Zakat Institutions: Accepting Bitcoin Transactions
•By Mahersaham Team
Artikel ini juga tersedia dalam Bahasa Melayu
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Hello everyone, I hope all readers of this blog are in good health. Today I would like to share some beneficial insights related to Bitcoin.
Before we go further, let us first understand what Bitcoin is.
Bitcoin is an online monetary transaction that does not involve banks in the transaction process. It is also known as a Digital Currency.
Due to the rapid advancement of technology in financial literacy, Malaysia also needs to be aware of the existence of this type of transaction.
I would also like to discuss the term Blockchain, which I am sure you have all heard of before. Let me share more information about it.
Blockchain is a decentralised digital public ledger that contains all cryptocurrency transactions. There are several types of cryptocurrencies that we can identify, such as Bitcoin, Digicash, and Cybercash.
Blockchain essentially contains information about the sending and receiving of user wallets and tracks the amount in each Bitcoin wallet.
Bitcoin mining activities can have a negative impact on the environment. This is because mining Bitcoin requires a large capital investment to purchase computers used as mining equipment.
Furthermore, Bitcoin mining activities incur significant expenses, including high electricity bills, as computers need to run continuously to mine Bitcoin.
There are views that permit the use of Bitcoin transactions for paying zakat, subject to specific conditions.
For example, Mufti Muhammad Abu Bakar''s view permits Bitcoin transactions. Among his views on Bitcoin is that it is permissible because Bitcoin is meant for buying and selling and to be used as a currency for its original intended purpose, rather than as an investment asset.
However, he also advises caution against fraudulent schemes that attempt to deceive users.
There are also views that prohibit Bitcoin. Among them are the Egyptian Fatwa Council and Sheikh Ali Qaradaghi (Secretary-General of the International Union of Muslim Scholars). The views expressed include that Bitcoin does not meet the conditions to be recognised as a currency, and there are elements of jahalah (ignorance), gharar (uncertainty), and manipulation that are difficult to control.
Bitcoin carries high risks due to several factors.
The factors include that Bitcoin has no underlying value and is not regulated by any authoritative body such as banks. Bitcoin is also frequently used as a channel for illegal activities and law violations, such as funding terrorist activities, money laundering, fraud, theft, and tax evasion.
Additionally, the instability of Bitcoin''s price fluctuations occurs frequently as Bitcoin prices can change drastically, making it unsuitable as a store of value, and the purchasing power of Bitcoin is limited.
If a user stores their Bitcoin wallet on a personal computer, there is a risk of theft if the computer is not protected with antivirus software.
Given that Bitcoin is a new form of currency for zakat institutions, various challenges need to be addressed to keep pace with advancements in the financial sector.
Among the challenges for zakat institutions are:
To accept Bitcoin transactions in zakat payment activities, authoritative bodies such as Bank Negara Malaysia (BNM), the Securities Commission, and academic institutions need to be empowered collectively. This step is important for building models and modules so that officers can carry out operations in preparing zakat institutions to accept Bitcoin transactions.
2. Investment Economics
Bitcoin needs to generate profits in order to produce higher returns for paying zakat, as this transaction carries high risks.
3. Technology
Bitcoin requires online transactions in line with current technological developments. Individuals with proficient technological skills are needed to use devices that meet standards for Bitcoin transactions.
For example, high-speed computers and specialised programmes are required to carry out Bitcoin mining activities.
4. Security
The security aspect is the biggest challenge for zakat institutions in Bitcoin transactions. This is to prevent cases of misuse, hacking, fraud, and theft.
5. Continuous Improvement
Zakat institutions need to carry out careful planning when making decisions regarding Bitcoin transactions. The implementation of acceptance by zakat institutions also needs to be cautious as Bitcoin is easily susceptible to fraud and hacking.
As of now, the acceptance of Bitcoin transactions by zakat institutions is still at the discussion and research stage. Zakat institutions need to ensure readiness in terms of technology, legislation, and security before accepting digital currency.
According to the views of some scholars, Bitcoin holdings that exceed the nisab and haul threshold are subject to zakat as they are considered assets with value. However, consulting local religious authorities is encouraged.
The main challenges include the risk of fraud and hacking, the instability of Bitcoin''s value, the need for blockchain technology infrastructure, and the absence of clear legal guidelines for zakat transactions using digital currency.
Muslim investors can refer to the list of Shariah-compliant securities issued by the Securities Commission Malaysia and seek advice from qualified Shariah advisers before making any investment decisions.
The readiness and preparation of zakat institutions to accept Bitcoin transactions need to be comprehensively established to keep pace with advances in digital financial technology.
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