Does a thing golden always glitter?
Within the umbrella column “Dribbles of Fiqh” of our e-magazine Sulwān (Vol. 1 – 2013), we noted the following and posed a resultant question: “If you buy gold with bank currency or silver, and you have handed over the purchase price, you cannot leave the gold in trust with the seller for you to collect it later. You must assume its possession at once to avoid deferment in taking delivery of the relevant exchanged currency, since that deferment is proscribed by the Law. Would purchase of e-dinar by EFT eschew that ban?”.
Subsequently to the publication of that article, a seeker of knowledge approached us and asked us for clarification on the legality of e-dinar transactions in Islam.
We felt accordingly bound to visit a real expert in the field, Ustādh Bradiperr, and hear his authoritative voice.
This is what he told us after greetings and other formalities were finalized.
Ustādh, can you briefly illustrate to us how an e-dinar transaction works?
B: ‘We are dealing with an Internet-based electronic payment and exchange system that facilitates transactions backed by physical gold and silver. The physical currency, let’s say gold, is held in Dubai (UAE) in a secure vault. You need to open an account and provide a ‘Know your Customer’ proof of ID. You buy the e-dinar online, on www.e-dinar.com, via EFT (electronic fund transfer). You receive a receipt saying you own a dinar, which as we saw is kept in Dubai. You may have the dinar sent to you for a fee; otherwise the gold remains inside the safe vault. You can pay for things online with the e-dinar receipt. The coins are sold by a company.’
Can you use US dollars or Euros to buy the electronic gold coin?
B: ‘Of course. The website provides you with information on the applicable exchange rates. For instance, it tells you today that the e-dinar is priced at 1'655,00 $/oz.’
What is the position in the fiqh concerning money such as British pounds? Is it currency and intrinsically susceptible of being affected by usury on that basis?
B: There are two broad views. The first, which is the prevalent one, maintains that it is currency analogous in its essence to gold and silver, because of the common denominator of price-ness. The other, much disputed and upheld by a minority, equates it to fulūs or small coinage as copper coins were in the past. According to this second view, bank money would not be regarded as a property intrinsically susceptible of usury (māl ribawī), unlike gold and silver. You could then sell gold nuggets or silver coins for bank money or vice versa despite a deferment in taking delivery of what you sell that for. The famous Hanbalī savant Ibn Qudāmah only considered it legitimate if one exchanged a price (thaman) for a priced item (muthamman).
How does www.e-dinar.com portray the transaction?
B: In my view, clearly as an exchange between two different types of currency, for which strict exchange rates are set = as the exchange of a price for another price.
Could you give a brief description of an exchange between two different types of currency in Islam?
B: It is called sarf in ‘Arabic. It is permitted by the Law. It consists in selling one currency for another. Classically, gold was exchanged for silver.
Is it permitted unconditionally?
B: No. There are stringent conditions of permissibility. For instance, gold cannot be sold for another currency unless that is done hand-to-hand, both parties taking delivery at once of the exchanged currencies at the time of their contractual session.
Why is that so?
B: It is in order to avoid usury by deferment (ribā an-nasī’ah), which is a major sin in Islam. A currency, as we said, is intrinsically susceptible of being a usurious property. One must thus be exact so as to prevent usury from tainting it.
Any cogent textual authority you might quote on our behalf?
B: There are so many. For example, the famous hadīth in Sahīh Muslim: “If these genera differ, then sell as you like, so long as it is hand to hand.”
By the way, what is the meaning of majlis when one is negotiating a contract?
B: It is the contractual session between the two parties where offer and acceptance are exchanged and consensus, if any, is reached on the object of the contract, such as a sale item and its purchase price. Here, the two parties are the vendor and purchaser of the two respective currencies.
I have Euros and want to buy an e-dinar online. Where is the contractual session?
B: It occurs as you place an online order to buy the e-dinar, and that offer to purchase is accepted by the corporate entity in charge of www.e-dinar.com.
At that contractual session, are the sum of Euros and the e-dinar which are exchanged by the parties present?
B: Not at all. The Euros are but an electronic impulse. The gold is in Dubai.
Is that lawful?
