Indonesian blockchain evangelists see bright future despite cryptocurrency fatwa
Some see cryptocurrency as an investment, others see it as the future of money, many more see the medium as a scam. No matter where you are on the spectrum, it must be recognized that crypto has caught the attention of people around the world, including Indonesia, where the number of crypto traders reached 7.4 million in July 2021 and the Crypto transactions totaled IDR 478.5 trillion ($ 33.5 billion), according to the Commerce Department. There are now a plethora of exchange platforms like Tokocrypto, Indodax, Pintu and more that specifically handle transactions for Indonesians.
As cryptocurrencies become more and more popular, the country’s largest group of Islamic scholars, the Indonesian Ulema Council (MUI), issued a fatwa that cryptocurrency as a means of payment is haram or not allowed in Islam. A fatwa is a non-binding legal opinion given by a recognized authority.
Crypto as a financial instrument has elements of speculation and uncertainty, and it is prohibited to function as currency under state law, as Indonesia only recognizes the rupee as legal tender in the country. The use of digital tokens as a commodity for commercial purposes is also prohibited due to their lack of value and clearly defined physical structure.. However, cryptocurrencies could be traded if they follow Islamic rules and have an underlying asset as well as clear advantages. Emil Dharma, vice president of the Indonesian Sharia Fintech Association offered an explanation. “An example of cryptocurrencies that could be traded are asset-backed tokens, which are blockchain-based units of value that are pegged to real assets like gold, oil, and other commodities. “, did he declare. KrASIA.
A fundamental principle of Islamic finance is the prohibition of interest charged by lenders and investors. Any form of income from speculation (qimar) or chance (maysir), as well as participation in excessive risk contracts (gharar) are also prohibited. The MUI fatwa has no legal weight in Indonesia. But given that the country has the largest Muslim population in the world, this could potentially discourage some Muslims from engaging in crypto trading or investments in the future.
“There is a growing interest in cryptocurrency in Indonesia, following the significant increase in the price of crypto assets. However, cryptocurrencies do not adhere to the principles of Sharia law, which requires that commodities have a physical form and have a defined value with a defined amount, ”Dharma said. “I personally believe that the issuance of this fatwa will have a major impact on the local crypto industry. “
However, there appear to be different opinions on crypto investing among religious scholars around the world. For example, Malaysian religious officials have said cryptocurrency is allowed, and some academics in the UK and Pakistan also share this view. The United Arab Emirates allows cryptocurrency trading in the Dubai Free Zone.
Industry players in Indonesia remain confident about the future of crypto. Tokocrypto CEO Pang Xue Kai believes crypto-based financial services are suitable for Indonesia’s unbanked population. “People from all corners of the archipelago can access the services as long as they have smartphones and internet connectivity, both of which have high penetration rates of 67% and 70%, respectively,” he said. declared to KrASIA.
Pang added that the government is currently exploring the development of a central bank digital currency (CBDC) and a national cryptocurrency exchange, which would open an unprecedented frontier for the local crypto realm. “These initiatives show the recognition of the legitimacy of cryptocurrencies and the unequivocal recognition that cryptocurrencies will soon become mainstream in Indonesia.” In addition, the industry has many benefits for society, as thousands of new jobs have been created in this industry and many lives have been improved – financially – through crypto and blockchain in Indonesia, believes. he does.
“We always welcome discussions with all relevant stakeholders and continue to contribute to a better understanding of the broader dynamics, while educating the public on the benefits of a healthy crypto asset industry,” Pang continued.
Timothius Martin, CMO of crypto exchange platform Pintu, also shares this optimistic view. “Although the popularity of crypto has grown rapidly this year, I think this is just the start. The adoption of crypto is only around 2% in Indonesia, so the gap is still very high, especially when compared with countries like the United States, Singapore and Australia ”, a he declared.
One of the biggest challenges in the industry is that there have been many scams that have operated under the guise of crypto investments, so market education is crucial, Martin said. “In a new hyper-growing industry like crypto, there are always bad players in the ecosystem trying to take advantage of the situation. We have already encountered similar challenges in the e-commerce and payments sectors, so better consumer education is needed. “
Martin believes that even more Indonesians will be part of the crypto investment market next year, as the country now has more regulated platforms like Pintu that provide easy and secure access to crypto assets. However, Martin appreciates MUI’s decision. “We fully respect the different perspectives consumers have about crypto and will respect regulatory compliance,” he said.