An Analysis of Paper Money and the Concept of Multi-genus Banknotes

Abstract

The concept of money has developed from primitive societies that included various items of value to the metallic money gold and silver coins, through to fiat money and digital currency. This has initiated a juristic debate in Islamic jurisprudence about the genus of today’s paper money. This matter closely related to the prohibition of usury, which is the essence of the Shariah rules regarding all forms of exchange transactions of paper currency (fiat money) today as explained in this chapter. The key question regarding paper money, in Islamic jurisprudence and economic thought, is whether it is a single genus no matter how many currencies or issuing countries there are, or it is multiple genera according to types of currencies that exist? This chapter analyses the views of Islamic scholars on the matter of whether modern paper money is a single genus or multi-genera banknotes, where such views are divided into two streams. The first view considers that paper money is a multiple genus according to countries of issuance. The other view considers paper money as a single genus, regardless of the number of countries printing it and issuing it, and regardless of its various names and forms. In that context, I analyse each view, its argument and implications on financial accounting in Islamic economics, based on the principles of Islamic jurisprudence.