This examination addresses the jurisprudential aspects of cryptocurrency value, considering that different types of assets can have varying religious and legal rulings in personal or governmental contexts.
“In 2019, the initial rulings from religious authorities focused primarily on the prohibition of trading and transactions involving Bitcoin.”
“The concept of value is situated on the border between religious and customary validity.”
“From a religious perspective, value is determined by the ‘sufficiency of common custom,’ meaning the presence of ‘supply and demand’ for things.”
“The rational and customary view recognizes the value of metaverse assets, but there are doubts about their value from a religious standpoint.”
“The jurists who cannot affirm the value of cryptocurrencies do not base their judgment on personal rational benefit.”
Value of Cryptocurrencies from a Jurisprudential Perspective
Introduction
Our world today experiences constant transformation in various fields. This is due to the rapid growth in two interconnected human domains: first, new technologies, especially in computer sciences, digital technology, and artificial intelligence; and second, economic growth and the expansion of the global economic pie. To understand the magnitude of this topic, consider that once the volume of human knowledge, science, information, and data grew slowly over centuries; whereas today, it has doubled in less than half a day. In this context, as we face the diverse phenomena of the modern world, new challenges, issues, and discussions continuously arise for various established systems and domains. For Muslims, particularly Shias, who regulate their religious and everyday lives within the framework of Islamic jurisprudence and rulings, both personal and social concerns emerge regarding how to deal with new phenomena, technologies, and fields in science, economy, and trade. Today, jurists and religious authorities strive to address new issues based on the Quran, Sharia, hadiths, and the adaptation of past rulings to current issues.
It can be said that cryptocurrencies and blockchain technologies are integrating into all aspects of today’s world. This phenomenon brings thousands of issues and challenges that have quickly entered the realm of religious rulings. Islamic jurisprudence, particularly the dominant Shia jurisprudence in our country, extensively addresses financial, economic, banking, asset, and trade issues, offering various rulings, issues, and answers for different domains. Therefore, it is expected that Islamic scholars, religious authorities, and jurists will express their jurisprudential opinions on the digital financial world and cryptocurrencies. However, it is important to consider how to approach the discussion of cryptocurrencies from a jurisprudential perspective and where to begin in deriving and extracting rulings.
In Islamic jurisprudence, when an issue enters the economic domain, its jurisprudential discussion holds significant importance, regardless of the nature of the subject. To illustrate this importance, let us consider cryptocurrencies as the central focus of this discussion. These digital currencies, whether defined or used as assets, money, or even commodities, may raise doubts about their validity. For example, whether cryptocurrency transactions fall under the category of Gharar (contracts that involve ambiguity or potential loss), or whether trading in cryptocurrencies is considered a valid sale, and if so, what type of sale it is. Thus, the jurisprudential viewpoint is crucial for initiating the extraction of rulings. Scholars consider different methods and principles, but from a comprehensive perspective, there are four main areas in Sharia and jurisprudence that scholars have faced concerning the digital financial and monetary world:
- Rational and customary perspectives on all matters from the viewpoint of Sharia and their acceptance if no corruption or prohibitory rulings exist.
- Issues surrounding transactions, contracts, and agreements.
- The customary nature of the concept of money and related issues.
- The customary nature of the concept of assets and value.
1. A Rational and Logical Perspective on All Matters According to Sharia
Regarding the first point in Islam, anything or action that is considered normal and acceptable by rational people and the general public, and becomes widespread in society, is acceptable as long as it does not inherently involve any prohibition or corruption, and does not lead to usurious contracts or harm. For example, anyone can create or produce something and transfer it to another person to settle a debt. However, if that thing is an item, receipt, or coin used “exclusively” in gambling and betting centers, benefiting from it would not be permissible according to Sharia and would be considered problematic. Therefore, cryptocurrencies, seem free of such issues, as currently, a large segment of the population and rational individuals deem them acceptable, unless, for example, a specific token is used in a project based on corruption or gambling.
