12.11.202110:20 Forex Analysis & Reviews: Muslims in Indonesia are banned from using cryptocurrency

According to the council of religious leaders of Indonesia, the use of crypto assets as a currency is prohibited for Muslims.

The National Council of Ulema, or MUI, recognized the cryptocurrency as banned because it contains elements of uncertainty, stakes, and harm. However, Asrorun Ni'am Sholeh, the head of religious decrees, said on Thursday after the council held an expert hearing that if the cryptocurrency as a commodity or a digital asset complies with the principles of Sharia and shows a clear benefit, then it is allowed to trade.

The MUI has the authority to enforce Sharia law in a country with the largest Muslim population in the world, and the Ministry of Finance and the Central Bank advise them on Islamic finance.

The government itself supports crypto assets, allowing them to be traded alongside commodity futures as an investment option and insisting on the creation of a crypto-oriented exchange by the end of the year. Indonesia does not allow the use of crypto assets as a currency, because only the rupee is the only legal tender in the country.

Although MUI's decision does not mean that trading of all cryptocurrencies in Indonesia will be stopped, the decree may deter Muslims from investing in assets and force local institutions to reconsider the issue of issuing crypto assets. The Bank of Indonesia is considering a Central Bank digital currency, but a decision has not yet been announced.

Crypto transactions totaled 370 trillion rupees ($26 billion) in the first five months of this year in Indonesia, which is still part of the global market at about $3 trillion.

The position of religious leaders in Indonesia may differ from that of their counterparts in other Muslim-majority countries. The United Arab Emirates has allowed cryptocurrency trading in the Dubai Free Zone, while Bahrain has been supporting crypto assets since 2019.