THE QUESTION OF PAPER MONEY

Allah says in the Qur'an:
"And amongst the People of the Book there are those who, if
you were to entrust them with a treasure (qintar), he would
return it to you. And amongst them is he who, if you were to
entrust him with a dinar would not return it to you, unless you
kept standing over him.
Qur'an (3,75)

Qadi Abu Bakr Ibn al-Arabi, the greatest authority on Qur'anic
Law wrote in his famous "Ahkam al-Qur'an" about this ayat:
"The benefit that can be taken from this is the prohibition of
entrusting the People of the Book with
goods".

Qadi Abu Bakr said: "The question concerning entrusting
property is legislated by the text of Qur'an." This means that
the ayat is a legal judgement of absolute validity and of the
greatest importance to the deen.

Entrusting wealth to non-Muslims is not allowed, but
furthermore, taking a non-Muslim as a partner outside Dar al-
Islam (where we stand over them) is extremely restricted,
because they might cheat or might use our wealth in forbidden
transactions. Since paper-money is a promise of payment, can
it be permitted to trust the issuers while they hold the payment
(our property) outside our jurisdiction? History has also
demonstrated repeatedly that paper money has been a
permanent instrument of default and cheating the Muslims.

In addition, Islamic Law does not permit the use of a promise
of payment as a medium of exchange.