Gold Linking and Its Impact on Cryptocurrency Value and Islamic Rulings

Abstract

This study examines the issue of linking cryptocurrencies to gold by analyzing its im-pact on their economic value and legal ruling within Islamic jurisprudence. It proceeds from the premise that gold has historically functioned as a relatively stable asset during times of crisis. Accordingly, the study explores the feasibility of employing gold as a backing asset for cryptocurrencies to enhance stability, reduce volatility, and strengt-hen market confidence. The research problem centers on the dual challenges posed by contemporary cryptocurrencies: sharp price volatility and the absence of tangible bac-king or an official guarantor. These characteristics have contributed to divergent juris-tic opinions regarding their permissibility. Opinions of impermissibility are often gro-unded in specific legal causes, particularly the uncertain or unstable nature of thama-niyyah (monetary character and function as a medium of exchange), the lack of gua-rantee, and the prevalence of excessive uncertainty (gharar) and speculation. The study therefore investigates whether linking cryptocurrencies to gold may address these eco-nomic and juristic concerns, and whether a transformation in their economic charac-terization could lead to a corresponding change in their legal ruling, in accordance with the principle that legal rulings vary according to their effective causes. The study aims to evaluate the economic and juristic implications of gold linkage in cryptocurrencies, focusing on its effects on volatility, stability, investor confidence, adoption, and the re-assessment of juristic rulings in light of the removal of previously identified prohibitive causes. Adopting an analytical methodology, the study integrates economic analysis with juristic reasoning. It concludes that gold backing, particularly when combined with issuance by a legally recognized authority, can mitigate volatility and address key legal objections, thereby opening the possibility of reconsidering the legal ruling in line with established juristic principles.