As cryptocurrency adoption grows globally, questions about its compatibility with Islamic principles and its legal framework in the UAE have sparked intense debate. Currently, the UAE Fatwa Council maintains a neutral position on the issue, stating that cryptocurrencies are "neither halal nor haram" but advising caution due to their speculative nature and risks.
Islamic Stance on Cryptocurrencies
The Fatwa Council describes its current position as "tawaquf," meaning it neither endorses nor forbids cryptocurrencies. A scholar from the council explained that digital currencies are not yet recognized as official currency under Shariah law, primarily because of their volatile value and speculative use.
“Cryptocurrencies fluctuate greatly, often overnight, and many people perceive them as a quick investment opportunity,” the scholar said. While some individuals have made significant profits, others have suffered severe losses. For now, the council recommends avoiding cryptocurrency transactions, though this stance could change if the government officially recognizes it as a valid currency.
Supporters of Bitcoin have argued that it is more Islamic than fiat currency, which is linked to riba (interest), a practice forbidden in Islam. However, financial analyst and Shariah advisor Arish Ehsan clarified that systemic banking issues affect all currencies and are not exclusive to fiat money. He advised potential investors to carefully weigh the risks and avoid being driven by fear of missing out (FOMO).
Cryptocurrency and UAE Law
The legal status of cryptocurrencies in the UAE remains complex. While mining and personal use are permitted, commercial activities involving cryptocurrencies require authorization within designated zones like the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).
Legal adviser Abdulrahman Al Nabhan emphasized that contracts signed outside these zones are often invalidated by courts. He shared cases where investors lost significant sums due to unauthorized activities. In one instance, an investment company operating outside its licensed zone faced lawsuits, and the court ordered the return of Dh200 million to investors.
Another case involved a gaming platform that failed to deliver promised services to investors, further highlighting the risks of engaging with unauthorized entities.
Conclusion
As cryptocurrencies continue to grow in popularity, their legal and religious status in the UAE remains uncertain. While not explicitly prohibited, experts urge caution and recommend compliance with existing regulations. The situation may evolve as the UAE government develops more comprehensive legislation to address this emerging financial trend.
