What is cryptocurrency and is it halal?

by Shazia Hussain

Cryptocurrency is essentially a digital means of currency exchange and digital payments platform that uses blockchain technology. The technological and digital revolution over the last few decades has meant that innovative payment systems have been created and utilised, and cryptocurrency is one of the major breakthrough payment systems for business and personal use.

Although there are over 2,000 cryptocurrencies on the market now, Bitcoin is probably still the most known form of cryptocurrency in the market, and was the first cryptocurrency coin to go mainstream. For Muslims, the question arises as to whether crypto payment platforms are deemed to be halal in the eyes of Allah and in accordance with Shariah principles, and this guide will address the use of the cryptocurrency market, and whether it is permissible under Islamic laws.


A comprehensive Islamic interpretation, one that sparked a massive rise in Muslim investment in Bitcoin and Ethereum in 2018, was provided by Sharia advisor Mufti Muhammad Abu-Bakar (former advisor to Blossom Finance) who argued that Bitcoin is permissible under Shariah law. He considered arguments that crypto itself was speculative, but his view was that all currencies have a speculative element and this did not automatically deem crypto as haram.

Another reason Muslim scholars argue that crypto is halal is that the concept of blockchain and cryptocurrency is inherently anti-interest. Islamic laws are also anti-interest so the blockchain technology, pricing, and buying and selling of cryptocurrency is deemed halal by many Islamic scholars.


Blockchains refer to the blocks of technology used to record digital cryptocurrency transactions. Blockchains act as a system of record and the reason this form of technology is so important is that it is virtually impossible to hack, change or cheat the blockchain platform or marketplace. With the use of blockchain technology, centralised financial institutions and establishments are not needed as no central control is required.

According to many Islamic scholars, cryptocurrency is deemed permissible and halal under Islamic Sharia law, and this has unlocked the crypto investment market to a global Muslim audience with increasing numbers of Muslims wanting to buy crypto and use it as a form of currency.


From the perspective of Islamic contract rules, there must be an element of consideration - Mal. Mal refers to possession and effective storage, and cryptocurrencies meet the criteria required as they can be possessed and stored and have commercial value (Mutaqawwam). Crypto is a real and viable digital asset, its worth and value lies in what is paid for it, and it is capable of being owned and traded commercially so the Shariah requirements are satisfied.

The Shacklewell Lane Mosque in East London became one of the first mosques in the UK to accept cryptocurrency donations and Zakat contributions in 2018 during Ramadan.


Islamic finance principles dictates that in order for income, or investing in any product or asset, to be deemed halal it has to meet certain criteria. The principles of Shariah law should be applied to the financial systems we operate in and there has been some discussion about whether rules devised centuries ago can still be applied to a technologically modern digital financial marketplace.

The answer quite simply is yes, Shariah principles can be applied to modern crypto analysis as they are based on social justice, accountability and ethics which transcend all forms of financial transactions. As long as there is no illegal activity, then trading or investing in crypto should not be deemed to be contrary to Shariah principles.


There has been some discussion around the use of cryptocurrencies for illegal activities such as gambling, drugs, and money laundering. Critics of Bitcoin also argue that it is not legal tender as it is not backed by any central government that assigns its value and maintains regulatory standards, and it is therefore deemed to be speculated trading. However, Islamically the use of an item that is deemed halal for an unlawful purpose does not make the original item halal.

Ownership of the currency remains with the owner, and the coins/tokens are kept in an e-wallet. This means that investors can take part in trading as and when they want, retaining control of their assets.

As mentioned above, the publication of the working paper conducted by Mufti Muhammad Abu Bakr clearly identified that cryptocurrency is permissible under Shariah rules. For Muslims worldwide this could have huge implications for the payment of Zakat monies that are made to the poor and to charities globally. If Muslims make up 25% of the world's population and hold approximately £1.04 billion in bitcoins, this means that £26 million is due in Zakat contributions. [1]


Cryptocurrency operates as a medium of exchange across the globe. This means that it can operate in legally diverse and unpredictable environments, often making it more accessible than mainstream finance options.

Although vulnerable to market changes, crypto coins such as Bitcoin and Ethereum are deemed to be a legitimate medium of exchange, available for use in transactions and trading.

The development of Shariah compliant cryptocurrency guidelines provides Muslims with the opportunity for ethical investments. From a financial perspective, Islamic charities could benefit hugely from Zakat and other donations as a result of crypto investment and trading. Many banks and financial establishments globally are recognising crypto as a financially viable medium of exchange, and this makes it easier for investors to continue to trade, buy and sell cryptocurrency. In terms of whether contracts relating to crypto are Shariah compliant, given that the contractual relationships in crypto are based on smart contracts using blockchain technology, this means that the process can be made increasingly secure and automated. This not only reduces administrative complexities, confusion and errors, but also ensures that banks are more likely to accept the contractual relationships created. 
In demonstrating Shariah compliance, cryptocurrency is earning legitimacy across the Islamic finance world. Cryptocurrency agencies are springing up across the Muslim world such as One Gram in Dubai, and Hello Gold in Malaysia. This adds further legitimacy to the rulings that cryptocurrency is halal and can be utilised by Muslims and Islamic financial institutions.


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