Forex trading

The issue of currency trading online has being discussed in detail by the Jameeatul Mufteen (Council of the leading jurists of South Africa). Majority of the Ulama concluded that online trading in currencies is not permissible. This is primarily due to the following reasons:

a) The notes which a person deposits in a bank are commingled with other. This means that when an account-holder deposits his money, it is mixed with other money and becomes undistinguishable. The bank now would transfer the value (and not the same notes). Thus, the money has become a debt which is owed by the bank. By doing currency trading, the transaction involves a debt from the part of both the buyer and seller. Such a transaction is unanimously forbidden in Shariah. It comes in a hadith that Ibn Umar (May Allah Ta’ala be pleased with him) has said,

مصنف عبد الرزاق – (8 / 90 المكتب الإسلامي – بيروت)
14440 – أخبرنا عبد الرزاق قال أخبرنا الأسلمي قال حدثنا عبد الله بن دينار عن بن عمر قال نهى رسول الله صلى الله عليه و سلم عن بيع الكالىء وهو بيع الدين بالدين

“Nabi صلى الله عليه وسلم has prohibited a transaction which involves a debt in exchange of a debt.” (Musannaf Abd Ar-Razzaaq 8/90
It is a condition for at least one party (either the buyer or the seller) to take physical possession of one of the currencies if the currencies are not gold and/or silver. When one understands how the commercial houses operate, he will realise that this fundamental condition is not attained when doing currency trading over the internet.

الفتاوى الهندية – (3 / 224 رشيدية)
لو باع الفلوس بالفلوس ثم افترقا قبل التقابض بطل البيع ولو قبض أحدهما ولم يقبض الآخر أو تقابضا ثم استحق ما في يدي أحدهما بعد الافتراق فالعقد صحيح على حاله كذا في الحاوي

b) The funds deposited in the bank do not enter into the risk of the account-holder. This is proven by the fact that even if all the notes in the vault of the bank were destroyed, the bank will still be indebted to the account-holder. This proves that the possession of the bank cannot be considered as constructive possession.
c) When one studies how financial institutions operate, he will find that there is no real transfer of notes. Rather, everything is carried out by a mere electronic recording.
The above-mentioned are a few of the reasons why it will not be permissible to engage in currency trading over the internet.

http://www.askimam.org/fatwa/fatwa.php?askid=af20660570e30c27f222509bafa437c8

And Allah knows best

Wassalamu Alaikum

Ml. Ismail Moosa,
Student Darul Iftaa

Checked and Approved by:

Mufti Ebrahim Desai
Darul Iftaa, Madrassah In’aamiyyah

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