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Is Bitcoin Halal or Haram? What Islamic Scholars Around the World Are Saying

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Islam is not only the world’s second-largest religion but also the fastest growing religion globally. Today, there are more than 1.6 billion Muslims in the world. Islam is also one of the religions where financial systems have clear guidelines based on religious principles. With the soaring adoption of bitcoin in markets such as the Middle East, which is a predominantly Muslim region, the question on whether bitcoin is acceptable in the Islamic religion has given rise to the debate on whether bitcoin is halal or not.

Currency in Islam

Islam is one of the few religions where Muslims believe that religion is a complete code for life. This means that the followers look up and live their lives according to the Sharia law.

According to Teaching Tolerance, Sharia – which is an Arabic word – means “the way” or the path to water”. The Sharia law is based on the Quran – Islam’s holy book – as well as the life of Prophet Mohammed. It encompasses laws on how Muslims can practice Islam ensuring that people are treated justly, that financial systems are fair, and has laws on marriage, inheritance, punishment, and divorce.

Sharia law, therefore, has various rules regarding what a currency is. In trying to understand whether bitcoin should be considered halal by Muslims, it is important to first understand how currency is viewed in the Islam religion. For a currency to be acceptable in Islam, it must have intrinsic value – this is the value or worth that something has – and should be difficult to get. Additionally, according to Muslim scholars, currency or money, is defined as a means of use in the purchase of an object of sale. For instance, gold and silver in Islam are considered as halal as they were used historically as legal tender in the form of gold Dinar and silver Dirham.

Islam also requires that a currency should not be linked to any debt. That is because the religion believes money should be used as a means of exchange and not as a product. To this extent, bitcoin can be viewed as a currency as it is used as a means to pay for goods in different countries with various people earning their salaries in the form of bitcoin.

The Islamic banking principles also forbid the acceptance of interest of any kind. While charging interest benefits the lender, it does not do the same for the borrower and is thus not halal. Currencies should not be affected by inflation and should have a stable market price. Furthermore, a currency according to the Sharia law should have proof of existence and be tangible.

Islamic View on Bitcoin

is bitcoin haramWhile bitcoin’s existence can be proven, the digital currency is not tangible like other currencies such as the dollar or Euro. However, there are certain similarities between bitcoin with gold and silver. They are all mined, the supply and demand dictate its value, they can both be used as currencies on their own and are also scarce.

Still, for a currency to be considered halal in Islam, it needs to be acceptable by a considerable number of people in any given community or demography which is not the case (yet) for decentralised digital currencies. In Islam, the fuqaha (body of scholars), define people living in a community as government. With this view, cryptocurrencies differ in their qualifications for the stature as most governments in different countries are not accepting bitcoin as a legal tender. A good example is in countries such as Kenya, Uganda, Zimbabwe, and other African nations, where investing in cryptocurrencies has been warned against but citizens still invest in them.

Most people view bitcoin as a form of money. When people think of spending bitcoin, investing or trading in it, they are usually doing so to make money. This was evident in the last year when the digital currency went mainstream and the prices soared to an all-time high of $20,000 before dropping to a low of $6,000 earlier this year. To this extent, the volatile nature of bitcoin also has some level of speculation. In this sense, bitcoin has some elements of gharar (risk) and Qimar (speculation) which contradicts the Sharia law.

As mentioned, the Sharia law also teaches about the fairness of financial systems. Most Islamic scholars and jurists agree on the fact that bitcoin is blockchain-based which prevents any level of exploitation or unfairness. To this extent, digital currency is permissible in Islamic. However, the same scholars believe that bitcoin can be manipulated in closed circles as there have been allegations of multiple market manipulations and bitcoin exchanges faking the trading volume in the past year. In this aspect, some scholars view bitcoin as haram.

