Uzbekistan’s Islamic Authority Retracted Fatwa Against Cryptocurrency, Issues Apology

• Uzbekistan’s highest Islamic authority has retracted a fatwa it issued on June 3 that deemed trading with cryptocurrencies impermissible. 

Uzbekistan’s highest Islamic authority has revoked a fatwa against cryptocurrency, blaming “carelessness” for its appearance online and saying it is still studying the issue.

This declaration, which stated that cryptocurrency trading violated Sharia law, was mistakenly released on social media due to an oversight. 

In response, the Fatwa Center issued a statement titled “Correction and Apologies.” 

The Fatwa Center of the Spiritual Directorate of Uzbekistan’s Muslims had originally said in a June 3 post on its website that cryptocurrencies do not meet Shari’a law standards for money.

The body’s Fatwa Center cited volatility in cryptocurrency prices and “signs of gambling” in crypto culture as a basis for deeming it haram, i.e. forbidden by Islamic law.

The center added that “no country in the world produces cryptocurrency and it is not officially recognized anywhere.” (El Salvador has officially recognized Bitcoin as legal tender).

Moreover, many governments around the world permit and regulate cryptocurrency mining — the energy-intensive, computer-powered, cryptographic process by which cryptocurrencies are created.

The Fatwa Center added that spiritual authorities in a number of countries — including Turkey, Egypt, and Jordan — have all issued guidance against cryptocurrencies.

The statement further elaborated: “The scientific research related to this fatwa project has not yet concluded, and we are conducting extensive studies on contemporary issues. We apologize and assure you that the scientific research on this fatwa will be completed and revisited in due course.” 

With more than 90 percent of Uzbekistan’s 35 million population identifying as Muslims, the opinions of the Spiritual Directorate of Uzbekistan’s Muslims, also known as the muftiate, carry weight.

But they have no legal force and its clerics operate under the close watch of the government, which has created a comprehensive set of regulations for the crypto sector, which it views as a source of investment and revenue.

Late on June 3, the Fatwa Center released an apology on Telegram for the would-be ruling, which it attributed to “carelessness” and “technical reasons.”

“It should be noted that the director of the Fatwa Center, Sheikh Nuriddin Kholiknazar, and his deputies are currently performing the hajj,” the body said, referring to the pilgrimage to Mecca prescribed as a religious duty for Muslims. It added that “research on [cryptocurrencies] has yet to be completed.”

As of the beginning of 2023, residents of Uzbekistan can legally engage in crypto transactions but only through licensed providers.

Changes were subsequently made to the Criminal Code that would penalize citizens buying and selling cryptocurrencies on foreign exchanges such as Binance.

In an interview with the business news website Spot.uz last week, the deputy director of the National Agency for Advanced Projects (NAAP), Vyacheslav Pak, said there were now 14 such businesses and exchanges in Uzbekistan regulated by the NAAP.

But Pak said there are as yet no licensed cryptocurrency mining operations in Uzbekistan, despite a regulatory framework for them existing. The official explained that the country’s power deficits made it difficult for the state to green-light mining operations.

Across post-Soviet Central Asia, crypto-mining outfits, both legal and illegal, have emerged as a new source of economic enrichment for elites — as well as a heavy burden on aging, undersupplied electricity grids.

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