Question:

We have mentioned in most of our publications and books that the currency will be of gold and silver, either in actual form or in the form of notes backed by gold and silver. In the book ‘Funds in the Khilafah "Caliphate" State' by Shaikh Abdul Qadeem Zalloum (May Allah have His mercy on him) on this subject, it is mentioned that the state can use either gold or silver or any other appropriate metal so long as gold remains the main currency. Therefore can the state use other expensive metals side by side gold and silver like platinum or gems like diamond and others?

Answer:

In Islam, the currency is gold and silver per se or other means like paper notes provided that the Bait ul Maal has an equal quantity of gold and silver reserved against it.

It is possible to use cheaper metals like copper as has been mentioned in the book ‘Funds in the Khilafah "Caliphate" State' since for the purpose of cheaper things, the gold and silver coin units will have to be of such minute quantity or weight that it will be impracticable for normal use in transactions. For this reason coins of appropriate weight made of minute quantities of gold and silver mixed with a larger proportion of a cheaper metal will be practicable in transactions involving very cheap commodities.

It is mentioned in the book ‘Funds in the Khilafah "Caliphate" State':

(...The state can also coin units smaller than that of silver to help obtaining trivial things. Since the silver contained in these silver units is little and it is difficult to deal with them as they are pure coins specific portions of different valueless metals can be added to them. However the portion of silver in weight used in these coined units must be clarified in a manner preventing any confusion over it.

The Muslims thereby proceeded on the gold and silver standard i.e. the bimetallic principle. In the last days of the Abbassids and the period of Attabka in Egypt, Muslims coined besides the gold and silver, copper currency to buy trivial things because copper's intrinsic value is low. It was not representative of gold and silver; rather it stood on its own depending upon its value as copper. Thus it was used to buy cheaper commodities...)

And thus metal other than gold and silver used for coins will generally be cheaper metals but these will not be used for purchase of precious metals like gold and silver because the issue here is purchase of cheaper commodities that require an appropriate and practical amount for transaction. If such coins used for purchase of cheaper commodities are made of gold and silver, then will have to be of a very minute quantity and weight. Therefore a cheaper metal would be used so that it is of a reasonable weight which is practicable for use in transactions which cannot be achieved by using precious metals.

As for the permissibility of Shari'ah currency using more precious metals like platinum or precious gems like diamond...then it is not permitted because the Shari'ah evidences on gold and silver being the currency and clear and known. Similarly, it is not permitted to have other metals even more expensive than gold and silver as reserves in the Bait ul Maal in accordance with the Shari'ah. And other metals is nothing more than a commodity.