Egypt's grand mufti Shawqi Allam has declared the trading of the digital currency Bitcoin unlawful - issuing an official fatwa and warning it could be used by terrorists.

The theological leader, who is the country's official interpreter for the religion, issued the fatwa because the trading of it could be used for criminal exchanges.

Allam added that it could provide 'stable and secure financial resources for terrorists and criminal groups'.

Egypt's grand mufti Shawqi Allam (pictured) has declared the trading of the digital currency bitcoin unlawful - issuing a fatwa and calling it forbidden in Islam.

Bitcoin, launched in 2009 and based on a peer-to-peer payment system, poses 'high risks to individuals and states,' Allam said in a published ruling.

Suggesting his decision to declare a fatwa was based on discussions with economic experts, he concluded bitcoin is not permissible as it undermines the state - a central feature in Islamic sharia.

Minting and issuing currency is an 'absolute right' of monetary institutions and 'one of the most specific functions of the state,' said the country's official interpreter of Islamic law.

Bitcoin, launched in 2009 and based on a peer-to-peer payment system, poses 'high risks to individuals and states,' Allam said in a published ruling

Suggesting his decision to declare a fatwa was based on discussions with economic experts, he concluded bitcoin is not permissible as it undermines the state - a central feature in Islamic Sharia

Bitcoin is a virtual currency created from computer code.

It and other virtual currencies use blockchain, which records transactions that are updated in real time on an online ledger and maintained by a network of computers.

Its value surged as high as $19,500 in December from around $1,000 last January, but has slipped back after a series of warnings from governments and analysts about the risk and volatility associated with cryptocurrencies.