Malaysian SC concludes crypto investing and trading is Shariah-Compliant

The Shariah Advisory Council of Malaysia’s Securities Commission (the Council) has advised that it is permissible, in principle, to invest and trade cryptocurrencies on registered exchanges, including Luno.

This is great news for our Malaysian customers, where around 60% (19.43 million) of the country’s population are Muslim.

The Council revealed its position on crypto trading during a teleconference panel session at the Invest Malaysia 2020 event last week. SC chairman Datuk Syed Zaid Albar explained: “The SC Shariah Advisory Council has resolved that in principle, it is permissible to invest and trade in digital currencies and tokens on registered digital asset exchanges.” He further added, “This is a really ground-breaking resolution by the SAC (Shariah Advisory Council) that could spur greater development and investment in digital assets … Once the resolution is finalised, we will issue further details.”

As reported in The Edge Markets, “to date the SC has allowed three digital asset exchanges to operate in the country”, with Luno being one of them.

What is the Shariah Advisory Council?

The Council was established in 1996, with the endorsement of Malaysian Ministry of Finance. Its establishment was endorsed by the Minister of Finance and it was given the mandate to ensure that the implementation of the Islamic capital market compiled with Shariah principles.

According to the Council’s website, “Its scope of jurisdiction is to advise the Commission on all matters related to the comprehensive development of the Islamic capital market and to function as a reference centre for all Islamic capital market issues.”

Shariah-Compliant securities are securities listed on Bursa Malaysia which have been classified as Shariah permissible for investment, based on the company’s compliance with Shariah principles in terms of its primary business and investment activities.

What is the Islamic Capital Market (ICM)?

The Islamic Capital Market (ICM) functions as a parallel market to the conventional capital market in Malaysia. Market transactions are fulfilled so as to not to conflict with the conscience of Muslims and the religion of Islam.

According to the SC’s Invest Smart initiative, all ICM instruments and institutions must comply with Shariah principles. These include:

  • Prohibition of riba (interest)
  • Application of al bai’ (trade and commerce)
  • Avoidance of gharar (ambiguity) in contractual agreements
  • Prohibition of maisir (gambling)
  • Disengagement from production of prohibited commodities, such as liquor, pork, tobacco, etc.

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