Since the launch of Bitcoin, the largest argument in Islamic banking and financial institutions has been “is crypto haram or halal?” Many Muslims around the world are interested in the authentic fatwa on cryptocurrency, particularly the Bitcoin halal fatwa, so they might contemplate utilizing these tokens.
Cryptocurrency and comparable digital forms of money fulfil the monetary functions of money – serving as a medium of exchange, a unit of account, an idea of decentralized finance (DeFi), and a store of significant value – and obtain status as Islamic cash by becoming “standard cash.” Here is a comprehensive guide to help you determine whether cryptocurrency is halal or haram.
Is Cryptocurrency Halal or Haram?
If you are reading this guide, you are likely searching for a response to the question, “is crypto haram or halal?” You may not have found a definitive solution. Adding to the uncertainty, numerous fatwas on cryptocurrencies offer contradictory shariah opinions. Unfortunately, many crypto-related fatwas are based on superficial and insufficient information, leading to additional complications. Despite the fact that the solution is not straightforward, if one approaches this issue objectively and analyzes this phenomenon in greater depth, it may be possible to comprehend the shariah compliance of digital tokens.
Concepts of Cryptocurrency and Money in Islam
Islamic Shariah defines standard cash as anything that enhances its monetary status by widespread public recognition or government decree. In El Salvador, Bitcoin is viewed as legal tender and hence qualifies as a currency. In places such as the United States, cryptocurrency requires official legal financial standing. However, digital tokens are accepted for payment at a variety of merchants and hence qualify as conventional currency.
According to Mufti Taqi Usmani, “Currencies are originally a medium of exchange, and making them a tradable commodity for profit earning is against the philosophy of Islamic economics. In Shariah, there is no valid reason to accept Bitcoin or other cryptocurrencies as a currency. It is just an imaginary number that is generated through a complex mathematical process. It is purchased for Gambling or Speculations, and used in illegal or unlawful transactions”.
According to Mufti Shawki Allam, “Here is my fatwa on cryptocurrency, as today’s widely asked questions are: is crypto halal or is crypto haram; or if crypto trading halal or haram. In my opinion, trading in cryptocurrency is haram. This is because it is not approved by legitimate bodies, such as Treasury Departments of States, as an acceptable interaction of exchange. Such currencies lead to ease in contrabands trade & money laundering, and they have amounted to Gambling“.
ISLAMIC SCHOLARS’ INTERPRETATION of Crypto Assets
Sharia advisor Mufti Muhammad Abu-Bakar (former advisor to Blossom Finance) examined the question of whether or not digital tokens are permissible as a form of money, resulting in a comprehensive Islamic law interpretation that led to a massive increase in Muslim investment in Bitcoin and Ethereum in 2018. According to his argument, Bitcoin is permitted under Islamic standards.
Answering the question “is crypto haram or halal,” Mufti Abu-Bakar evaluated arguments that crypto itself was speculative in terms of personal money, but he concluded that all currencies contain a speculative aspect and that this does not inherently make cryptocurrency haram. A business that does not have an element of appropriate loss probability within its assets does not strictly comply with Sharia law.
Shaykh Shawki Allam, the Grand Mufti of Egypt, and numerous Shariah academics from the Middle East and abroad, like Shaykh Haitham Al Haddad, feel that Bitcoin is forbidden by Islam. Their argument rests on the premise that digital tokens lack sufficient credibility as a currency to be deemed halal. Nonetheless, many other Sharia scholars argue that crypto conforms to Sharia’s money regulations and rules and that Muslims may invest in crypto.
Ziyaad Mahomed, the chairman of the Shariah Committee at HSBC Amanah Malaysia Bhd, and Mufti Faraz Adam are Islamic scholars who feel that cryptocurrency and digital assets are permissible. These opinions lend credence to the idea that Muslims can invest in cryptocurrencies. Another reason Islamic jurists and experts from Muslim countries claim that Bitcoin is halal is that the concept of the blockchain and other cryptocurrencies is intrinsically interest-free when viewed as a source or perspective for money generation.
Islamic banking laws are also anti-interest. Therefore, many Islamic scholars who seek permissibility counsel based on the teachings of Prophet Muhammad PBUH regard the technology, pricing, and buying and selling of cryptocurrency money to be halal. Ultimately, many Muslim scholars say that only Allah knows best.
Fatwa on Cryptocurrency – Opinions of Shariah Scholars
The Islamic Canonical Law, also known as Sharia, is founded on the teachings of the Quran and forbids specific activities, such as the acceptance of a particular premium that is considered as usury (Riba) or investments in organizations that are against Islamic recognition, for example, alcohol. The official board of the International Monetary Fund has held the first dialogue on Islamic Banking since the institution’s inception.
According to the Directorate of Religious Affairs Turkey, “Since cryptocurrencies are open to speculation, mostly used for illegal deads, and far from state auditing and supervision; their trading is not appropriate at this point, in the light of Shariah”.
