Can Muslims invest in cryptocurrency? What are Halal cryptocurrencies? What do Islamic scholars say about these newly-invented digital asset classes called cryptocurrency? Do religious scholars agree on this issue? These and other similar questions are important for Muslims globally as the world is increasingly looking into alternative digital currencies. But, do we know enough about cryptocurrencies (including bitcoin and other major types) to make an informed judgment about whether it is Halal or not?
Why So Much Talk About Cryptocurrency?
The concept of cryptocurrency has gained popularity like wildfire since it started in 2008. In Indonesia alone, more than 6.5 million people invest in cryptocurrencies. Celebrities have been endorsing it all over the world. Governments have been rushing to make laws to either control, regulate or ban cryptocurrency as the sector today is largely unregulated.
The value of all cryptocurrencies including bitcoin is more than $2.3 trillion and it is increasing. It is radically reshaping the future of finance and commerce. So, Muslims as the second-largest religion globally have to clear their minds about the permissibility of cryptocurrencies.
What Does Shariah law Say?
Shariah law requires currency to be tangible (having evidence of existence), have ownership rights, be transferable to the buyer and have a stable market value to be considered Halal.
Is Cryptocurrency Halal?
A large number of Muslims want to buy and sell cryptocurrencies. Crypto trading is booming among Muslims. So, naturally, the answer to this question is important for them as these individuals and institutional investors alike would like to comply with the financial regulations stipulated by Shariah scholars while trading in these currencies. The permissibility of cryptocurrency as Halal may have global implications as Muslims comprise 26% of the world population. Many of them are keen to invest in new forms of financial products such as cryptocurrency.
In 2021, Ulema in Malaysia announced the permissibility of cryptocurrency as Halal. They say that crypto is a venture worth investing in. They issued this fatwa as the popularity of digital currencies is growing in the country.
On the other hand, Indonesia’s Muslim council MUI recently banned crypto trading. They contend that the speculative nature of cryptocurrency makes it unlawful in Islam. According to these scholars, bitcoin has a high degree of risk (maisir) and uncertainty (garar), a lack of provision of real assets, and state guarantees. That is why it is not halal.
These religious scholars state that “Crypto as a currency is forbidden because it has elements of uncertainty, harm and doesn’t meet the Islamic requirement according to Shariah [law].” But, they also added that if cryptocurrency as a commodity or a digital asset can abide by Shariah laws, it is lawful.
IslamicFinanceGur.com has published an excellent article on the topic. It discusses why Muslims need to be involved in cryptocurrencies.
What do Other Scholars say About Crypto Permissibility?
The United Arab Emirates has allowed crypto trading in Dubai’s free zone, while Bahrain has backed crypto assets since 2019. Iran is also preparing digital rials in a bid to counter the negative impact its economy has been facing due to the US-backed economic sanctions.
There have been voices by other scholars in Indonesia and other countries for the permissibility of cryptocurrencies as halal assets provided that they follow Shariah laws.
A study conducted by Muhammad Abu-Bakar of Blossom Finance in Indonesia discussed the concept to determine whether cryptocurrencies could be considered money from an Islamic point of view.
Medina Kalimullina, the adviser on Islamic Economics and Finance of the Russian Muftis Council has stressed that the Muslim religious scholars need to declare bitcoin and other cryptocurrencies as either halal or haram.
The sentiment around cryptocurrencies has been getting more positive in the Muslim world as it is said to comply with Shariah tenets and meets the definition of money by Shariah standards.
We believe that Muslims should be actively involved in trading cryptocurrencies so that they are not left behind by the revolution in the finance industry. They also need to have first-hand experience dealing with all types of crypto digital assets so that they can compete with the rest of the world on equal footing while serving the Muslim communities they belong to.