However, the matter does not end here. Currently, there is overall ambiguity regarding cryptocurrencies, their functionality, and the return on investment in transactions based on them. Hence, any exchange based on this could be considered risky, harmful, or unjust enrichment, or it may take on another form of prohibition in transactions, where, any such act is invalid, and the wealth obtained is considered unlawful. Even the initial rulings from religious authorities in 2019 regarding Bitcoin mostly focused on the impermissibility of trading it due to the ambiguity in the transactions. Only the late “Ayatollah Yousef Saanei,” a religious authority, deemed Bitcoin permissible by referencing the common understanding of property and money, and “Ayatollah Seyed Mousa Shobairi Zanjani,” another religious authority, tied the issue of cryptocurrency trading to the presence of economic corruption or violation of the law. The discussion on this is vast, but it seems that the increasing prevalence and normalization of digital currencies, along with the clarification of their transaction mechanisms, have influenced opinions. This is because online exchanges are expanding their operations, and the Central Bank and the Parliament of the Islamic Republic of Iran are drafting laws and regulations for cryptocurrency activities. Additionally, scholars like “Ayatollah Mohammad Reza Modarresi Yazdi” (a member of the Guardian Council), “Ayatollah Javad Marvi” (a professor at religious seminaries), and “Hujjat al-Islam Javad Ebadi” (a professor at religious seminaries) have presented and published lessons within the framework of Islamic jurisprudence regarding cryptocurrencies. Furthermore, “Hujjat al-Islam Mahmoud Mohammadi Armandi” has authored a book on cryptocurrencies. These works examine cryptocurrency-based actions from a Sharia and jurisprudential perspective and provide corresponding rulings.
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2. Issues Surrounding Transactions, Contracts, and Agreements
Moving beyond the first aspect, the second aspect comes into consideration. Contracts, like the previous matter, are generally acceptable in Sharia as long as they are rationally and customarily acceptable to individuals unless there is a specific prohibition—for example, an agreement to perform an action that takes the form of gambling. In fact, from a Sharia perspective, the fundamental principle in contracts and transactions is their validity, and they are not void unless proven otherwise. Therefore, it can be assumed that with the nuances that fall within the expertise of jurists, various types of contracts and their rulings can be applied to cryptocurrencies. Since this discussion is not the primary focus of this article, we will move on from it.
3. The Conventional Nature of Money and Related Issues
Money is not derived from Sharia, and therefore, Sharia accepts it rationally and based on custom. In its simplest definition, anything—whether coins, banknotes, bank receipts, or otherwise—that serves as a measure of value for goods, services, or anything else and facilitates financial and commercial exchanges is, in a customary sense, money and holds the same status in Sharia. However, modern currencies, which are not backed by gold or silver, or credit receipts, have introduced new issues. If cryptocurrencies are accepted as conventional money and gain official recognition in global transactions—or, in other words, are considered international currencies—they would also be justifiable in Sharia but would follow the same rulings as regular currency. Again, it is clear that there could be subtle differences from a jurisprudential perspective regarding the classification of cryptocurrencies as money. It should also be noted that digital currencies still face many challenges before they can be considered official currencies—whether in the international economic framework or Sharia—and consensus from economic and religious authorities is needed for this to happen.
4. The Conventional Nature of Property and Ownership
It can perhaps be confidently said that without a doubt, the most important issue regarding cryptocurrencies, which brings other matters into question, starts from whether cryptocurrencies are considered assets, or in other words, property. Are they tradable and exchangeable assets? The answer to these questions from a jurisprudential perspective sheds light on the subject, allowing specific rulings to be applied or formulated for cryptocurrencies. The complexity of the matter arises from the fact that although property and ownership are not derived from Sharia and are considered conventional and intersubjective concepts, they often straddle the line between being religiously and customarily recognized. In practice, many things may be considered property in a conventional sense, but their ownership might be denied from a Sharia perspective. For instance, consider this abstract example: if a quantity of wine is stolen, it is not considered property from a Sharia point of view, and the thief would not be subjected to the prescribed punishment. However, conventionally, it can be considered property, meaning the harmed party would be entitled to compensation, and the thief must make restitution. From a legal standpoint, according to the laws of society, the thief would also be subject to punishment. Such examples become relevant in multi-religious societies.