Fintech Based on Sharia Law

When it comes to banking and finance, Muslims unlike other religions, have interesting needs since the Sharia law has guidelines on financial systems. As such, acceptance of any interest is considered illegal in the Islamic religion as well as investing in the alcohol, tobacco, pornography, pork, and sex industries. An increased interest in Islamic Banking has led to the first-ever discussion on Islamic banking by the executive board of the International Monetary Fund. This growing demand has led to the use of blockchain technology by various entrepreneurs to meet the needs of Islamic banking.

bitcoin halalOne such company is Blossom Finance, an Indonesian fintech startup that was established to provide microfinance services to small businesses and Muslim entrepreneurs. The Fintech startup collects capital from different investors globally using the cost-saving bitcoin transactions and provides the funds to microfinance units for different investments. After a 12-month period, the company issues the profit made back to the investors. Blossom Finance clearly demonstrates how blockchain transactions and bitcoin obey the Sharia law. How so? It is because the company does not get or distribute interest and it ensures that the microfinance institutions getting funded do not invest in haram businesses. The business model is also built on Mudharaba (risk-sharing) which is permissible according to the Sharia law.

Moreover, with bitcoin, the transactions are transparent and are recorded on the blockchain, which is open to anyone for scrutiny. In this regard, Matthew J. Martin, Founder and CEO of Blossom Finance said, “Bitcoin guarantees that the money invested into small Islamic businesses is not done on margin, and that its existence as a real asset is publicly verifiable using the blockchain. Bitcoin ensures ownership of underlying assets with 100% mathematical certainty.”

And Blossom Finance is not the only fintech company to offer solutions in Islamic countries. Goldmoney Inc, a company based in Toronto, implemented the halal gold standard and got certified as Sharia-compliant for its gold-based financial product. This puts the company on the list of Islamic finance institutions that are utilising the blockchain for Islamic finance transactions.

In order to gain access to millions of Muslim clients in Malaysia, HelloGold introduced an online platform that is both blockchain-based and Sharia-compliant to enable customers to make direct transactions while incurring low costs for gold trading.

Is Bitcoin Halal or Haram?

This is one question where Muslim scholars have differing opinions. While some scholars view it as halal, some see it as haram. The latter make their argument based on the fact that its price volatility makes it a speculative currency, hence not compliant with Sharia law. Also, in Islam, a currency has to be tangible which is not the case with bitcoin or any other digital currency for that matter. On this point, another group of scholars argues that although money is tangible, its paper is worth close to nothing and is prone to damage, theft, illegal duplication, and loss. This is not the case with bitcoin.

In that regard, they see bitcoin as having proper value compared to money. Moreover, fiat currency is debt-based as most of the money in circulation is on loan which earns interest. Unlike fiat currency, bitcoin is asset-based making it abide by the Islamic finance principles. To this extent, most scholars believe that cryptocurrencies such as bitcoin are actually more halal than fiat currency.

The above argument shows the differing takes that scholars have concerning the halal nature of bitcoin. With these differing views from Muslim scholars, it is hard to decide whether bitcoin is indeed halal or haram. And while there are differing views, some Muslim scholars have only warned their Muslim counterparts to be wary of the digital currency due to its price volatility but have not declared it as impermissible according to Islam. Although there is still an ongoing debate on this, Muslims who want to invest in bitcoin or any other digital currency for that matter should look at the risks involved and tread carefully before making any investments. As digital currencies continue to soar in demand, it remains to be seen on whether Muslim scholars will eventually reach a consensus on the halal nature of bitcoin.

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How Often Is Crypto Really Used In Illegal Activity?

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Illegal Activity

Statistics, examples, and ways to legally use cryptocurrency

October 1, 2013, was a turbulent day for San Francisco Public Library. A dozen FBI agents pretending to be usual visitors surrounded a man sitting at one of the tables, took his laptop and put a pair of handcuffs on his hands. That man was Ross Ulbricht, founder of Silk Road – the largest darknet marketplace for drug dealers, killers, and other criminals. The seizure of Ulbricht was supposed to tackle the illegal online trade, but, as the news site DeepDotWeb wrote, the bust was “the best advertising the darknet markets could have hoped for”. The reputation of cryptocurrency also suffers from associations with terrorists, who sometimes use it for their needs. How big is the real scale of the problem? And how many legal ways to use crypto exist? ChangeNOW has dived into the topic – and suggests you an overview of the current state of the problem.