B: No. It is an exchange hit by usury by deferment. Both the countervalues, the bank currency and the electronic gold coin, are in fact absent from the contractual session, and neither party takes delivery of what he has sold to the other.
Is that the ruling in the fiqh of Mālik?
B: It is the ruling in the fiqh of all four Imams.
As al-Habīb b. Tāhir summed it up: “It is likewise if both the exchanged currencies are absent from the contractual session. The currency exchange is vitiated by irregularity (fāsid), even if their absence from the session did not take too long, since the context is such that one suspects a lengthy delay before the parties take delivery of the exchanged currencies”.
Of course, with an e-dinar transaction there is usually perpetual delay: The Euros are never cashed and the gold never leaves the Dubai vault. Unless you have the gold coin sent to you from Dubai for a fee, in which case there is a substantial delay before you take delivery of the e-dinar; and the value of your purchase differs from what it was at the time you completed the online transaction.
What if the gold coin at least was physically there?
B: No difference. There has to be mutual immediacy in delivering both currencies hand to hand.
And if my agent in Dubai took actual possession of the gold coin while I was busy transacting online?
B: That does not take place. But even then, nay, even assuming the Euros were there, the agent could not lawfully take delivery of the dinar on your behalf. But now we are just talking remote hypotheses, and we could aimlessly go off tangent like that forever. The e-dinar transaction is the simple electronic exchange I mentioned to you.
The company in charge of www.e-dinar.com might contend that the dinar is there, inside the vault, under the safe control of the Dubai storeroom.
B: I gave you the unanimous ruling.
Listen to this narration from Al-Muwatta’. It is reported on the authority of Aws b. al-Hadathān an-Nasrī, as the opening hadīth of the section on currency exchange in the Book of Sales. The said Companion wanted to exchange 100 gold coins of his for some other currency. Talhah b. ‘Ubaydillāh summoned him, and the two negotiated the terms of a possible agreement. Eventually, Talhah b. ‘Ubaydillāh accepted the 100 gold coins from Aws. Talhah took the gold coins and turned them about in his hand, after which he said, while ‘Umar b. al-Khattāb was listening, ‘(I will hand you the corresponding currency) by the time my store man returns from the thicket.’ ‘Umar commented, ‘By Allah, do not part ways with him until you have actually taken the currency from him!’. He then added, ‘The Messenger of Allah, Sallallāhu ‘alayhi wa-Sallam, said: “Gold for silver is usury except hand to hand”, etc.
Ibn ‘Abdi’l-Barr says in Al-Istidhkār that Muslim savants unanimously declare this hadīth authentic, and adds that no disagreement exists among the scholars of the ummah as to the fact that deferment in selling gold for silver is disallowed in the Law.
You cannot therefore say, ‘My store man in Dubai has it.’ It is still forbidden.
You stressed that it was fāsid. What does that entail?
B: The legal effects of a currency exchange do not ensue. The Law invalidates the transaction. It is therefore terminated by operation of the law, let alone if one party institutes legal action to terminate it. You must return the e-dinar, and www.e-dinar.com must restitute the Euros to you.
The gold is safely there, in the Dubai vault, in the seller’s constructive possession.
B: I will reply to your point by quoting the following question put to the Māliki Mufti from Libya Dr. Sādiq al-Gharyānī, and his answer:
Q: “Is it permissible for someone who purchases gold and disburses its purchase price to leave what he has thus purchased with the vendor in trust?”.
A: “If you buy gold by paying for it in bank currency or in silver, and you have disbursed the relevant purchase price (...), you should not leave what you have thus purchased with the vendor in trust, for you to approach him later and claim delivery of the gold then. It is incumbent on you to physically receive your need (= the gold you have bought), and take it into your actual possession, lest deferment in taking delivery of money which is the subject-matter of a currency exchange materialize”.
What is the e-dinar as receipt by which you purchase goods online?
B: It is a promise. A redeemable promise: A promise to pay you in Dubai the value in gold reflected on your receipt.
What is the difference between it and a promissory note issued by a conventional bank?
B: It is backed by real gold.
Does it mean it is currency in the eyes of the fiqh by which I can buy real merchandise online?
B: Of course not. A promise is not currency.