Today, internationally and even within our own country, cryptocurrencies are considered assets and are even referred to as money by some. However, can cryptocurrencies be regarded as assets and property from a Sharia and jurisprudential perspective, and can property-related rulings be applied to them? The central question for scholars and jurists is: “Why are some things considered property by convention and others are not? In other words, what criteria determine whether something is considered property?” The subsequent basic questions are: “How can consensus between custom and Sharia be achieved on this issue? What types of property can exist, and what Sharia rulings should be considered for it or transactions involving it?” With this background, it can be said that the concept of cryptocurrency as property is a fundamental and classic jurisprudential issue emerging from the modern commercial and financial world. With this introduction, we will further examine the topic of “The Jurisprudential Perspective on the Property Status of Cryptocurrencies.”
2. An Overview of the Concept of Property
What is property?
To begin, we must address the issue of property with greater precision. From a legal perspective, property refers to anything of economic value that can be traded and for which money or other assets can be exchanged to obtain ownership. The criterion for determining property is based on convention, and anything that is traded and valued in the market is considered property under civil law. This criterion is derived from Sharia. According to “Imam Khomeini (ra)” and “Allameh Tabatabai (ra),” any item that has value according to rational individuals, requires the exchange of money [or another asset] to acquire, is intended for lawful profit, and the transaction is rationally valid and not foolish and does not cause harm to anyone, is considered property. Thus, if an item is such that it does not provide any benefit to any person based on its qualities or characteristics, such as spoiled food, it is not considered property.
It seems that with these explanations, there is no controversy about this issue. However, jurists and scholars do not agree on the matter of benefit from the perspective of rationality, or in other words, “rational benefit,” and various opinions have been issued by each. Despite differing views, they can generally be categorized into two main groups:
- The sufficiency of any rational benefit for something to be considered property.
- The necessity of a specific type of rational benefit for something to be considered property.
Regarding the first group, some scholars accept the property status with a minimal and simple condition; if something is considered valuable due to a certain situation or condition, or even a particular perception, it is regarded as property. Translating this into economic terms, if “supply and demand” exist for something, it is considered property, which in terminology is referred to as “sufficiency of specific custom.” Of course, the issue of legality and permissibility—whether generally or according to necessity (e.g., the prohibition of alcohol being waived for medical treatment)—must be considered. In contrast, the second situation requires a consensus from the public and rational individuals regarding the existence of benefit, referred to as “general custom.” This is a stricter condition.
Although it seems challenging to determine the boundary between the two groups, there is a clear distinction. For the first situation, if an individual attributes value to something, it acquires property status, even if others and rational individuals consider it illogical. Even the “illusion of property” of an item can be sufficient. Scholars such as “Shaheed Sadr” in his famous book Economics and “Ayatollah Hakim” in his fatwas, and Imam Khomeini (ra) in all his economic opinions and works, consider the sufficiency of specific customs. According to the late Hakim, property status is generally considered a conventional attribute rather than a real one. With this explanation, any factor or perception that causes an individual or people to be interested in trading something and competing for its possession can lead to the perception of its property status. Imam Khomeini even went further by setting aside the priority of rational benefit in some cases. According to him, if there is a rational intention or purpose to trade something that is entirely devoid of rational value, that thing is considered property, and the ruling on the transaction is its validity and rationality. With this interpretation, anything that has demand or need at a given moment will be considered property, and it will lose its property status if the demand disappears.
When considering “general custom,” the diversity of opinions, criteria, and the degree of strictness that scholars and jurists consider becomes broad and varied. It also appears that more jurists support the view that can be attributed to figures like “Sheikh Ansari,” Muhammad Hasan al-Najafi,” “Ayatollah Khoei,” “Ahmad ibn Muhammad Ardabili,” “Mirza Javad Agha Tabrizi,” “Agha Hossein Khansari,” and many other scholars. According to this perspective, the criterion is that rational individuals and the general custom have a broad consensus that there is some degree of rational benefit regarding anything whose property status is in question. In other words, the majority of rational individuals should be able to discern inherent benefit and value in an item from the outset, while simultaneously, there should be substantial demand for its possession and benefit. It can be said that the mentioned scholars unanimously believe that individual interest and desire to value or possess something are not sufficient criteria. In this view, scholars explicitly consider what Sharia has declared as forbidden, contrary to reason and custom, thus it cannot be regarded as property. Additionally, things that are particularly rare and exceptional (such as the famous example of buying and selling snakes and insects) may be of interest to some, but since they are not widely desired and are not considered marketable items according to custom, they are not considered property, and their acquisition is practically deemed unfeasible. This viewpoint exercises caution because it perceives a higher risk of fraud, ambiguity, and uncertainties in transactions and sales of rare items, considering reliance on the illusion of property status to be dangerous and insufficient, and thus declares such transactions invalid. This group of scholars views economic issues as having more social dimensions rather than personal interests and considers caution and conservatism to be more in line with reason, ethics, and Sharia.
