The Dinar is typically referred to as the ‘currency of Islam’. The idea stems from the fact that the initial currency minted by an Islamic government was that of the gold Dinar and silver Dirham. It was the Caliph Abdul Malik ibn Marwan who ordered the minting of these currencies in the year 76 AH. However, does that mean that Islam has a specific currency it encourages or advocates? Far from it. Matters of economics and finance in Shariah are generally left to the people to do what is most optimal, fair, and useful for themselves within a divine framework featured in the Qur’an and Sunnah. Those elements which are relatively more likely to cause harm to individuals and society have been banned by Shariah. Such practices do not fall within the remit of human discretion in transactions.
In regard to an Islamic currency, Ibn Taymiyyah states that Shariah has not defined any specific condition nor definition for currency and has instead left it to the customary practice and governance of the people. Other scholars have enumerated various forms of money such as commodity money, customary money and more. This has always been the understanding and therefore during the Mamluk dynasty (872-922 A.H/1468-1517 CE), they introduced Fulus (copper coins) as a currency to use in small commercial transactions. The Ottomans introduced a currency named Qaimah in the form of paper money. In 1914, the Ottomans officially declared that paper currency was the only legal tender for the medium of exchange.
What makes gold so special then? It is the characteristics of gold that make it naturally appealing to humans to use as a currency. In earlier times, humans only had the elements in their natural environment. The most obvious thing to do was to use one such element which can represent the transfer of value. Something from their environment had to be used as a technology to represent value and facilitate exchange. Gold proved to have all the innate characteristics of a medium of exchange based on:
• Gold has no time limit or shelf-life; it is durable.
• Gold is portable
• Gold is divisible and malleable
• Gold is rare
• Gold is finite and has scarcity
There are 118 elements in the Periodic Table of Elements. Humans eliminated all of the elements that represent gas for obvious reasons such as the inability for it to be ascertained. Another 38 other elements could not be used in everyday exchanges as they posed a threat to human life and endangered the very people currency should serve. These elements were either too reactive, corrode over time and/or ignite when exposed to air. The medium of exchange had to be rare but not too rare to ensure it has maintained value and is not impacted by hyperinflation. That left only 5 possible precious metals: rhodium, palladium, silver, platinum, and gold. Platinum and palladium were proven to be too rare to create enough coins to circulate; people needed a metal that was somewhat rare so that not everyone produced their own coins, but available enough so a reasonable number of coins could be created to allow commerce. Silver wasn’t a good choice because it tarnishes over time and rhodium was also too rare to be used. This left gold as the strongest choice when making/choosing an element as a currency.
Thus, gold was not established as the currency because of it being gold, rather it was the characteristics and features of gold which made gold the dominant form of currency. A monetary system needs particular characteristics which create a conducive environment for monetary stability. Anything which harnesses these characteristics has the potential to serve as a currency; whether it is naturally found or digitally constructed. The purpose is to have a monetary language by which people can interact, exchange value, price items, and have economic stability, permitting the acquisition of everyday needs and a mechanism for remuneration.