Highlights:

  • The drugs trade volume using cryptocurrency is relatively large
  • Crypto was a significant reason why a part of drug sales migrated to the web, though stays yet not viable and anonymous enough for dealers (same as for terrorists)
  • As efficient use of blockchain technology requires good infrastructure, crypto remains not suitable enough for many terrorist groups
  • However, some terrorists are trying to adjust to anonymity threats and hold fundraising in crypto
  • Legal ways to use cryptocurrency include dozens and vary from IT services to car rentals   

Crypto & Drugs & Rock’n’Roll

crypto crime

The total volume of the online drug market using cryptocurrency is around $1 billion. It is located in the darknet, which provides an attractive, profitable, and mostly secure environment for drug dealers. Cryptocurrency, in turn, allows making payments that are hard to be tracked by authorities. This is how blockchain technology has helped to bring a big part of drug sales online from the streets. And it’s not only about drugs themselves – many legal opioid drugs are illegally sold here, too.

However, cryptocurrency is not always as secure and anonymous as it is thought to be. The information about any transaction ever made stays forever in the blockchain, which makes the system way more transparent than cash payments. This is a significant limitation for using crypto in illegal purposes.

According to the University of Technology Sydney, about 46% of criminal activity of each year is connected to Bitcoin. As for the drug sale itself, trade volumes in crypto keep rising, but the percent of Bitcoin drug transactions out of all transactions goes down. This means Bitcoin is more frequently used for legitimate purposes.

What cryptocurrency is used for drug sales most often? Surprisingly, privacy coins such as Monero are used only for 4% of transactions. Due to its pioneer position, Bitcoin is used in 76% of all deals despite all its anonymity risks.

The main problem for drug dealers using crypto is to turn their income into cash. This move remains complicated and insecure. Most cryptocurrency exchanges have instruments to define whether a transaction is coming from a suspicious source like the darknet. The rise of Monero use in the online drug market will hinder such tracking. However, for the reasons listed above, crypto is unlikely to completely replace regular cash in drug sales in the foreseeable future. 

Cryptoterrorism

Cryptoterrorism

The views on how much cryptocurrency is used and will be used by terrorists vary widely. While some claim that terrorists have no infrastructure to use it and the methods are not secure enough, others argue that they are learning fast and adjust to crypto rapidly. Let’s see what both sides say.

Not actively using, unclear future 

Lack of appropriate infrastructure, inability to use crypto. Most terrorist groups settle in the Middle East region, especially on its remote and war-torn territories. The vast majority of roads and technological infrastructure have been destroyed. In such circumstances, cash remains the most common and convenient way to pay and fundraise. Imagine a gun seller in a Syrian village – does it look like he has a tool to accept Monero?

Anonymity threats. Given the relative transparency of blockchain mentioned above, crypto might remain too unsafe for terrorists. Miners can see any potential terrorist money exchange while checking transactions, and it’s not too hard to see who sends them money. It can change with the rising use rate of privacy coins, but the ability to spend such money remains questionable.

Increased attention to crypto by the authorities. As the number of transactions keeps rising, more regulatory bodies’ attention gets focused on cryptocurrency, which apparently makes terrorists nervous and cautious.

Problems of specific currencies. While top cryptocurrencies like Bitcoin receive much regulatory attention, others remain marginal and unreliable because of a lack of support. Conflicts and uncertainty lower the trust to such cryptocurrencies – yes, even terrorists’ trust.

Using actively now, increasingly in the future

Terrorists seem to be rapidly learning to escape from tracking in blockchain. Several years ago it was easy to find any address or transaction made for a terrorists’ fundraiser.  Today they use well organized and finely designed websites, where detailed video tutorials show how to donate money anonymously. Unique Bitcoin addresses and other crypto tricks are used to preserve security. Analysts from intelligence services claim there’s only going to be more such cases. And, of course, privacy coins are a “great opportunity” for terrorists too.