Types of Property
After reviewing the concept of property, it is useful to know that in Sharia and among jurists, property is divided into three categories: 1. Substance, 2. Benefit, and 3. Right. According to this classification, a substance is any property that has a physical existence and can be touched and perceived, such as gold, silver, cash, etc. Benefit refers to the gradual advantage derived from the substance or existence of property, such as the profit earned from trading property. However, the concept of rights is somewhat more complex, as some rights can acquire property status. For example, a house is considered property in itself, but the right to reside in it can also have property status, and the owner can benefit by renting it out. Similarly, if someone cultivates an abandoned and barren land, they do not become its owner, but when the land becomes capable of yielding benefit, that person has priority.
Now, based on the concepts briefly outlined, we can return to the main topic. It should be noted that the details and conditions surrounding the issues discussed so far are more extensive than what this article can cover and require extensive jurisprudential expertise.
Three. The Property Status of Cryptocurrencies
We will now explore the jurisprudential dimensions of the property status of digital currencies and briefly review the speculations and research presented so far.
Given that, nowadays, internationally and even within our country, trading, investing, and saving based on digital and encrypted currencies has significant volume and has experienced notable growth, and that there is competition among individuals to participate in projects or acquire more cryptocurrencies, it can be said that the concept of asset and property for these currencies has been defined among a significant number of people abstractly and customarily. Therefore, in light of the opinions of Imam Khomeini, Ayatollah Sadr, and Ayatollah Hakim, which we reviewed earlier, we can consider cryptocurrencies as property, and transactions and other activities based on them will be permissible from a jurisprudential perspective. As mentioned in the introduction, initially, due to ambiguity and caution, many religious authorities ruled that Bitcoin and cryptocurrencies were not considered property and that transactions involving them were not permissible. However, within the seminaries, arguments have been presented based on “specific custom sufficiency” and the characteristics of digital currencies, especially those that are encrypted and operate on a blockchain platform. For instance, “Mahdi Khateebi,” a lecturer at the Qom Seminary, has argued in an interview with IQNA, the International Quran News Agency, that Bitcoin should be considered property and tradable, and due to its characteristics, it is transparent and reliable, with no potential for usury, financial relations, or ambiguity in Bitcoin transactions. In fact, due to the high transparency of the blockchain and the recording of all information on each block, as well as the open-source nature of most projects in this field, criticisms and doubts about ambiguities and risks in this area are well addressed. However, this is not the end of the matter. Other jurists continue to have doubts and advocate for caution. For example, regarding issues like buying and selling property in the metaverse, it is believed that while the property status of metaverse assets is established from a rational and customary perspective, there are still doubts about their property status from a jurisprudential standpoint.
Jurisprudential experts who cannot endorse the property status of cryptocurrencies have arguments similar to those of Muhammad Hasan al-Najafi and Sheikh Ansari. As mentioned earlier, personal rational benefit is not a criterion for these scholars. These experts have expressed their cautious and pessimistic views for several reasons: First, domestic responsible authorities are constantly issuing warnings and delaying the issuance of licenses or executive regulations. Second, unfavorable news about domestic and international cryptocurrency events frequently makes headlines. Third, international financial systems and global organizations, such as the World Bank, despite their positive stance and acceptance of cryptocurrencies, continue to warn about the volatility and risks associated with these markets. All of these factors contribute to the lack of certainty regarding the rational benefit of cryptocurrency projects, leading them to reject the notion of property status for these virtual assets.
