Islamic economy should be things with real value given by Allah.
Gold, silver, and even durable foods like barley, wheat, and even rice work fine for an
Islamic currency. And also there’s a few special rules about money more than just the
normal rules of Islamic economy. Why extra rules? Well because it’s money and it’s
really important ya? So what are the extra rules? Well the important one is “like for like”
meaning when you exchange gold for gold and silver for silver they should be of similar
qualities. With paper money this is a problem because governments always print more
more more because why well because who doesn’t love having more money! But
seriously governments print money and it makes the value of money smaller smaller
smaller and smaller until, well, until for example in just a few months between
1997–1998 the Rupiah lost 80% of it’s value. Imagine if your bank account had 10jt and
in a few months later you check the balance and you only have 2jt. That’s inflation for
ya! And the inflation of the currency is cited by historians as a major reason why
Szuharto fell out of power.

“OK already so tell me is bitcoin haram” I hear you saying. OK well let’s see… Does
bitcoin involve reba? No! Bitcoin is created by a computer algorithm, not by loans with
interest. How about fractional reserve? No! Bitcoin cannot be arbitrarily created by
banks making loans - to send bitcoin from wallet A to wallet B you need to demonstrate
100% absolute mathematical proof that you own the money in wallet A. How about “like
for like”. Does bitcoins value decrease over time? No! Bitcoin is deflationary. Less
bitcoin is added to the supply over time. Eventually no new bitcoin will be creates. That
means as bitcoin becomes more scarce it’s value increases - the opposite of fiat money.

So bitcoin is halal then right? Well sure. There is nothing haram about bitcoin. But
bitcoin probably doesn’t fit the Islamic definition of money. Islamic money must be
something universally useful that gets its value from Allah.