The use of crypto assets as a currency is forbidden for Muslims, according to Indonesia’s council of religious leaders.
The National Ulema Council, or MUI, has deemed cryptocurrency as haram, or banned, as it has elements of uncertainty, wagering and harm, Asrorun Niam Sholeh, head of religious decrees, said on Thursday 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, he added.
MUI holds the authority on Shariah compliance in the country that’s home to the world’s largest Muslim population, with the finance ministry and central bank consulting them on Islamic finance issues.
The government itself has been supportive of crypto assets, allowing it to be traded alongside commodity futures as an investment option and pushing to set up a crypto-focused exchange by the end of the year.
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.
Crypto transactions amounted to IDR370 trillion (US$26 billion) in the first five months of the year in Indonesia, still a fraction of the global market at around US$3 trillion.
The stance of Indonesia’s religious leaders may diverge from their counterparts in other Muslim-majority countries. The United Arab Emirates have allowed crypto trading in Dubai’s free zone, while Bahrain have backed crypto assets since 2019.
Cryptocurrencies Are Legal In Indonesia
Although the MIU has come out against cryptocurrencies, they still remain legal in Indonesia. The government is supportive of cryptocurrencies, allowing its citizens to trade them alongside commodities as investment options.
The government is also working on establishing a crypto-focused exchange by the end of the year. However, the government doesn’t recognize cryptocurrencies as legal tenders but sees them as commodities and digital assets.
The crypto market has retraced following the rally experienced earlier this week. At the time of writing, Bitcoin is trading just below US$65,000, down by more than 4 percent over the past 24 hours. The leading cryptocurrency reached an all-time high above US$69,000 earlier this week, but the market is currently correcting following the rally.