Similarities and differences between paper money and gold and silver

The answer, and God is the Grantor of success, is that there is a similarity and a difference between paper currency and gold and silver:

1- Paper money has no value in and of itself, unlike gold and silver.

2- Gold and silver are weighed, unlike banknotes.

3- The state controls the value of its currency, and a state may strike the currency of another state, other than gold and silver.

4- Gold and silver are the currency of all people on earth equally, and paper money is the currency of a country. Some banknotes may be subject to public expenditure, but this is an obstacle due to the strength of the country’s economy.

6- Paper money is subject to final collapse, such that it has almost no value, when the state collapses.

In appearance, paper money is equal to gold and silver in the prices of goods in buying and selling, in leasing, in evaluation, compensation, and in all transactions in all countries.

Therefore, we say: The rulings on paper currency should be detailed, as it is not like gold and silver in every respect, so that all of their rulings can be given. Rather, there are similarities and differences between the two currencies, as we explained previously, so their rulings should be accordingly.

Here we mention the rulings that differ from the rulings on gold and silver, and we say:

1- If a religious man has Yemeni or Saudi riyals, and then the currency becomes completely unstable, the debtor must guarantee the value of the currency that has become unstable, and the value will be based on its value at the time of taking it. This is the ruling if the currency becomes completely unstable.

أما إذا كان الكساد جزئياً فإن كان في حدود ما جرت به العادة من الزيادة والنقصان أو أكثر قليلاً فلا يضمن ذلك، وإن كان الكساد أكثر مما جرت به العادة في العملة بحيث يسبب ذلك الكساد القلق العام والخوف فإن المديون يضمن النقص.

وإنما قلنا ذلك لما فيه من العدل.

If it is said: This may be usury, because it involves an increase, because if someone owes a thousand Yemeni riyals and we oblige him to pay two thousand, we will have doubled his debt, and it is well known that two times the same is usury.

We said: We previously said that paper money has no value in itself, and that its value is temporary, so it is dealt with based on its temporary value.

In reality, the transaction took place at the value of the paper currency, and therefore the debt is in reality the value of the paper currency, not the paper currency itself.

فإن قيل: فكيف الحكم لو انعكس الأمر كأن يزيد سعر العملة؟

We said: The ruling is the same in the matter of increase and decrease, because the debt is in reality the value of the currency.

If it is said: The same applies to someone who has a debt of grain, wheat, barley, or corn, and the price decreases to half or more, the debtor must guarantee the decrease.

We said: It is not the same, because love has a value in itself, unlike paper money, which has no value in itself, and its desired benefit is present in it whether the price decreases or not.

2- It is permissible to sell the Saudi currency, for example, for the Yemeni currency on credit and vice versa. Similarly, it is permissible to sell paper currency for gold or silver on credit.

It is permissible to sell Yemeni currency for each other, for example, it is permissible to sell a thousand note for nine hundred and fifty, and the difference is in exchange for the difference that is the desired purpose in this transaction. It is also permissible to sell one hundred thousand note for ninety-nine thousand note because one is new and the other is worn out.

However, if there is no purpose, then the increase is not permissible, because then it would be without compensation and would be usury.

We said what we said about this issue because paper currency is not measured by weight or measure, so it is a commodity subject to the rules of commodities, and in this way it differs from gold and silver.

3- If you save paper currency, there is no zakat on it. However, if it is for trade, then zakat is due on it like all other trade money.

We said what we said because the basic principle is that there is no zakat on it.

If it is said: Paper money is comparable to gold and silver because of the semantic similarity between them, and this is apparent.

We said: The similarity between them is not sufficient as an explanation. The evidence is that grain was used in place of gold and silver in many countries until recently, and no one said that zakat was obligatory on it for that reason.

If it is said: Today’s merchants only save paper money, so if we did not say that zakat is obligatory, the poor would be lost, and what God has prescribed of the rich helping the poor would be ended.

We said: Other than that, what meets the needs of the poor, and what God Almighty has legislated in terms of consolation is in specific funds that the wise Lawgiver has specified.

It is fixed in the conscience, such as gold and silver.

If paper currency is exchanged for gold and silver, it is treated as a commodity, and it is permissible to sell it for gold and silver, for cash or on credit.