Of course, this is not the end of the matter; other issues are also at stake:
1. Lack of Legislation and Regulation and Unclear Legal Responsibility in the World of Digital Currencies:
Currently, there is no specific regulation or law for cryptocurrencies, neither at the national level nor within cryptocurrency communities. For example, in markets like the stock exchange, the responsibilities of legal and natural persons are well-defined, and market operators work within a framework of responsibilities and access controls. In the case of activities such as speculation, regulations play a crucial role. In contrast, no official body has a legal responsibility in the realm of cryptocurrencies. The World Bank’s reports also emphasize this issue, calling for the establishment of robust laws and regulatory bodies for this new world.
2. Absence of Credit Providers:
No central or international bank acts as a credit provider for these currencies, and consequently, no goods or services are directly valued based on them. In other words, the intrinsic value of cryptocurrencies is not well-defined.
Given these issues, it is apparent that from a jurisprudential perspective, it cannot be concluded that the property status of cryptocurrencies is definable based on common custom. However, a jurisprudential question arises: whether a type of non-personal custom can be defined or not; in other words, whether it is feasible at least for the cryptocurrency market participants. Although the rational benefit defined by common custom might not fit this stricter definition, it might offer a level of custom that could be acceptable in this jurisprudential perspective. Assuming all the above issues are resolved, considering the existence of legal and credit-providing institutions, it could be said that cryptocurrencies are “customarily recognized property.” This means that with the presence of an overseeing and credit-providing institution, which can achieve consensus on the validity of operations from the perspective of common custom, a rational benefit can be defined for all market participants, thereby allowing cryptocurrencies to be classified as property. Otherwise, cryptocurrencies would only be widely beneficial from the perspective of certain individuals, such as speculators and those who disregard the value and property status of cryptocurrencies and related tokens. In simple terms, such supply and demand, based on the rationale of common rational benefit, would be entirely disadvantageous for market participants and susceptible to potential abuses. This perspective, especially within the framework of government jurisprudence and secondary rulings, might further highlight its significance, with the property status of any type of cryptocurrency—other than central bank-issued cryptocurrencies—always being questioned and proving to be very challenging to establish.
It should be noted that the type of reasoning from both groups of scholars has some thought-provoking points, and it seems that there is still room for further scrutiny and careful consideration. It is also important to remember that these issues are within the framework of primary rulings, and the arguments may change when considering governmental jurisprudence.
What Type of Property Are Cryptocurrencies?
Another significant point of contention is the type of property that cryptocurrencies represent if they are considered property at all. According to the definitions provided, there are three options: physical property, benefit, and right. Initially and simply, it can be said that no cryptocurrency in its standard form can be classified as a right. In the world of blockchain-based digital economics, if metaverse transactions and unique tokens (NFTs) are accepted under the concept of property, these might be considered a form of property related to rights. However, it is worth noting that projects and contracts operating within frameworks such as holding and staking, and other similar investment activities in cryptocurrencies, might create such a situation through smart contracts. This topic requires further examination by scholars and experts.
Regarding whether cryptocurrencies can be considered physical property, it can be said that according to classical jurisprudential frameworks, cryptocurrencies are not physical property, as they do not have a clear physical existence. However, considering the nature of promissory notes, new financial markets, and the banking system based on bonds, there can be scrutiny and questioning of this concept, as these cases also present non-physical and non-material assets that might not necessarily bring benefits in the future. Nevertheless, prevailing opinions in the field of jurisprudential research mainly emphasize the benefit-based and non-physical nature of cryptocurrencies.
The importance of this issue, which seems to remain an open and unanswered question, arises from the fact that different types of property can have various jurisprudential and legal rulings in both individual and governmental contexts. For example, physical property might be subject to tax laws, or rights-based property might need more monitoring and management to control money laundering crimes.
3. Conclusion
In this article, we initially aimed to clarify the importance of a jurisprudential perspective on cryptocurrencies, then addressed the central discussion of their property status and the related jurisprudential issues. Finally, we provided a concise review of the jurisprudential aspects of the property status of cryptocurrencies.
What emerges from this article is that within Shia jurisprudence, at the level of primary rulings, there are two viewpoints: one cautious and the other more open to the subject, each leading to results that require further investigation. It is possible that some nuances have been overlooked or additional details should have been included, but this was somewhat intentional. Firstly, because social and governmental aspects will be addressed in a separate article for simplicity and brevity. Secondly, a more detailed examination would have turned this article into a lengthy and specialized thesis in the field of jurisprudence, which is beyond the scope of this work.
