The following is an an extract from a transcript of an interview completed in September 2021 with Sh. Dr. Sajid Umar by the Islamic Finance Advisory on Crypto-currencies. The full transcript and video link can be found here.

Key answers to the following questions are answered in this piece and are as follows:

1. Is the concept of money in Islam something revealed?
2. What was the difference between the dinār and the dirham in terms of weight?
3. Who, after Islam, was the first to mint a coin in a metal other than Gold and Silver, and what was this coin known as?
4. Who was the first person to mint the very first Islamic Gold Coin?
5. What impact did the minting of the first Islamic Gold Coin have on the idea of money in Islam within Islamic Scholarship?
6. What are the characteristics of wealth and money, and what is defining characteristic of money from the perspective of Islamic Scholarship?
7. Is Fiat currency a form of money from the perspective of Islamic scholarship? Why?

The Idea of Money from an Islamic Perspective

When Muhammed ﷺ became a Prophet and was sent as a Messenger, the people of the region would conduct trade using the Roman gold coin known as the dinār, and the Persian silver coin known as the dirham. And at that time, these metals were used for exchange in accordance with their weight. Some sources highlight that for this period, seven gold coins were equal to ten silver coins in terms of value. This exchange rule was based on the amounts of each respected metal in weight that was present in those coins.

And accordingly, the Messenger ﷺ tacitly approved peoples’ trade based on the currency of the time, and things remained like this. This was with the exception of a few framing rules in relation to the exchange of gold and silver, when ribā became prohibited.

In terms of currency use, however, this practice continued until the time of ʿUmar رضي الله عنه. For at his time, he minted a coin upon the style of the Roman dinār, but with a metal other than gold and silver. This was called the fals. Sometimes he wrote on these coins his name, and on others phrases like (Alḥamdulillāh), (Bismillāh), and (Allāh Rabbī).

As a footnote, we can see here how societies of old recognised the intrinsic nature of money to meet the needs of mankind, and how through money, ideas and identities can be shared. This is because it was the easiest way to get messages across on a mass scale to all of society because of its function in the lives of people. Today we use media!

But coming back to ʿUmar رضي الله عنه, he introduced the fals, and in addition to this he considered making the leather of camels (camel skin) as a form of money. But he was advised against it, after he did shūrā, as he was told that if he went ahead with this, there was a real fear that camels would become scarce…

Things then remained like this after the introduction of the fals until the caliphate of ʿAbd al-Malik b. Marwān. He was the 5^th Umayyad Caliph, and came into power around 65 AH. During his time, he minted an Islamic gold and silver coin for the first time.

This act by ʿAbd al-Malik was seen from the perspective of Islamic fiqh as a paradigm shifter. This is insofar as we find for the first time a worldview among Islamic scholarship regarding money and its issuance, in the form of it being from the rights of the state!

So this is the summary of the history of money before the paper money phenomenon, and to summarise things thus far, we can say:

1. From the beginning of mankind and trade, we see that the idea of money surrounded having something that would be a means towards the achievement of something else, not an end in and of itself…

2. We notice that its birth and evolution was based on what facilitated trade and fostered mankind’s ability to leverage off the strengths of each other in a better and more sustainable way…

3. And we learn that Allah Almighty left this matter to be formalised by mankind based on what they considered suitable, and as such we do not find a verse or hadith defining for us what money is.

In terms of the characteristics of money in Islam; the fuqahā’ discuss the characteristics of money (وظائف النقود) , and for that matter they also discuss something else too, which is known as the characteristics of wealth (وظائف المال). And I make this distinction, as I have noticed some students of knowledge conflate wealth for money in this discussion and vice versa. Whilst this is appropriate when discussing wealth as a whole, this is not a precise approach from the perspective of Islamic fiqh when discussing money. Nor is it true to the texts of the fuqahā’, as there are subtle distinctions…

In terms of the discussions of the fuqahā’, we see aspects like al-māliyyah, al-taqawwum and al-thamaniyyah discussed, with them being connected to wealth generally, and the third being connected to currencies specifically…

