How should Muslims calculate zakah on digital assets like NFTs, stablecoins, and token holdings?

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1. Understanding Digital Assets in Islamic Terms

Before calculating Zakah, it’s essential to classify digital assets according to traditional Islamic jurisprudential categories. Contemporary scholars generally categorize digital assets as follows:

  • Currencies or monetary instruments: Stablecoins, cryptocurrencies used primarily as mediums of exchange or stores of value (e.g., Bitcoin, USDT, USDC).
  • Trade commodities (ʿurūd al-tijārah): NFTs and tokens held explicitly for trade or investment (to sell for profit).
  • Personal use assets (al-qinyah): NFTs or tokens primarily for personal use, not intended for sale or profit.

Zakah calculation differs based on these categories.

2. Conditions for Zakh Obligation

Zakah is obligatory when these general conditions are met:

  • Ownership: Full ownership and control of the assets.
  • Nisab: The assets’ total value reaches or exceeds the Nisāb threshold (equivalent to 85 grams of gold or 595 grams of silver—commonly the gold standard is used).
  • Hawl: Completion of one lunar year (Hijrī calendar).

3. Calculating Zakah by Asset Type

A. Stablecoins and Cryptocurrencies (Currency-type assets)

Ruling:
Treated as currencies due to their nature as mediums of exchange or stored value.

Method:

  • Evaluate the total market value on your Zakah due date.
  • Calculate 2.5% (one-fortieth) of the total value if it meets or exceeds Nisāb.

Practical Example:
If you hold stablecoins valued at $10,000 USD equivalent, your Zazāh obligation is: 10,000 times 0.025 = 250 {USD equivalent}

B. NFTs and Tokens (Held as Trade Commodities)

Ruling:
Considered trade goods if bought explicitly with the intention of resale and profit.

Method:

  • Evaluate the total market price of all NFTs or tokens at the Zakah due date.
  • Pay 2.5% on the combined market value if it meets or exceeds Nisāb.

Practical Example:
You purchased NFTs with the intention of selling, valued collectively at $15,000 USD on your Zakāh date: 15,000 times 0.025 = 375 {USD equivalent}

C. NFTs for Personal Use or Collection (Non-trading)

Ruling:
Personal use items (e.g., artwork or collectibles without trading intent) are typically not Zakatable.

Method:

  • No Zakāh due unless the intention changes clearly towards trade.

4. Important Scholarly Opinions and Fatwas

Contemporary Islamic scholars and organizations (e.g., International Islamic Fiqh Academy, European Council for Fatwa and Research, AAOIFI Shariah Standards) broadly agree:

  • Stablecoins & cryptocurrencies: Treated as cash/currency, Zakah payable annually at 2.5%.
  • Trade-intended tokens/NFTs: Considered commercial merchandise, Zakah payable annually at 2.5% on market value.
  • Personal-use NFTs: Exempted from Zakah unless clearly intended for trading or commercial resale.

5. Practical Steps for Calculating Zakah on Digital Assets

Step-by-step:

  1. Determine your Zakāh anniversary (hawl date).
  2. Categorize each digital asset clearly (Currency-type, trading, or personal use).
  3. Check the market price/value of all assets on your Zakah due date.
  4. Combine asset values within the same category to assess whether Nisāb threshold is reached.
  5. Calculate 2.5% Zakah on applicable assets.
  6. Pay Zakah promptly and document clearly.

Practical Example (Combined Scenario)

On your Zakah date, you hold the following:

Zakah Calculation:

  • Currency-type (USDC + Bitcoin): $6,000 + $4,000 = $10,000
    Zakah: $10,000 × 2.5% = $250
  • NFTs for Trading: $5,000
    Zakah: $5,000 × 2.5% = $125
  • NFTs (Personal-use): No Zakah due.

Total Zakāh: $250 + $125 = $375 USD

Zakah on digital assets aligns with classic Islamic jurisprudence principles.

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