Question: What is the ruling on cryptocurrencies in Islamic finance?
Answer:
بِسْمِ اللَّهِ الرَّحْمَنِ الرَّحِيمِ، الْـحَمْدُ لِلَّهِ رَبِّ الْعَالَمِينَ، وَالصَّلَاةُ وَالسَّلَامُ عَلَى أَشْرَفِ الْأَنْبِيَاءِ وَالْمُرْسَلِينَ، نَبِيِّنَا مُحَمَّدٍ، وَعَلَى آلِهِ وَصَحْبِهِ أَجْمَعِينَ، وَمَنْ تَبِعَهُمْ بِإِحْسَانٍ إِلَى يَوْمِ الدِّينِ.
Cryptocurrencies are a modern financial phenomenon not explicitly addressed in classical fiqh texts. However, their permissibility is assessed through foundational principles from the Qur’ān, Sunnah, and legal analogy (qiyās) regarding currency and trade.
Allah says:
﴿ يَا أَيُّهَا الَّذِينَ آمَنُوا لَا تَأْكُلُوا أَمْوَالَكُم بَيْنَكُم بِالْبَاطِلِ ﴾
“O you who have believed, do not consume one another’s wealth unjustly…” (Sūrat al-Nisāʾ: 29)
The conditions of valid trade and currency in Sharīʿah include: possession of value (qīmah), general acceptance (qabūl ʿurfī), and the absence of excessive uncertainty (gharar) or harm. The classical madhāhib permitted various forms of currency as long as they were accepted by society and used for lawful exchange.
Modern Sharīʿah councils and bodies have examined cryptocurrencies such as Bitcoin and Ethereum through this lens. They consider factors such as volatility, usage, transparency, speculation, and whether the cryptocurrency functions as a store of value or medium of exchange.
Among the main views are:
- That cryptocurrencies are permissible when they are used lawfully, not purely for speculation, and are not involved in fraudulent or illicit activities.
- That their use is permissible if they serve as recognized assets and comply with Sharīʿah principles of trade.
- That cryptocurrencies are impermissible if they exhibit extreme gharar, are used for prohibited transactions, or are primarily speculative without real utility.
Some councils have stated conditional permissibility, acknowledging that cryptocurrencies may be considered māl (property) and tradable if proper regulatory and ethical conditions are observed.
Muslim scholars around the world who specialize in Islamic finance and economics have different opinions about cryptocurrencies. They’ve split into two main groups.
The first and larger group is against using cryptocurrencies. Their main reason is that every type of cryptocurrency involves gharar, which means uncertainty. This uncertainty comes from speculation—people buying and selling it based on guessing whether its price will go up or down, without any real guarantee. Because of this, the value of cryptocurrencies constantly changes, and no one can be sure what it’s truly worth.
Also, most people don’t actually recognize cryptocurrencies as real money or a proper currency. And in Islamic law, there’s a principle that says: “What people commonly accept as currency is treated like a currency in Sharia.” ( المعروف عرفًا كالمشروط نصًا.)
So, because cryptocurrencies aren’t widely accepted as real money by the public, and because of the high uncertainty and speculation involved, the majority believes that using them is not halal (not allowed) in Islam.
Thus, the permissibility of engaging with cryptocurrencies depends on the specific coin, its use-case, the level of risk and speculation involved, and whether it is used within Sharīʿah boundaries. Care and caution are necessary to avoid falling into unlawful financial behavior.
وَاللَّهُ أَعْلَمُ.