The Application of Cryptocurrency in The Islamic Banking and Finance in the Era of Digitalization

Abstract

Cryptocurrency is a digital payment system that doesn't rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets. Islamic banking, also referred to as Islamic finance or Shariah-compliant finance, refers to financial activities that adhere to Shariah (Islamic law). Two fundamental principles of Islamic banking are the sharing of profit and loss and the prohibition of the collection and payment of interest by lenders and investors. Meanwhile, in Islamic law, cryptocurrency is not issued by a legal/official financial authority, it has not been accepted by the wider community, if because it contains speculation, dharar, gambling, it is already in the abstract, only after that, because there is no physical form it is possible to have gharar and maysir elements. According to Islamic Law and the Indonesian Ulema Council opinion, both as a medium of exchange for payment and as an investment are both unlawful (haram). The Research will take the comparison between Islamic Law and Conventional Law and how to find proper law to combine between both laws in the daily implementation in the global society.