Despite the fact that interest, investment, and speculation in crypto and digital currency have continued to rise, there is growing confusion among Muslims – who make up nearly a quarter of the world’s population – regarding whether Bitcoin and cryptographic forms of currency comply with Shariah law. Shariah law is a set of principles followed by Muslims in accordance with the Quran and the teachings of Prophet Muhammad PBUH.
The Islamic fund segment, which provides financial products to Muslims and Islamic organizations, adheres to Shariah law. The same holds true for Islamic or halal mortgages – a clear comprehension of digital currency and blockchain will continue to grow in significance as experts come to realize that blockchain will change every aspect of the global financial system in the same way that the Internet altered media and distribution.
According to Shaykh Assim al-Hakeem, “In my opinion on is crypto haram or halal, I would say that crypto remains anonymous when you deal with it. Cryptocurrencies facilitate money laundering, drug money and haram (forbidden) money. Hand-to-hand exchange of currencies is permissible in Islam. However, in virtual currencies, you don’t have this.”
Quora Users opinions
In this section, we will discuss the Muslim community’s perspective on cryptocurrencies and what they have to say about them. You will be intrigued to see how Muslims interacted with crypto tokens, if at all. In doing so, the primary purpose of this article is not only to grasp the method by which Muslims reach an agreement on crypto but also to present opposing opinions.
Blogger Aysha Akter believes that cryptocurrencies like Bitcoin have a place in the future of currency, an aspect of an economy that is essential.
Abdullah Ali Abbasi says there are five fundamental considerations that must be taken into account before determining whether or not a certain business transaction is permissible under Islamic law.
- Everything that can be weighed cannot be rented
- Anything that cannot be weighed is available for rental
- Any type of currency cannot be rented out
- It is strictly forbidden to operate a firm whose revenue source is obscure or ambiguous
- Any enterprise that lacks an adequate loss probability is likewise forbidden
Answering the question “is crypto haram or halal,: Ali Abbasi said that the origin of money generation in cryptocurrencies is unknown or ambiguous. Therefore, cryptocurrency lacks sufficient credibility to be called halal. He concludes by stating that only Allah knows best.
Another user named Junaid Moola had a unique take. He says, “Islam is a progressive religion, I would not think that Cryptocurrency, Bitcoins, etc..… is totally not permissible, provided it follows a basic guideline. However, the fact still remains that this is still like playing the stock market (gambling) which is not Sharia-compliant, and it earns interest which they call ‘dividends’ or ‘profits’.”
Twitter Users opinions
The next stop is Twitter. The majority of my Twitter feed consisted of repetitive tweets about the halal status of cryptocurrency in Indonesia. However, one particular tweet will attract your attention. It is possible that the person who tweeted this is not Muslim, but let’s include it because it was retweeted by a large number of Muslim Twitter users. The individual discusses how cryptology contributes to environmental harm. Here’s the complete Twitter thread.
5 Reasons Muslims Should Invest In Crypto Now
If you inquired about the future of finance, there would be only one plausible response: cryptocurrency. Global interest in cryptocurrencies has increased in recent years as a result of the technical revolution that has been striving to produce this more “sustainable” way of payment. And it continues to expand as time passes. But why? Why is everyone now so fixated on this concept? And why is a significant chunk of this newly discovered audience Muslim? Here are the 5 reasons Muslims should invest in crypto now:
- Cryptocurrency is still in its infancy.
- It provides phenomenal returns
- You’ll get rid of brokers and provide everyone with better rates.
- Blockchain technology has genuine potential
- The top 5% are quite serious about it
Why Is A Muslim Presence In Crypto Important?
Simply said, individuals must have a seat at the table. Being at the forefront of one of the most inventive sectors enables all individuals to alter the world in accordance with their religious beliefs. Another point they have made is that if we want to build our own projects in space as a community, we must have Muslims with direct experience in the field. Having Muslims in the cryptocurrency industry can facilitate the development of halal offerings that produce true value for the Ummah and the wider public.
So Is Cryptocurrency Halal?
According to the majority of Islamic jurists, is crypto haram or halal notions would not be simply addressed. Some regulations and governance rules believe crypto to be halal, while others consider it to be haram. However, the majority of experts are certain that cryptocurrency trading is haram since cryptocurrency has no intrinsic value. No economic strength provides it value, nor does it return any sort of origin. It has not been adopted by any government institution, and its value is based solely on market fluctuations.
The majority of qualities, features, and functionalities of cryptocurrencies such as Bitcoin are haram, and they are used for betting and other crypto haram activities. However, since crypto is regarded as the digital equivalent of gold, and since gold is halal in Islam, we may expect Muslims officially accepting cryptocurrencies in the future and it may increase the utility of crypto. There may also be a hybrid solution of crypto acceptance for Muslims.