Economic and Legal Analysis of Cryptocurrency: Scientific Views from Russia and the Muslim World
- Acceleration, cost reduction and significant simplification of settlements between entities, since the scheme excludes “unnecessary” intermediaries;
- Protection from inflationary processes;
- Amount of issued bitcoins grows at a predetermined rate, unlike public money printed by the government at its own discretion (Swan 2017).
2. Cryptocurrency as an Economic Category
- Installation of a special program on a computer with sufficient video card power;
- Installation of special equipment and the creation of a so-called farm;
- Powerful computer stations to ensure the smooth operation of the system;
- Entering the pool—a server that unites a certain number of devices into a single whole with the subsequent division of the cryptocurrency in proportion to the performance, depending on the power of the equipment.
- One party sends from their wallet a hash-encrypted cryptocurrency in the form of a transaction block.
- This block is sent to the rest of the subjects in order to establish its validity, that is, verification.
- The sent block is summed up with the rest in case of validation.
- The cryptocurrency is transferred to the second party wallet.
- Development of the shadow economy, leading to tax evasion, which basically destroys the idea of an integral state.
- Unsecured cryptocurrency.
- Inability to trace participants in financial transactions (anonymity, laundering of criminal proceeds, financing of crime, fraudulent activities, etc.).
- High volatility of the exchange rate.
- Lack of a mechanism for the redistribution of benefits to solve social challenges.
- Loss of data in a cryptocurrency wallet makes it impossible to withdraw financial assets from it in any other way.
- Regulatory uncertainty, including illegality in some countries.
- The ever-increasing complexity of the cryptocurrency production process.
- No influence of inflation—27%;
- Open code—14%;
- Low costs—5% (Shmigidin and Borkova 2019).
3. Cryptocurrency as a Legal Category
- If the legislator classifies cryptocurrency as objects of civil law as digital rights;
- If the legislator classifies cryptocurrency as an object of civil law as property;
- If the legislator classifies cryptocurrency as objects of civil law as property rights.
- Cryptocurrency is not legal tender in the Russian Federation.
- Cryptocurrencies are not electronic money.
4. Cryptocurrency as an Object of Islamic law: The Pros and Cons
- Mandatory (“fard” or “wajib”), for example, payment of “zakyat” (mandatory annual payment from a Muslim’s income);
- Desirable (“mustahab” or “mandub”), for example, granting a delay in debt payment;
- Permissible (“mubah”), for example, conclusion of a permissible contract;
- Undesirable (“makruh”), for example, excessive wastefulness;
- Forbidden (“haram”), for example, setting interest on a loan (usury—“riba”).
- Cryptocurrency is prohibited in Islam.
- All operations with cryptocurrency are not allowed, since these are “hypothetical units” not backed by real assets. We have already analyzed the inconsistency of this argument in the economic block above;
- The prohibition comes from the fact that the cryptocurrency does not depend on a centralized institution and does not have a supervisory authority. We also analyzed this argument, pointing out that any new phenomenon should gradually enter the framework of the economic and legal field, and it is a hasty decision to say in its infancy that this is an uncontrollable asset;
- The fatwa was about the lack of mass distribution that complicates the life for individuals and legal entities using cryptocurrency. This thesis contains an inherent contradiction: no need to distribute this means of payment, because it is not widespread. Deliberate tautology is used for hyperbolic weakness of the argument;
- The lack of price standard status on the part of cryptocurrency in the economic arena. It is an erroneous decision to ban cryptocurrency due to lack of the specified status, for one should speak about the prospects, and not about the current state;
- Cryptocurrency is a high-risk asset. Indeed, today investing in cryptocurrencies is an extremely risky investment, but do not forget that cryptocurrencies are very different, including crypto assets, as well as the fact that some of them are limited. If we assume that in 15–20 years the production of bitcoins will become impossible after reaching 21 million units, then we can expect the stabilization of its rate, all other things being equal, and subsequently the risks should decrease.
- Cryptocurrency is allowed in Islam.
- The decision on the cryptocurrency has been postponed.
- Speculative component.
- Complete anonymity of parties to transactions.
- Lack of communication with the real sector of the economy.
- The problem of legality.
- Cryptocurrency: money or goods?
- The need for methodological developments, taking into account the patterns of turnover in assessing and predicting the rate of cryptocurrencies, which will make it possible to correctly calculate their development trends, because even experts make mistakes in their rate forecasts. A rather bold, updated prediction was made about the growth of bitcoin by the end of the 3rd quarter of 2018 to USD 11,000 in one recent scientific article (Safiullin et al. 2018). Despite the high quality of the authors in their research, hopes for such a bitcoin rate did not come true, as there was a gradual devaluation during this period to USD 650032.
- Solutions are presented in the balance sheet related to cryptocurrency, the development of which is only at the initial stage (Pinskaya and Tsagan-Mandzhieva 2018; Tsagan-Mandzhieva 2017).
- A detailed analysis of the cryptocurrency investment, which has an insufficient amount of research in the scientific and pseudoscientific environment (Borisova 2017).
- Studying cryptocurrency as a type of economic activity, as today it is a serious business, including mining, initial placement, trading, funds and additional services. Articles on calculating the economic feasibility of mining are just beginning to appear in scientific journals (Naidis and Nestrugina 2018), which seems to be a recent trend.
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Conflicts of Interest
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Shovkhalov, S.; Idrisov, H. Economic and Legal Analysis of Cryptocurrency: Scientific Views from Russia and the Muslim World. Laws 2021, 10, 32. https://doi.org/10.3390/laws10020032
Shovkhalov S, Idrisov H. Economic and Legal Analysis of Cryptocurrency: Scientific Views from Russia and the Muslim World. Laws. 2021; 10(2):32. https://doi.org/10.3390/laws10020032Chicago/Turabian Style
Shovkhalov, Shamil, and Hussein Idrisov. 2021. "Economic and Legal Analysis of Cryptocurrency: Scientific Views from Russia and the Muslim World" Laws 10, no. 2: 32. https://doi.org/10.3390/laws10020032