1. In terms of the first term, māliyyah refers to an item of need or want which provides a benefit considered permissible in Islam. So this would exclude musical instruments and alcohol, for example. As is clear from this simple explanation, the idea of māliyyah is not specific to money.
2. In terms of taqawwum – the second term – it refers to something that can be legally exchanged per Islamic law. This is a term used by the scholars of the Hanafi madhhab predominantly, though its prevailing idea is present in all the fiqh schools of thought. This criterion would exclude a forbidden product being traded, such as musical instruments or alcohol, or a permissible item – like a vehicle – from being traded if it was stolen. Again, this is not something specific to currencies.
3. In terms of thamaniyyah – the third term – then this is specific to currencies, and we see the fuqahā’ using this terminology in the chapters pertaining to sale-based ribā and the exchange of gold and silver particularly, as they discuss the underlying cause (illah) for the rules of sales-based ribā applying to gold and silver.

When one observes the collective discussion of the fuqahā’ regarding thamaniyyah and gold and silver, we find predominantly two characteristics highlighted, and I say predominantly since through observation, some fuqahā’ have listed – and correctly so – other characteristics which advance the idea about what thamaniyyah entails…

In terms of the two predominant characteristics, they are:

1. Something which society agrees to be a standard through which the price of other forms of wealth are determined. So for example we say that a car costs x amount of silver coins, while a house is worth x amount of gold coins.
2. Something which society agrees would be a means of facilitating exchange, or buying something, on both a specific and mass level. Now, I highlight ‘mass level’ here to exclude what some fuqahā’ have called customary money or النقد العرفي, which would facilitate something being a means of exchange in a specific confined space.

So this second characteristic means that a far greater amount of wealth can be acquired through money, and as such, societies consider it valuable and a means for them to purchase through it, a variety of their needs, due to it being widely accepted.

An important observation from these two characteristics denotes that money being money, in the minds of the fuqahā’, is not connected to the fact that it purely possesses intrinsic value…

…And that is why when we look at the collective views of the scholars across the madhāhib over the centuries of Islam, we see a far larger group of scholars highlight that gold and silver were considered money. This was not purely because of their weight, but rather due to the fact that societies considered them to be a standard of value and a means of exchange…

Now before we discuss the other characteristics of money, we must also take note of the topic of sales-based ribā discussed by the fuqahā’ in terms of gold and silver and the idea of thamaniyyah.…

Why? Because if gold and silver are money and the rules of ribā apply to them both, is it possible to find other things which the rules of ribā here also apply to, and as such we can also consider those things money as well?

For example, today we have fiat money in the form of pounds, dollars, dirhams, riyals, etc. We consider all of these things to be money. On what grounds do we do so? Are they considered money in Islam?

When we look at the discussion of the fuqahā’, we find 2 views:

The approach of ghalabah al-thamaniyyah, which is the famous view within the madhhabs of Imam Mālik and Imam al-Shāfiʿī, and a reported view of Imam Aḥmad. I say here reported view, as he has more than one reported opinion on the matter.

This approach entails that gold and silver can be used for jewellery, armour, and weapons, and even for sealing other metals. However, the main usage of gold and silver, as per the consideration of societies, is to be a means of exchange and a standard of measure (or thamaniyyah). And because of this, ribā is prohibited in gold and silver.

As a footnote and point of interest, gold and silver are often referred to as naqdayn, or the two forms of money, as seen in the chapters of zakāh and ribā in the books of fiqh.

According to the scholars who hold this view, they argue that the reason for why ribā is prohibited in gold and silver (or naqdayn) is due to the fact that they are gold and silver in and of themselves and not for any other reason…

And this line of expressing the underlying cause for why a ruling applies to something else in Islamic legal theory is known as العلة القاصرة, which refers to an exclusive restrictive reason for something to have a ruling…

To make this clear, take, the example of wine, for instance.

We know that it is ḥarām. But why is it ḥarām? Is it ḥarām because it is wine, which would entail العلة القاصرة?

Or is it ḥarām because it intoxicates?