The owners of the e-dinar company claim that zakāt cannot be paid in paper money because it is a mere promise. I cannot see the difference between paying for goods with a receipt representing money.
B: I cannot see it either.
No person with some association with the fiqh can see it.
What is the difference with the scenario you surely know well from the Muwatta’, the one involving the Umayyad ruler Marwān b. al-Hakam?
There, the sukūk were food coupons = demarcated shares of food allowances granted by the ruler (to his soldiers, civil servants etc). Food, as is well-known, is another property susceptible of ribā by nature. They represented real food they were entitled to, just as much as the e-dinar receipts “represent” real gold you claim as your own.
Unlawfully, because the currency exchange is corrupt at source.
B: True, but let us assume you could rightfully claim it as your own and you traded with a receipt representing it.
What you are using when buying online are promissory notes backed by the gold-storing establishment.
Check chapter 19 in the Book of Sales, the one on the ‘īnah and kindred sales, hadīth no. 1296.
Marwān was critically asked by Zayd b. Thābit, the leader of the jurists at that time, and another Companion, whether he was legalizing the sale of usury by allowing the receipts to be bought and sold in lieu of the food they represented, which food was never taken into their possession …
And Marwān said in an exculpatory tone, ‘I seek refuge with Allah.’
You can have the gold coin posted to you from Dubai for a fee. Legitimate?
B: An unlawful currency exchange, with a fee charged against you on top of that … (He grimaces as he vocalizes that).
It is stated in www.islamicmint.com that zakāt cannot be paid with a promise of payment, and support for that is sought in a fatwā issued by the classical Mālikī jurist ‘Ulaysh. What did Shaykh ‘Ulaysh actually say?
B: What he said is found in his collection of fatāwā, titled Fath al-‘Alī al-Mālik. He mentioned that paper bearing the Sultan’s stamp and circulating as money as if it were gold and silver coins was no more than fulūs, and that, since zakāt was levied in Islam on ‘ayn (= gold and silver) but not on fulūs, no zakāt could be extended to such paper money.
I am confused. www.islamicmint.com promotes the idea that one does charge zakāt on paper money but distributes it in gold and silver, and that such practice is founded on Shaykh ‘Ulaysh’s fatwā. But Shaykh ‘Ulaysh, as you explained to me, said there was no zakāt on paper money to begin with!
B: That is indeed so. It appears that Shaykh ‘Ulaysh’s fatwā is selectively applied to the end of the process, but not to the initial segment thereof. In secular legal terms, we would be speaking of approbating and reprobating his fatwā at one and the same time (He lets out a smile while he says that).
Is the view held by Shaykh ‘Ulaysh agreed upon in Mālik’s madhhab?
B: No, many contemporaries and subsequent scholars, such as Muhammad b. Mahfūz ash-Shinqītī, have disagreed with him, even robustly, as we said. They deem paper money to be currency assimilated to gold and silver rather than to fulūs, and as such fully taxable in Islam.
Is that your view?
B: Paper money is obsolete. Most of money today is bank currency, pure electronic signal. Banks are largely “cashless”. Shaykh ‘Ulaysh made ijtihād which was related to his age, may Allah reward him for it. Money is now a fictional existent which is usuriously leased by the central banks, in spite of being a fungible that is consumed by use and cannot be rented. You and I do not own it. It falls unrestrictedly outside the principled scope of what zakāt can be levied upon.
What is your assessment of e-dinar and its devisers?
B: They are Muslims who are taking a step towards restoring healthy currency. They raise consciousness and shake the ummah out of its apathy. They should be credited for their valuable contributions.
Could they have done things differently?
They should have visibly told users and Muslims generally that, although in the immediate term the transactions they were calling to were not in accordance with the Law, they were engaging in them as a transitional measure on the path of correctness, as part of a multi-phase political vision of revival.
As it stands, users and Muslims generally are given the clear and erroneous impression that they are transacting once more in line with the Law, which is very much what “Islamic” banks alleging mere implementation on their part of “sharī`ah-compliant” transactions endeavour to do.
Let’s move now to our next batch of questions …
Ustādh Bradiperr looks at his watch to tacitly and politely indicate that his time is over.
Politeness has its unwritten rules, and only rudeness would dare disregard them.