Bitcoin: A Contemporary Medium of Exchange in the Light of Jewish Law
By Aleks Souschuk
Over the past decade, technological change has revolutionized every aspect of our lives. One profound shift has been in the realm of finance, with the emergence of digital currencies, prominently Bitcoin. Bitcoin differs from traditional currency because it is not issued or regulated by any central bank or government. Instead, it utilizes decentralized, peer-to-peer technology to manage transactions. This paradigm shift raises many intriguing questions, particularly in the context of Jewish Law, or Halakhah. How does Halakhah view Bitcoin? Is it considered a legitimate medium of exchange? If so, how should financial agreements involving Bitcoin be structured under Halakhah?
Bitcoin, the first and most popular cryptocurrency, was introduced in 2009 by an anonymous entity known as Satoshi Nakamoto. It is a digital currency that utilizes cryptographic techniques to secure transactions, control the creation of new units, and verify the transfer of assets. Thus, Bitcoin is essentially a series of cryptographically-signed transactions bundled into 'blocks,' forming a 'blockchain.'
The intersection of Bitcoin and Jewish Law sparks a lively conversation, with every aspect of Bitcoin inviting scrutiny. First, there's the question of whether Halakhah recognizes Bitcoin as a currency. Halakhah stipulates that for an object to be considered money, it must have intrinsic value. Fiat currencies, like the dollar or euro, do not have intrinsic value but are backed by the government, which ensures their worth.
Bitcoin does not possess inherent value either, and it is not backed by any government. However, there is a market where Bitcoin is traded for goods, services, and other currencies, indicating it has acquired 'market value.' Consequently, a growing number of Halakhic authorities posit that Bitcoin should be assessed in light of that market value.
Assuming Halakhic authorities accept Bitcoin as a form of currency owing to its market value, the next question is how contracts involving Bitcoin should be structured. Bitcoin's value is extraordinarily volatile - its price can swing dramatically in short periods. This creates uncertainty, a situation Halakhah wants to avoid in business transactions.
An analyst from Bitcoingambling.org said, "One possible resolution could be adopting a 'bench-marking' or 'indexing' approach in Bitcoin contracts. In such contracts, the Bitcoin amount will be determined based on a stable currency's value at the time of contract formulation and fulfilled based on it at the time of the actual transaction."
Another critical consideration when discussing Bitcoin's status under Jewish law isn’t just whether or not it’s permissible, but whether it’s ethical. Bitcoin, like all other currencies, can be used both for good and for ill. It can be a platform for tzedakah - charitable giving - and for funding nefarious activities too. Therefore, the more fundamental question might be - how should one use Bitcoin ethically and in a way that aligns with Jewish values?
From a Halakhic perspective, the discussion around Bitcoin is emblematic of broader ethical and legal questions associated with the accelerating pace of technological change. While Bitcoin brings unique opportunities, it also brings new challenges that need careful evaluation. The intersection of ancient Jewish laws with the most modern of financial instruments like Bitcoin offers a fascinating study in the contemporary application of timeless principles.