A Shariah Advisory Council chairman in Malaysia has praised the “great potential” of cryptocurrency
Just three months after a landmark decision declaring digital assets trading is permissible under Islamic law, and religious scholars in Malaysia say crypto is looking bullish as an investment.
The Malaysian Reserve reported Dr. Modh Daud Bakar, the Securities Commission Malaysia (SC) Shariah Advisory Council chairman, as saying that crypto has great potential but adoption in the country faced challenges from a lack of understanding about the asset class.
Speaking at the SCxSC Fintech Conference 2020 in Kuala Lumpur on Oct. 6, he said that only 2% of Malaysians have any knowledge about cryptocurrencies. Bakar said because crypto was not considered legal tender under religious law, it can be treated as a commodity, provided it isn’t backed by “ribawi items” — substances that must be exchanged in equal measure like gold and silver.
“It is a medium of exchange, and we cannot stop people [from using] commodities as medium of exchange. It is as good as buying an e-ticket or commodities in the market.”
“[The acceptance of digital assets] can open up so many interesting areas in Malaysia, in which crypto can be deemed as investment assets where people can buy and hold for trading,” said Bakar. “The potential of this currency is as great as it comes with a growing digital economy of the world.”
The question of whether crypto is allowed according to Islam is still being debated, but in 2018 an advisor to an Indonesian FinTech firm declared that Bitcoin was “generally permissible” under Sharia law. Prior to that ruling, the firm’s CEO Matthew Martin told Cointelegraph that crypto was more likely to be permissible under Islamic law than fiat, due to it being based on Proof-of-Work, rather than debt.
Shariah Advisory Councils are typically the authority that oversee the implementation of Islamic laws in the operation of Islamic Financial Institutions. In July, Malaysia’s council declared that digital assets trading was permissible according to Shariah Law.
“This has opened opportunities to take advantage of cryptos as a commodity or as an investment in a company,” Bakar said.
As more than 60% of people in the country practice Islam, crypto firms have the opportunity to welcome more Muslim traders into the digital asset space. The country currently has three licensed exchanges including Luno Malaysia, Tokenize Malaysia, and Sinegy Technologies. Binance currently does not have authorization to operate in the country, but supports the Malaysian Ringgit.