The surge in cryptocurrency trading has sparked widespread debate in the UAE over its compatibility with Shariah guidelines and its legal standing. While proponents champion Bitcoin as “the most Islamic form of money ever invented,” scholars and legal experts remain cautious about its use.
The UAE Fatwa Council has adopted a neutral position on cryptocurrency, describing it as “neither halal nor haram.” A scholar from the council explained, “Our current position is ‘tawaquf’; we can’t say it is halal or haram, but we say it is better not to engage in it. It is a complicated issue because there are various ways you can analyse crypto currently.”
Concerns have been raised over the speculative nature of cryptocurrencies, particularly the extreme price volatility that has fueled perceptions of it as an investment tool rather than a legitimate currency. “While some people have benefited a lot from it financially … there are other premises at stake, so we don’t recommend it yet,” the scholar added.
The council’s stance could shift if cryptocurrencies receive official government recognition. However, for now, they are not considered an official currency under Islamic law.
Legal Complexities Surrounding Cryptocurrency
The UAE’s legal framework for cryptocurrency remains intricate. According to legal adviser Abdulrahman Al Nabhan, while the mining and personal use of cryptocurrencies are permitted, there is no specific legislation from the Central Bank to regulate or prohibit commercial crypto investments. “Entities still require authorisation from relevant authorities to engage in any commercial activities,” he explained.
Currently, licences for crypto-related operations are restricted to the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). Contracts and transactions conducted outside these zones may not be legally enforceable.
Al Nabhan cited cases where investors suffered losses due to unauthorised operations. In one instance, a trading app for digital currencies failed to deliver promised projects, leading investors to file lawsuits. Similarly, a European investment company operating outside its authorised zone in Jumeirah Lake Towers (JLT) faced legal action after losses from a Dh200 million investment contract. “The contract was declared invalid as the office was not authorised to operate outside JLT,” Al Nabhan stated.
Shariah Perspectives and Market Dynamics
Supporters of cryptocurrencies argue that the Muslim world risks missing out on the opportunities presented by Bitcoin and other digital assets. Financial analyst and Shariah adviser Arish Ehsan noted that Bitcoin’s decentralised nature contrasts with fiat currencies, which are often criticised for being infused with riba (Islamically forbidden interest).
However, Ehsan cautioned that flaws in the traditional banking system impact the broader economy and all interchangeable currencies. He advised potential investors to be mindful of the risks involved. “People should know the flip side of the coin to make informed choices instead of getting targeted on their FOMO (Fear of Missing Out),” he warned.
As cryptocurrency continues to evolve, the debates over its Shariah compliance and legal recognition in the UAE highlight the complexities of balancing innovation with religious and legal principles.