Characteristics of Money in Islam
(Shaykh Dr Sajid Umar, Standing Shariah Committee, Islamic Council of Europe (ICE), interviewed by Usman Malik)
U: Shaykh, you mentioned that we do not have a verse or hadith about what money is, but we see the scholars of fiqh setting boundaries to understand what constitutes a currency—which you discussed in your recent video on the ruling of cryptocurrencies. Where does this understanding then come from?
S: Good question. The fuqah discuss the characteristics of money, and for that matter they also discuss something else too, which is known as the characteristics of wealth. And I make this distinction, as I have noticed some students of knowledge conflate wealth for money in this discussion and vice versa. Whilst this is appropriate when discussing wealth as a whole, this is not a precise approach from the perspective of Islamic fiqh when discussing money. Nor is it true to the texts of the fuqah, as there are subtle distinctions…
U: So we see aspects like al-maliyyah, al-taqawwum and al-thamaniyyah discussed.
S: Yes, with them being connected to wealth generally and the third being connected to currencies specifically…
In terms of the first term, maliyyah refers to an item of need or want which provides a benefit considered permissible in Islam. So this would exclude musical instruments and alcohol, for example. As is clear from this simple explanation, the idea of maliyyah is not specific to money.
In terms of taqawwum – the second term – it refers to something that can be legally exchanged per Islamic law. This is a term used by the scholars of the Hanafi madhhab predominantly, though its prevailing idea is present in all the fiqh schools of thought. This criterion would exclude a forbidden product being traded, such as musical instruments or alcohol, or a permissible item – like a vehicle – from being traded if it was stolen. Again, this is not something specific to currencies.
In terms of thamaniyyah – the third term – then this is specific to currencies. We see the fuqah using this terminology in the chapters pertaining to sale-based riba and the exchange of gold and silver particularly, as they discuss the underlying cause for the rules of sales-based riba applying to gold and silver.
When one observes the collective discussion of the fuqaha regarding thamaniyyah and gold and silver, we find predominantly two characteristics highlighted, and I say predominantly since through observation, some fuqaha have listed – and correctly so – other characteristics which advance the idea about what thamaniyyah entails…
In terms of the two predominant characteristics, they are:
- Something which society agrees to be a standard through which the price of other forms of wealth are determined. So for example we say that a car costs x amount of silver coins, while a house is worth x amount of gold coins.
- Something which society agrees would be a means of facilitating exchange, or buying something, on both a specific and mass level. Now, I highlight ‘mass level’ here to exclude what some fuqaha have called customary money, which would facilitate something being a means of exchange in a specific confined space.
So this second characteristic means that a far greater amount of wealth can be acquired through money. So societies consider it valuable and a means for them to purchase through it a variety of their needs, due to it being widely accepted.
Now from these two characteristics, you can see that money being money, in the minds of the fuqaha, is not connected to the fact that it purely possesses intrinsic value.
And that is why when we look at the collective views of the scholars across the madh?hib over the centuries of Islam, we see a far larger group of scholars highlight that gold and silver were considered money. This was not purely because of their weight, but rather due to the fact that societies considered them to be a standard of value and a means of exchange.
Now before we discuss the other characteristics of money, we must also take note of the topic of sales-based riba discussed by the fuqaha in terms of gold and silver and the idea of thamaniyyah.
Why? Because if gold and silver are money and the rules of riba apply to them both, is it possible to find other things which the rules of riba here also apply to, and as such we can also consider those things money as well.
So for example, today we have fiat money in the form of pounds, dollars, dirhams, riyals, etc. We consider all of these things to be money. On what grounds do we do so? And you can see where I am going with this; as soon as we discuss crypto-currencies, the question which will be asked is: are they considered money in Islam?
So when we look at the discussion of the fuqaha, we find two views:
The approach of ghalabah al-thamaniyyah, which is the famous view within the madhhabs of Imam Malik and Imam al-Shafii, and a reported view of Imam Ahmad. I say here reported view, as he has more than one reported opinion on the matter.
So what does this approach entail? It entails that gold and silver can be used for jewellery, armour, and weapons, and even for sealing other metals. However, the main usage of gold and silver, as per the consideration of societies, is to be a means of exchange and a standard of measure (or thamaniyyah). And because of this, riba is prohibited in gold and silver.
And by the way, gold and silver are often referred to as naqdayn, or the two forms of money, as seen in the chapters of zakah and riba in the books of fiqh.
According to the scholars who hold this view, they argue that the reason for why riba is prohibited in gold and silver (or naqdayn) is due to the fact that they are gold and silver in and of themselves and not for any other reason.
And this line of expressing the underlying cause for why a ruling applies to something else in Islamic theory is known as illah-al-qasira, which refers to an exclusive restrictive reason for something to have a ruling.
To make this clear, I will share another example. Take, the example of wine, for instance.
We know that it is haram. But why is it haram? Is it haram because it is wine, which would entail illah-al-qasira?
Or is it haram because it intoxicates?
If it is the latter – that it intoxicates – and that is considered the underlying causative effect for why wine is haram, then we can likewise extend the ruling of haram to anything else that intoxicates…this is as the ruling will no longer be specific to wine per se, but anything that intoxicates.
