Currency trading rule

Money and currencies in Islam

Ancient and contemporary jurists discussed the legal rulings related to money, money, and currencies in general, and this was raised in all directions and differences, such as: the dealings of people with each other, or the dealings of large companies with each other, or even the dealings of states, institutions, and official and private financial bodies, and that. If it indicates, it indicates the greatness of Islamic law, the breadth of its areas, and its attachment to various aspects of life. As financial transactions had a greater share in Islamic jurisprudence, this article will discuss, with God’s help, the issue of currency trading: its ruling, its practical form, its legal rooting, and other matters. With the aim of arriving at a clearer picture of its ruling, how to deal with that issue, and how Islam views it practically.

Meaning of money and coins

Money is a language

Money in the language: the plural of cash, and criticism is different from the negative, and criticism and criticism: is distinguishing the dirhams, taking out the false and bad ones from them, and criticizing them in cash: he gave them to him and took them from him, and criticism is also: distinguishing the dirhams, giving them to a person and taking them from him.

Money and currencies, by definition

Money and currencies in terminology: means everything that nations and peoples deal with that has material value, such as: gold dinars, silver dirhams, and copper coins. Contemporary economists define money and currencies as: (anything that is generally accepted as a medium of exchange and a measure of currency). The Journal of Judicial Provisions defined currencies and money as: gold and silver, and in another place it stated that what is meant by money and currencies is everything that can be an exchange for the sale, and is related to the liability.

Some ancient jurists believe that it is possible to define money and currencies as everything that is exchanged as money, as the author of Al-Madwan Al-Kubra sees, where he says about its meaning: (And if the people had passed skins among themselves until they had a peg and an eye, I would have hated it. It will be sold for gold and paper at once. What is meant by Imam Malik’s words: Everything that is dealt with as money is suitable for that as long as it is customary to accept its exchange between people as cash and currency. Even if skins became money used in buying and selling, that would be permissible, and the provisions of financial exchanges would apply to them, such as exchanging them for gold and silver on a deferred basis. This is in Chapter on exchange.

What is meant by “disliked” in Imam Malik’s previously mentioned statement is “disliked by prohibition.” Since the exchange of money for money is forbidden by agreement, and the point of evidence is that if skins are known to people to become money, then it is forbidden when dealing with them what is forbidden when dealing with any other currency, such as: gold, silver, and other valuables, as if he is saying: Money is everything that is recognized. People, it becomes a price in their financial transactions, it is suitable for being a debt, and it performs the function of gold and silver. Whether it is metal, paper, or otherwise.

Ruling on currency trading

There is no doubt that dealing in currencies is permissible according to Sharia law as long as it is free of forbidden conditions, or what makes the transaction turn into forbidden by introducing usury, gambling, deception, and deception into it. Perhaps this article is intended for a special type of transaction, where it is stipulated that the exchange be after A period of the contract, and the amount is not deposited in the contracting party’s account until after that period has passed. This condition, by its nature, invalidates the contract, and makes it forbidden in many ways. The Islamic Fiqh Academy discussed this transaction and concluded that it is forbidden by agreement.

The Council called this type of dealing as margin trading. It means that the buyer pays part of the price of what he wants to buy, and the broker pays the rest of the amount in the form of a loan, and the contracts purchased remain with the broker, subject to the amount of the loan. With regard to the decision of the Fiqh Academy and its details, and the reason for prohibiting this type of dealing, this is explained as follows:

What is included in a margin trading transaction?

After the Council of the Fiqh Academy listened to and discussed the research submitted regarding this type of transaction, it found that this transaction consists of the following:

Trading: It is through buying and selling securities known as stocks and bonds, or buying and selling some types of commodities, or it may include buying and selling options contracts, futures contracts, and other types of trade.
Loan: It is the amount paid by the broker-bank, or others, to the client.
Usury: Usury in this transaction is carried out through overnight fees, which is a conditional interest on the investor if he does not act on the deal on the same day, and this interest may be a percentage, or a lump sum.
Brokerage: It is an amount that the broker receives for trading through him. So that the bank gets an agreed upon percentage of the value of the trades that occur through it.
Mortgage: Where the client commits by signing an agreement requiring that trading contracts be kept with the broker as a form of mortgage; To guarantee the loan amount paid by the broker, the broker has the right to sell those contracts for the purpose of repaying the loan if the client’s loss reaches a certain percentage of the margin.

Reasons for prohibiting margin trading

The Council ruled that it is forbidden to engage in this type of dealing. For the following reasons:

This type of dealing includes outright usury, which consists of increasing overnight fees on the loan, and it is undoubtedly forbidden usury. The Almighty said: (O you who have believed, fear God and give up what remains of usury, if you are believers. *But if you do not, then take notice of war from God and His Messenger, and if you repent Then you shall have your capital; you shall not wrong or be wronged.).
The bank requires that trade be conducted through it; Where the broker stipulates for the client that his trade be through him only, which makes the transaction shared between the advance, which is the loan, and the compensation, which is the brokerage that the bank or broker takes in exchange for completing the transaction through him, and this has been forbidden by law. The jurists agreed that any loan that brings benefit is usury.
The trading that takes place in this transaction in global markets often includes many contracts that are forbidden by Sharia, such as: trading in forbidden bonds and stocks, buying and selling currencies without fulfilling the terms of the contract and solutions stipulated by Sharia, and trading in option contracts and futures contracts, which is forbidden by Sharia. The middleman in these transactions sells what he does not own, and this is prohibited by Islamic law.
This transaction includes many economic damages to the parties dealing with it, especially the investor, and also causes damage to the local economy in general. Where debts, risks, etc. are expanded, it also includes deception, misleading, rumours, monopoly, and impurity. With the aim of getting rich quickly, and owning the savings of others, even if this is done by illegal means, in addition to transferring money and financial returns in societies from being real fruitful economic activities to being fruitless economic risks, which may lead to violent global and local economic shocks, which may inflict on societies. Heavy losses and damages