Most legal jurisdictions don’t consider Bitcoin to be ‘money’ or ‘currency’ in the same way they do government-created fiat currencies. But what about Jewish religious law, with thousands of extra years’ experience on the topic?
Is Bitcoin Money According to Jewish Law?
This is important as religious law may transcend the pragmatic definitions of “money” nation-states must follow in order to suit domestic commercial and taxation practices.
Information site Chabad.org, which represents the Orthodox Jewish and Hasidic organization Chabad, approached the question this week with its article “Does Judaism Consider Bitcoins to Be Money?”
The article points out that whether something is considered legal “currency” by a sovereign government has little bearing on whether Jewish law considers it money or not. It focuses mainly on Jewish usury laws pertaining to loans and interest, since legal definitions may impact how traditional law approaches bitcoin lending in these situations. Specifically:
According to Jewish law, currency is defined as something that the sovereign government declared is the legal tender of the country and\or is the generally accepted currency used in that locale for transactions.
It is forbidden for one Jew to borrow money from or lend it to another Jew with interest. If money is borrowed, the exact same amount must be returned.
However loans may be more than just money. If goods, property or merchandise are loaned instead, the borrower must return the same good of equal market value to what what borrowed – since that value may change in the interim.
Therefore, Chabad.org concludes that if Bitcoin is considered a commodity by most governments then a bitcoin loan should be repaid in bitcoins of equivalent market value to the coins borrowed, not the actual number of bitcoins.
The article does not touch on the effect inflation may have on fiat currency loans, especially if those loans are long-term.
Bitcoin & Islamic Financial Law
Bitcoin has not been studied in great depth by Jewish scholars so far, but it will probably warrant further examination by scholars in future as it and other cryptocurrencies become more widely used.
Much has been written, however, on the topic of Bitcoin and Islamic finance, which is similar in parts and is probably more widely applied in the world.
Islamic law requires money to have “intrinsic value,” says this article. Its lack of a governing body and price volatility due to surrounding speculation could mean it does not yet enjoy the public’s confidence, according to a religious council ruling in Malaysia – a global leader in Islamic finance.
The council did not rule that Bitcoin is impermissible, though.
Approach to Interest
Islamic financial law also prohibits interest. Islamic banks will, however, still provide loans and companies/governments may issue bonds (called sukuk), complying with religious law by applying service charges to the loans instead of interest.
The article references an academic paper arguing that, in this sense, Bitcoin may be even more appropriate than fiat currencies, which are often not accepted as true money under Islamic law.
Another paper, published on IslamicBanker.com, also examined Bitcoin but suggested surrounding activity – such as mining, gambling and lack of trust – could be “problematic” when seeking compliance with Islamic financial law and inclusion in its products. Gambling is also “haram” or strongly forbidden.
Deeper Examination Will Come with Demand
For the moment, Bitcoin makes an interesting thought experiment for those interested in religious law, but cryptocurrencies have probably not yet attained the level of mass acceptance required for official rulings at the highest levels.
As in the non-religious financial financial world, there is a lot of potential for innovation and boundary-pushing experiments will eventually determine what is allowed. Opinions will no doubt differ, as will interpretations of various concepts.
Once again, we have to say: only time will tell.
Have you ever followed religious or traditional law in your use of money? Would official endorsement by a major religion have a beneficial effect?