Malta seems to be the leading EU member state in taking forward the discussion on cryptocurrencies. Its prime minister, Dr Joseph Muscat, has been the only EU leader who has stated a political willingness to reap the benefits of the opportunities that arise from this new phenomenon.
Recently, discussions on whether this could be Shariah compliant and whether Malta could take the lead on a Shariah compliant cryptocurrency exchange have also been initiated. Though controversial, it does really fall on the proper analysis of what currencies really are. There seems to still be the wrong impression that currencies are backed by gold reserves. In reality, none of the major currencies including the US dollar and the euro are backed by such reserves.
Currencies are nothing but the goods they manage to buy and therefore nothing more than a unit of measurement and exchange. With this in mind, one may say that currencies are nothing more than the paper they are printed on. With this, there may be no difference between paper money and cryptocurrencies. The real question is whether cryptocurrencies should be regulated and how. If a cryptocurrency is a medium of measurement and exchange, then it may be considered as Shariah compliant. On the other hand, if it is an investment instrument then it cannot be considered Shariah compliant as it would be Riba to all intents and purposes.
It will be interesting to follow what the special committee set up in Malta will come up with on the cryptocurrency issue and if Malta will take this toward Islamic finance. More interesting will be the views that different Islamic schools of thought will take and which Shariah scholars will endorse which point of view. To date, there has been extreme caution on the subject and scholars seem to be shying away from giving a categorical opinion on the matter let alone a Fatwa.