Shift to cryptocurrency is a reaction to economic sanctions. ISIS has lost most of its territory and resources, Hamas has been sanctioned by the West. Having been cut off from all main financial institutes, terrorist groups had to find other pathways for their financial activities – and cryptocurrency appeared to be the best substitute.

There might be difficulties and inconveniences, and the number of terrorists using crypto is yet unknown – but as we can see, digital money in terrorism is reality. Same as in drugs. And this is what cryptocurrency is notorious for, lacking trust among millions of people. The reputation of some of the exchange services only adds to this mistrust – ChangeNOW has carried out a special investigation on how such platforms may cheat their clients. But can you buy anything besides heroin and firearms with your crypto? What about pizza or a concert ticket?

Only Antarctica left

Cryptwerk, a platform monitoring actual use cases of different cryptocurrencies, says there are about 3500 ways to spend Bitcoin and more than 800 for Monero today. They range from music services to car rentals, from buying clothes to hotel booking services, and from sports bets to virtual tours.

Organizations accepting cryptocurrency are located on all continents besides Antarctica (what could be a better place for crypto than a continent without governments and countries though?). Mostly, in the USA and Central Europe. Bitcoin as the largest cryptocurrency is relatively widespread in India and Southeast Asia.

As this is a whole another topic, ChangeNOW will issue a post dedicated to use cases of cryptocurrencies. As it will be more detailed, who knows – maybe you’ll find a pizza right by that you could pay for from your crypto wallet!

This article was contributed by Jeremy from ChangeNow.

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Buroka Review: How to Buy Bitcoin on Nigeria’s Newest Bitcoin Exchange

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Buroka Review

Buroka is a new breed of cryptocurrency exchange for Africa! Currently operating in Nigeria, Buroka was designed to fulfill the needs of modern Africans. Buroka allows customers to buy and sell Bitcoin with Naira via Local Transfers and cash deposits at the bank. In this Buroka review, you will learn more about the exchange and how you can use it to buy bitcoin in Nigeria.

How to Buy Bitcoin on Buroka

Step 1: Account Creation

To create an account, visit Buroka.com and hit the “Register” button. This will lead you to a page where you will be asked to fill in your personal information, including your name, email address, and password. Like any other serious exchange, Boruka will ask you for your ID, Proof of Address, and to take a selfie with your ID to eliminate fraud.

Step 2: Fund Your Account

Funding your account on the platform is straightforward. You can deposit either via bank transfer or at any bank branch. Make sure to use a unique reference code given to you by Buroka deposit system.

Step 3: Buying and Selling BTC

Once your deposit has been credited to your account you can immediately buy your Bitcoin. The buying and selling tab is located on the top right corner of the dashboard. There you can input the amount of bitcoin you want to buy. Once you do that, you then click on the “BUY BTC” button.

Step 4: Storing Your BTC

After buying BTC, Buroka provides users with the option of either storing bitcoin on the platform in a BitGo wallet or any other wallet of their choice.

Currently, Buroka only supports bitcoin (BTC). However, the exchange plans to include other cryptocurrencies going forward.

Security

Buroka ReviewBuroka exchange makes use of Two-Factor Authentication (2FA). 2FA provides an extra layer of protection for users. With the 2FA in place, an extra piece of information is needed before login into the platform or making any withdrawals.

In addition, Buroka’s platform is also protected using the latest security technology, including web-socket and API protocols that allow for a fast and secure order processing. Buroka also makes use of a well-updated SSL certificate, which makes it easy to detect a phishing attempt.

To further ensure that clients’ funds are secure, Buroka operates segregated accounts. These accounts are held with trusted banks so that clients can enjoy an extra layer of security provided by the banking system.

Conclusion

Buroka is a relatively new Bitcoin exchange with a well-designed, user-friendly interface. The Bitcoin trading platform provides several deposit options, which is attractive for Nigerian Bitcoin traders, as well as competitive market rates for both buyers and sellers.

