Is Crypto Halal?

Cryptocurrencies are gaining massive popularity in the world of finance and investments. But for Muslims, there is an issue with their compliance with Islamic principles. Many Muslims still wonder: Is crypto Halal? Many Muslims around the world are curious and interested in knowing the true fatwa of cryptocurrencies, especially the Bitcoin Halal Fatwa. 

Comparative digital forms of money, including cryptocurrency, satisfy the monetary jobs of cash. They act as a medium of trade, a store of significant worth, and a unit record. But before diving deeper into whether cryptocurrency is Halal or Haram, we will first get a brief overview of cryptocurrency and how it works.

Key Takeaways

• A brief introduction on whether crypto is halal or haram.
• What is crypto as money in Islam?
• 7 major concerns
• Cryptocurrency and Shariah compliance

What is cryptocurrency? How does it work?

Cryptocurrency is a digital asset that works on blockchain technology. It is a decentralized technology spread across various nodes that manages and records transactions. The core idea of cryptocurrencies is to build a setup where two parties can transact directly without needing a third party, like a bank or government.

In cryptocurrencies, transactions are managed by a network of computers around the world. Each transaction is stored in a block, which forms a chain. The cryptographic chain of blocks is impossible to alter for anyone, providing high-level security for the transaction.

Cryptocurrency as money in Islam

Islamic Shariah sees cash as anything that adds a money-related status through wide acknowledgment in the public eye or by government command. In Germany, digital currency is observed as lawful cash, and it does qualify as cash in the country. In the United States, cryptocurrency requires the official lawful status of the government as cash. Yet, they are acknowledged for installment by an assortment of traders, and along these lines, they qualify as standard cash. 

Islamic Scholars’ Interpretation- Is Crypto Halal or Haram?

A comprehensive Islamic Law Interpretation sparked controversy among Muslims regarding investments in Bitcoin and Ethereum back in 2018. It was provided by Sharia advisor Mufti Muhammad Abu Bakar, who was the former advisor to Blossom Finance. He looked at the question of whether cryptocurrency is halal as a money supply and argued that Bitcoin is permissible under Islamic laws.

Mufti Abu Bakar argued that crypto itself is speculative when it comes to personal finance. However, his view was that currencies have a speculative element, and this element did not rule out cryptocurrency as haram.

Is Crypto Halal or Haram? 7 Major Concerns

There are several reasons that point to the potential prohibition of crypto as haram in Islam.

1. Element of Gharar

Firstly, the element of uncertainty, or Gharar, is particularly prevalent in cryptocurrency trading. Cryptocurrencies are majorly known for their volatile nature, which is akin to gambling. This is explicitly forbidden in Islam, for which some Muslims believe crypto trading to be haram in their religion. 

2. Anatomy of Transactions

Secondly, the anonymity of crypto transactions in the financial world raises concerns about their serious ethical issues and compliance. Crypto trading or cryptocurrencies can be prone to certain illegal activities, like money laundering or financing for illicit purposes. They are indisputably considered Haram in Islam.

3. Involvement of Riba

The concept of usury, also called Riba in Islam can come into play during the crypto transactions. Some cryptocurrencies yield profits or interest over time. They might be prone to traditional banking practices. And they are completely forbidden in Islam.

4. Non Tangible Nature

The non-tangible nature of cryptocurrencies might contradict the finance principles of Islam of having any physical commodity or any asset underlying financial transactions. The lack of physicality raises concerns about the intrinsic value of cryptocurrencies and their validity as a medium of exchange in Islamic Finance.

5. High Risk Investment

Besides other issues and concerns, Crypto’s nature as a high-risk investment is a significant point of contention. In Islam, financial practices that involve speculative behavior or excessive risk are generally discouraged. Cryptocurrencies’ drastic fluctuations might fall into this category, and thus, they can be considered Haram by some Muslims.

6. Unregulated Nature

The unregulated nature of cryptocurrencies poses a significant challenge. Without oversight or regulation from any financial authorities, the crypto market is subject to fraudulent market practices and potential manipulation. Both are a direct contravention of the principles of fairness and integrity emphasized in Islamic finance. The lack of accountability and control further complicates the classification of crypto halal or haram.

7. Crypto Isn’t Money

Another important point to consider is that crypto is not considered money in any traditional sense. Unlike conventional currencies, cryptos are not issued or regulated by any central authority. This raises the question of whether crypto aligns with the Islamic rules of legitimate currency, which ideally should be accepted, stable, and supported by the trust of users. 

ALSO READ: Cryptocurrency Regulations Worldwide

Cryptocurrency and Shariah Compliance

Even though premiums, theories, and ventures on cryptocurrencies have kept rising upwards. There is a developing disarray among Muslims regarding cryptocurrency, particularly whether Bitcoin or other cryptographic forms of money conform to Shariah Laws. Shariah law is an arrangement of tenets influenced by the Muslims according to the rules of the Quran and the lessons of Prophet Muhammad.

The Islamic fund segment, which offers money-related items to the Muslim people and Islamic foundations, adheres to Shariah law. The same applies to Halal mortgages.

Conclusion

According to most Islamic jurists, the crypto halal or crypto haram controversy is not going to end soon. Some rules consider crypto halal, while some rules consider it as haram. Most scholars believe that crypto is haram because of the following facts.

• It has no value in itself.
• It has not been adopted by any legitimate entity.
• Its value is based on the fluctuations of the market.
• They are used for gambling, which is forbidden by Muslim law.

Download the Mudrex app from the Google Play Store and update yourself with the latest crypto news and proceedings.

FAQ

1. Is cryptocurrency allowed in Islam?

Scholars are arguing about whether crypto is haram or halal. However, most Islamic scholars feel that cryptocurrency is haram in their religion.

2. Is Binance Halal in Islam?

Margin and future trading is Haram in Islam because you are not allowed to sell what you don’t own. But, there is still confusion among the Islamic leaders regarding the trading of cryptos.