Evaluating cryptocurrencies through the lens of Islamic finance based on maqasid shariah

Cryptocurrencies (digital asset) have been a growing area of interest for individuals, investors, and governments worldwide. It is a currency in a digital or virtual format, without any physical representation like traditional fiat money. This Cryptocurrency is exclusively accessible through internet-connected devices such as personal computers, laptops, cell phones, and other devices. A cryptosystem that utilizes blockchain technology offers numerous benefits, including enhanced transaction security, convenience, rapidity, and cross-border applicability. However, the circulating cryptocurrencies also have certain drawbacks, such as the absence of a regulatory body and the contentious legal status in many countries. The debate surrounding the advantages and disadvantages of cryptocurrencies has become active among professionals, including professors who have studied it from an Islamic perspective. The objective of this study is to assess the compatibility of cryptocurrencies with the principles of Islamic finance based on Maqasid Shariah. From the Islamic viewpoint, money possesses distinct attributes and prerequisites, including stability and a foundation in tangible goods. Cryptocurrency may not satisfy this requirement due to concerns regarding its classification as money from an Islamic standpoint. The research methodology employed the extant literature on cryptocurrencies. The findings indicate that Cryptocurrency exhibits significant volatility and has inherent limitations in being classified as 'money' due to its restricted supply and prevalent use for speculative purposes, which is forbidden in Islam. The research suggests that Muslims might hesitate to adopt cryptocurrencies as a medium of exchange or transaction. This factor gives rise to the anticipation that the growth of cryptocurrencies will be sluggish in Muslim nations.