So coming back to our discussion on gold and silver, do the rules of riba apply to it because despite its other uses, the main consideration is that it is money due to it being a standard of measure and a unit of exchange (i.e. thamaniyyah)? If that is the case, the rulings of sales-based riba can only ever apply to it, as nothing else can play the role of gold and silver, which naturally would mean that nothing else besides gold and silver could be money.
There are a group of scholars who held this view. They say: Yes, only gold and silver can be money.
So what does this mean in terms of the fals which was introduced at the time of Caliph Umar?
These scholars were of the view that riba did not apply to them, as the metals used for the fals were more famous for being used in other forms of wealth. They thus would never reach a level of being a standard through which the prices of other things would be determined, except in items of miniscule value.
So whilst the fals was a means of exchange for items of miniscule value, it did not ascertain the concept of thamaniyyah to the required level. Thus, whilst it was a means of exchange, it cannot be considered money…
Now upon this view – and purely upon it, without any other fiqhi discussions such as al-istilah, which we can discuss later – what would this view mean in terms of Bitcoin and Altcoins today? They are not money and cannot ever be money.
So here we see a second reason why something can be viewed as impermissible if it is considered to be money.
The first reason was related to the issuance of money being the right of the state! This is something we already discussed, when we spoke about the monetary event at the time of Abd al-Malik b. Marwan.
And this reason of ghalabah al-thamaniyyah would be the second.
Now before we question the suitability of this line of reasoning from within the field of Islamic law, let us not forget that these scholars are not saying that we cannot have other things that can be used as a means of exchange. They are just highlighting that nothing else can circulate as money besides gold and silver.
With that in mind, let us move onto the the second approach, which is the view of mutlaq al-thamaniyyah.
This view is a minority opinion in the Maliki madhhab, one of the reported views of Imam Ahmad, as well as a view supported by specialists in Islamic law like Ibn Taymiyyah and others. It is also a view reported by scholars from the period of the Tabiin , and the view of the majority of the later and contemporary scholars today, not to mention fiqh councils. Accordingly, fiat money has been deemed as money from a fiqh? perspective today!
So what does this approach entail? It entails that anything used on a mass scale as a thaman – that is, a standard of value and a means of exchange – would be considered money. Subsequently, the rules of riba would apply, even if that thing is well known to have other uses. So as long as society does not batter an eyelid when it is used as a standard of measure and a means of exchange, and through it people’s monetary and wealth aspirations are achieved without any over-riding harm, then it will be considered as money. Thus, the rules of riba and zakah would both apply. Based on this view, fals would be considered money. This is just like how fiat money today is considered money from a fiqh perspective at the level of gold and silver, when it was considered money in its day.
Now what about the hanafi madhhab? We did not mention them yet in this discussion! And we must for the sake of completion.
The hanafi madhhab would be placed in this same category we are currently discussing; as such fals will be considered to be money. And the reason for this is that whilst they have a different treatment regarding why the rules of riba apply to gold and silver, Imam Muhammad b. al-hasan al-Shaybani specifically and the hanafi madhhab generally permit the concept of al-istilah when it comes to money being considered money. This means that if a class of people come together and agree upon something being a measure of value and means of exchange – meaning they confer it the notion of thamaniyyah – then it will be considered money from a fiqhi perspective and the rules of sales-based riba would apply to it.
And I hope through this presentation both you and the attendees can see the complexity of the minds of the fuqaha here and their quest for precision in these discussions. And I also hope you can see today how deep the scholars of today have to go before they can pass their rulings on crypto-currencies, for example, and why having more than one view on the matter is possible. Their rulings do not stem from a void or vacuum.
Now, let us consider the mutlaq al-thamaniyyah paradigm, which is the second discussion we just had. What would this mean in terms of Bitcoin and Altcoins?
Well, theoretically it would mean that if crypto coins achieve the threshold for thamaniyyah from this perspective of fiqh, then they can be considered to be money. This is because money is not confined to gold and silver.
However, there is an important caveat here. And this is not a disclaimer, but a fact worthy of being mentioned. In a practical sense, a scholar can hold the view of mutlaq al-thamaniyyah, but also hold the view that the issuance of money is the right of the state, for example. Or they may determine that the harms of a new idea of money outweighs the benefits, and accordingly still rule it to be haram!
Again, we should note from this discussion how substantial our tradition is.
U: You mentioned earlier that aside from money being a standardised measure of value and a means of exchange, there are other characteristics mentioned by the fuqaha.
S: Yes, it is true that Imam al-Ghazali famously mentions for instance the idea which means that money should be something that has a stable value over a long period of time, such that it can be used when needed in the future, like on a rainy day, as they say.
And other scholars have also added another condition: This means that money should be a means towards successfully pricing deferred trade. So for example, if I sell something to someone with an arrangement that they pay you after a year for example, you should be able to price that trade successfully using money.
Again, all these are based on the observations of the fuqaha of how money is used and how the characteristics of money are discerned, and if we look at gold and silver, then we see that it fulfils all these characteristics. Likewise, fiat money today does the same, although not at the same level of efficiency as gold and silver.
To be continued at Decrypting Cryptos – IV: Islamic Rulings on Bitcoins and Altcoins
Reproduced with permission from A Master Class on Decrypting Cryptocurrency