The use of cryptocurrency is prohibited for Muslims as it is not Shariah-compliant, according to Indonesia's top Islamic body, Majelis Ulama Indonesia (MUI). The MUI was founded in 1975 and holds significant religious, political, and legal power in Indonesia. According to reports by Bloomberg, the council reportedly declared cryptocurrencies "haram" or forbidden under Islamic law. The head of religious decrees, Asrorun Niam Sholeh, noted that the council heard that cryptocurrency has elements of "uncertainty, wagering, and harm" on Thursday, November 11.
Sholeh, however, explained that crypto can be used as a digital asset or a commodity if they show clear benefits and can abide by the Shariah tenets. Indonesia is the largest Muslim country in the world, with an estimated 231 million Muslims, amounting to 86.7% of the country's population.
The MUI counsels the country's finance ministry and central bank on Islamic finance issues. It is made of many Indonesian Muslim groups including Nahdlatul Ulama (NU), Muhammadiyah, Syarikat Islam, Perti, Al Washliyah, Mathla'ul Anwar, GUPPI, PTDI, DMI, and Al Ittihadiyyah.
The decree could scare off Muslims from investing in crypto
The MUI decree on the use of crypto as a currency is not legal and does not necessarily mean that crypto is banned in Indonesia. It could, however, dissuade local institutions from issuing or providing services in crypto assets. The decree could also scare off Muslims from investing in crypto. A branch of Nahdlatul Ulama, the largest Islamic organization in the world based in Indonesia declared a similar decree citing cryptocurrency 'haram' under religious law in October. The NU has membership estimates ranging from 40 million to over 90 million. It is a charitable body that funds schools and hospitals.
The Indonesian government does not plan to impose a ban on cryptocurrency
The Indonesian government hinted that they are not planning on imposing a ban on crypto. The government has allowed the trading of crypto assets alongside commodity futures. Crypto as currency, however, cannot be used. The government is planning to set up a crypto exchange by the end of this year. Also, Bank Indonesia is exploring a central bank digital currency (CBDC). Reuters report that the total value of crypto trading reached around $25.96 billion from January to May in 2021 in Indonesia, according to the trade ministry.
