I heard a fatwa from one of the scholars that it is permissible to exchange paper currency for metal currency with a difference in value or an increase in one of them, such as exchanging fifty
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The questioner : I heard a fatwa from one of the scholars of knowledge that it is permissible to exchange paper currency with metallic currency, with a difference and increase in one of them, such as exchanging fifty paper riyals for forty-eight metallic ones. What is the ruling of the Shari'ah in your view regarding this? And if this is permissible, I ask you to clarify the reason for it, may Allah reward you?
The Shaykh : What I see is that this is permissible, but with the condition of mutual possession in the session of the contract. It is permissible for me to give you ten paper riyals for nine metallic riyals, or fifty paper riyals for forty-eight metallic ones, or the reverse. Or I give you ten paper riyals for eleven metallic riyals. This is because sometimes the desire is for this, and sometimes the desire is for that. This is due to the difference in type, even if the value is considered the same by the government, the type is different. This valuation is a regulatory valuation, not a real valuation. The proof is that if the government wished, it could make the exchange for one paper riyal two of this metallic riyal, or more, or less. So, if this is a price according to the government's system, not according to reality, then there is no harm in the difference.
And so we say regarding all paper currencies: if their type differs, then it is permissible to have a difference in them, but with the condition of mutual possession in the session of the contract. And this which I said is a middle position between the one who says that equality and mutual possession are necessary, and the one who says: that mutual possession and equality are not required.
So this is the middle position: that anything other than gold and silver, if its type differs, then it is permissible to have a difference in it, but with the condition of possession in the session of the contract.
As for gold and silver, if gold is sold for gold, then two things are necessary: equality in weight, and mutual possession in the session of the contract.
And if silver is sold for silver, then these two things are also necessary: equality in weight and mutual possession in the session of the contract.
And if gold is sold for silver, even if each is currency, like dirhams for dinars, then mutual possession in the session of the contract is necessary, but equality is not a condition.
The questioner : May Allah bless you.
The Shaykh : What I see is that this is permissible, but with the condition of mutual possession in the session of the contract. It is permissible for me to give you ten paper riyals for nine metallic riyals, or fifty paper riyals for forty-eight metallic ones, or the reverse. Or I give you ten paper riyals for eleven metallic riyals. This is because sometimes the desire is for this, and sometimes the desire is for that. This is due to the difference in type, even if the value is considered the same by the government, the type is different. This valuation is a regulatory valuation, not a real valuation. The proof is that if the government wished, it could make the exchange for one paper riyal two of this metallic riyal, or more, or less. So, if this is a price according to the government's system, not according to reality, then there is no harm in the difference.
And so we say regarding all paper currencies: if their type differs, then it is permissible to have a difference in them, but with the condition of mutual possession in the session of the contract. And this which I said is a middle position between the one who says that equality and mutual possession are necessary, and the one who says: that mutual possession and equality are not required.
So this is the middle position: that anything other than gold and silver, if its type differs, then it is permissible to have a difference in it, but with the condition of possession in the session of the contract.
As for gold and silver, if gold is sold for gold, then two things are necessary: equality in weight, and mutual possession in the session of the contract.
And if silver is sold for silver, then these two things are also necessary: equality in weight and mutual possession in the session of the contract.
And if gold is sold for silver, even if each is currency, like dirhams for dinars, then mutual possession in the session of the contract is necessary, but equality is not a condition.
The questioner : May Allah bless you.