If you are looking to buy or sell bitcoin in Nigeria, you can give Buroka a try.

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3 Reasons to Use a Bitcoin Mixer in 2020

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Bitcoin Mixer

Bitcoin is not as anonymous as people think. Bitcoin transactions are viewable on the network’s public blockchain, which also means that transactions can be linked to real-world identities. As a result, bitcoin is not (yet) fungible and does not protect individuals’ financial sovereignty as much as it should. Fortunately, there is something called a bitcoin mixer that enables bitcoin users to increase their financial privacy.

In this guide, you will learn what bitcoin mixers are and why you should consider using them.

How Anonymous Are Regular Bitcoin Transactions?

Regular bitcoin transactions are not anonymous. Bitcoin addresses are pseudonymous. They do not reveal your identity as a user but can be linked to your identity.

For instance, most exchanges require you to verify your identity with legal identification (ID) documents. In a situation where you withdraw funds from an exchange into your wallet, your identity can be linked to that wallet, and all your linked transactions could be tracked.

Blockchain analysis companies can use information from your linkable transactions to track how many bitcoins you own, what you spend your coins on, and who you transact with. If you are conscious about your privacy, you might need a bitcoin mixer.

What is a Bitcoin Mixer?

Bitcoin mixing service

A bitcoin mixer allows you to mix your coins with other users. This obscures the ties between your personal identity and bitcoin transactions.

The end goal of a bitcoin mixing service is to create a misleading trail of transactions that makes it difficult to track your transactions. This is achieved by breaking down your bitcoin into smaller parts and then mixing them with coins from other transactions.

Most bitcoin mixers are non-custodial, run on the Tor network, and do not keep records of users after a couple of hours.

Why Do People Use Bitcoin Mixers?

The primary reason for using a bitcoin mixer is to increase transactional privacy. You may not want “the whole world” to be able to see what you are doing with your bitcoin. Through the use of a mixing service, you can achieve that despite Bitcoin’s public blockchain.

Moreover, there are a number of other reasons why you should consider using a bitcoin mixer. They include:

Your Transactions Reveal Personal Finance Information

Every time you send bitcoin to or receive bitcoin from an individual, the other party gains some information about your bitcoin holdings.

For example, if you have ten bitcoin in your wallet and you send two to another person. The individual who received the bitcoin now has access to your bitcoin address, which allows them to check your balance on the blockchain.

In some cases, by analyzing your inputs and outputs, they can predict other addresses you own, giving them more information about your finances and transactions you have done in the past. Mixers can prevent this. The mixer breaks the connection between addresses in your wallet by creating transactions that make it difficult for blockchain analysts to track.

Based on the example above, if you use a coin mixing service to send out the coins, the receiver can still check the blockchain to verify the transaction but will be unable to track your old transactions and find your bitcoin address.

Blockchain Analysis Companies Are Watching

Over the years, blockchain analysis companies have been established to track transactions and monitor the Bitcoin blockchain. These groups have resources to probe deeper into transactions, with some going as far as connecting IP addresses to bitcoin transactions.

Further, cryptocurrency exchange verification is required by regulators to keep an eye on how individuals use their bitcoin. This means that exchanges can still trace your transactions after you have purchased bitcoin.

Bitcoin mixers allow you to detach connections between your initial receiving address and other transactions you make. This can prevent companies from gathering data about you, which it would otherwise share with (or sell to) third parties.

To Prevent Censorship

Money has become a tool used to fund political groups and operations. In authoritarian regimes, where the financial system is highly monitored by the ruling government, critics or opposition groups may opt for bitcoin.

To ensure complete privacy while using bitcoin, such groups will require bitcoin mixing platforms. Without increased transaction privacy, these groups risk losing support in situations where the state begins to target individuals funding them by tracking their transactions on the blockchain.

This allows bitcoin to be used as a tool for freedom of speech and expression.

If you want to mix your coins to protect your financial sovereignty as a bitcoin user, check out Bitcoin Mixer.

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