Different Interpretation of Cryptocurrency as a Property

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The literal meaning according to Islamic Fiqh al-maal is wealth. Literally, al-maal in Quranic term means: property possession, goods, wealth, income, revenue, asset,capital and fund. However, literally meaning of al-maal in the books of Islamic Fiqh is specially defined as : whatever that is owned and controlled by a person in the form of substances or benefit. Examples of al maal in form of substances are gold, silver, animal and plant, whereas in form of benefits are riding a car or an animal, wearing a piece of cloth and dwelling in a house.

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Therefore, things that are not owned or controlled are not considered are not considered as al-maal literally. Such as in the air, fish in the water, trees in the forest and metal in the ground.

Next is technically meaning which is varies meaning of al maal. According to Hanafi School of Islamic Fiqh and other that Hanafi School of Islamic Fiqh. Hanafi school stated that “whatever thing or substance that can be owned and controlled and it can be benefited under normal circumstances”.

It means the ownership and controlled means intangible matters such as knowledge, honour, health, intelligence, air, sunshine, and moonlight are not wealth. Similary whatever cannot be secured and controlled such as air in space around us, heat from the sun and moonlight are also not considered as al-maal. Furthermore, according to Non Hanafi Fiqh scholars mention that whatever things or substance that has value and substance that has value and if damaged must be compensated.

This meaning is taken to be legal meaning. Thus, legally al-maal is a substance that possesses value. Which mean is that everthing must be compensated if the value and substance were damaged.

Problem Whether Cryptocurrency is a Property (Al Maal) or Not

There are few different interpretation of cryptocurrency as a property. The first interpretation is According to the Internal Revenue Service (IRS) of United States has mention that cryptocurrency is a property because Internal Revenue Service (IRS) of United States has issued the guidance on the taxation of transaction with bitcoin and other cryptocurrency, according to which they can be qualified in three type which is currency, property and investnment instrument for example long-terms investment in shares. However, there are a diffirrent point of view that was expressed by Gabenor of the Central Bank of Canada’s Stephen Poloz who are stated in January 2018 that he objected to the terms cryptocurrency, since they are not currencies, they are also not assets, they can rather in technically be classified as a securities. The next intrepretation is, according to the Fatwa Center of South African Islamic Seminary, Darul Uloom Zakariyya, has consideration is that cryptocrurrency meet the criteria and definition of property. The last interpretation is according to Australia Taxtion Office (ATO) has decide that the digital currency is a commodity, and it is not a currency because which corresponds to the tax intructions provided by the relevant authorities in the other country for example Canada, Singapore. Resolution of ATO of 17th December 2014, stipulate that also notes that bitcoin is neither money nor foreign money, and for the taxation purpose, the sales of cryptocurrency is not considered as a financial service. According to the Australia Securities and Investment Commission (ASIC), the digital currency or as known as cryptocurrency, it is not included in the legal definition of a “financial product” and the digital currency trading does not fall under the category of the financial services.

Causes of the Problem

Based on the problem, there are explanation about the cause of the problem that tell why they have a different interpretation about cryptocurrency whether it declare as property or not. First according to the Internal Revenue Service (IRS) of United States said that they have declared cryptocurrency as a property because fo the purpose of payment of U.S federal taxes, cryptocurrecy is considered to be property, upon sale of which the owners will not receive the profit from exchange rate diffirences, but the profit from the capital gains. Which is mean that U.S federal taxes charges taxed based on three types that must be qualify such as currency, property and investment instrument.

Next is, according to Gabenor of the Central Bank of Canada, he object the terms of the cryptocurrency as a asset used because for him he stated that cryptocurrency is better used as a securities. Because the Gabenor did not want to give the similarity between the cryptocurrency and the currency such as a fiat money. However according to the Fatwa Center of South African Islamic Seminary have said cryptocurrency is consider as property (al-maal) because that cryptocurrency meets the criteria and definition of property (mal) and because of the following reason. The cryptocurrecy is treated as valuable thing among the people because the cryptocurrency have its value based on market. Next is, cryptocurrency also have be accepted as medium of exchange by a group of people. Futherrmore it also have measures a value and has a unit account functions. Besides that, it also fulfill the seven requirement which is divisible, Homogenous, durable, mobile, rare and stable value.

The last cause of the problem is according to Australia Taxtion Office (ATO) has decide that the digital currency is a commodity because they said that the cryptocurrency is not fulfill the requirement of the money. According to A new tax system (Good and services tax) Act 1999, Australia Taxtion Office (ATO) includes currency, promissory notes and bills of exchange and any negotiable instrument used or circulated or intended for use or circulation, as currency whether of Australia or any other country. However, it does not include a collecter’s piece, investment article or currency the market value of which exceeds its stated value as legal tender in the country of issue.

Shahriah View

From Shahriah point of view, crytopcurrency considered permissible and lawful as a al-mal or known as a property in because it is have the criteria and definition of the property. Based on the Mutaqawwam, this is a core condition to determine something as mal, Mutaqawwam refers to something which permissible in Shariah. (Shaykh Zuhayli, 2011) explain that mutaqawwam is mean “ something which is stored or present and permissible to use”. if something is not stored and not permissible to use is consider as mal, that is the reason why dead and alcohol are not considered as mal. However, by mutaqawwam cryptocurrency is consider as a property because it is valueable and can be stored.

Next point is, according to urf or as known as customary practice, when the text of shahriah do not give any judgement in explicit terms urf is considered an important source of rulling. The jurist have said that what is derived from urf is equivalent to what derived from texts. The criteria for determining something as mal is not clearly defined in the texts of shahriah. However, scholars have emphasized the role of custom in determining something as mal. The jurists of all four schools of Islamic law are unanimous that if something becomes valueable due to the custom and acceptability of people, then its considered as mal.The custom determines and treats something as mal, it would automatically be considered as mal. This is the reason that many hanafi scholars have considered various right and benefits such as copyright, patent and trademark. As mal, since people in society treat them as valueable and material things.

Solution

The solution that we need to focus is to create a regulation to declare cryptocurrecy as a property as soon as possible to prevent people from confuse with this issues, because many people did not aware whether cryptocurrency is a property or not. According to Prof. Mohamad Akram Laldin, one of Dr Bakar’s colleagues on the Central bank’s Shahriah Advisory Council and executive director of the International Shari’ah Research Academy for Islamic Finance (ISRA), Malaysia’s role in developing fintech technology is a “work in progress” that has not yet reached its potential. He also says that blockchain-based platforms have been emerging for Shahriah uses, though an Islamic cryptocurrency will only follow once digital coins generate more widespread acceptance. After that,If the regulation have been made, the country should the people about the cryptocurrency as a mal or not to make sure that people will know the regulation.