If it is the latter – that it intoxicates – and that is considered the underlying causative effect for why wine is ḥarām, then we can likewise extend the ruling of ḥarām to anything else that intoxicates…this is as the ruling will no longer be specific to wine per se, but anything that intoxicates.

So coming back to our discussion on gold and silver, do the rules of ribā apply to it because despite its other uses, the main consideration is that it is money due to it being a standard of measure and a unit of exchange (i.e. thamaniyyah)? If that is the case, the rulings of sales-based ribā can only ever apply to it, as nothing else can play the role of gold and silver, which naturally would mean that nothing else besides gold and silver could be money…

There are a group of scholars who held this view. They say: Yes, only gold and silver can be money…

So what does this mean in terms of the fals which was introduced at the time of ʿUmar?

These scholars were of the view that ribā did not apply to it, as the metals used for the fals were more famous for being used in other forms of wealth. They thus would never reach a level of being a standard through which the prices of other things would be determined, except in items of miniscule value.

So whilst the fals was a means of exchange for items of miniscule value, it did not ascertain the concept of thamaniyyah to the required level. Thus, whilst it was a means of exchange, it cannot be considered money…

Now before we question the suitability of this line of reasoning from within the field of Islamic law, let us not forget that these scholars are not saying that we cannot have other things that can be used as a means of exchange. They are just highlighting that nothing else can circulate as money besides gold and silver.

With that in mind, let us move onto the the second approach, which is the view of muṭlaq al-thamaniyyah…

This view is a minority opinion in the Mālikī madhhab, one of the reported views of Imam Aḥmad, as well as a view supported by specialists in Islamic law like Ibn Taymiyyah and others. It is also a view reported by scholars from the period of the Tābiʿūn , and the view of the majority of the later and contemporary scholars today, not to mention fiqh councils. Accordingly, fiat money has been deemed as money from a fiqhī perspective today!

So what does this approach entail? It entails that anything used on a mass scale as a thaman – that is, a standard of value and a means of exchange – would be considered money. Subsequently, the rules of ribā would apply, even if that thing is well known to have other uses. So as long as society does not batter an eyelid when it is used as a standard of measure and a means of exchange, and through it people’s monetary and wealth aspirations are achieved without any over-riding harm, then it will be considered as money. Thus, the rules of ribā and zakāh would both apply. Based on this view, fals would be considered money. This is just like how fiat money today is considered money from a fiqh perspective at the level of gold and silver, when it was considered money in its day.

Now what about the Ḥanafī madhhab? We did not mention them yet in this discussion! And we must for the sake of completion.

The Ḥanafī madhhab would be placed in this same category we are currently discussing; as such fals will be considered to be money. And the reason for this is that whilst they have a different treatment regarding why the rules of ribā apply to gold and silver, Imam Muḥammad b. al-Ḥasan al-Shaybānī specifically and the Ḥanafī madhhab generally permit the concept of al-iṣṭilāḥ when it comes to money being considered money. This means that if a class of people come together and agree upon something being a measure of value and means of exchange – meaning they confer it the notion of thamaniyyah – then it will be considered money from a fiqhī perspective and the rules of sales-based ribā would apply to it…

And I hope through this presentation we can see the complexity of the minds of the fuqahā’ here and their quest for precision in these discussions.

In terms of the other characteristics of money mentioned by certain fuqahā’, we have Imam al-Ghazālī famously mention for instance the idea of: أن يكون مخزونا للقيم والثروة

This means that money should be something that has a stable value over a long period of time, such that it can be used when needed in the future, like on a rainy day, as they say…

And other scholars have also added another condition: أن يكون معيارا للمدفوعات الآجل

This means that money should be a means towards successfully pricing deferred trade. So for example, if I sell something to someone with an arrangement that they pay you after a year for example, you should be able to price that trade successfully using money.

…Again, all these are based on the observations of the fuqahā’ of how money is used and how the characteristics of money are discerned… and if we look at gold and silver, then we see that it fulfils all these characteristics. Likewise, fiat money today does the same, although not at the same level of efficiency as gold and silver…

And Allah knows best.