Shari'ah and Digital Currencies: Analyzing Cryptocurrency in the Islamic Finance Framework

From the historical development of currency and an Islamic perspective, it is evident that the use of any specific form of currency whether gold, silver, or any other medium is not mandated by religious commandments. Instead, currency is seen as a social convention, determined by what people collectively agree to use as a means of exchange. The emergence of cryptocurrency, or technology-based money, has instigated deliberations on whether it complies with Shari'ah rules and how it will affect the financial and economic sectors, especially in the context of the Islamic financial environment. As a result, in today's high-tech world, the necessity for research into the possible effects of this new currency on the Islamic financial system has become a more pressing issue. This research adopts a ‘normative research’ approach applied to understand, evaluate, and offer recommendations for future actions. A comprehensive analysis of the body of existing literature and a careful review of the secondary data from various sources insights into the nature of cryptocurrency, its Shari’ah compliance, and the potential impact of its adoption in the Islamic financial system.