Cryptocurrency has gained popularity as an investment option, in times. Muslims who are conscious of their faith may want to know whether is trading cryptocurrency Halal or Haram. In this article, we will discuss the varying scholarly opinions and experts on this matter.
What is Cryptocurrency?
Cryptocurrency refers to a form of virtual currency that employs cryptography for security measures. It operates independently without the involvement of a bank. Allows direct transfers between individuals without relying on intermediaries such as banks.
The Perspective of Islamic Financial Experts
According to the Islamic Finance Guru cryptocurrency can be considered compliant with Sharia principles in essence. They view it either as a currency or a digital asset based on their Sharia policy.
Moreover, they advise cryptocurrency traders to assess each purchase or project individually to determine its permissibility under Sharia law.
A notable aspect worth mentioning is that cryptocurrency does not involve interest (riba) which is considered haram. Consequently it may be viewed as controversial compared to profiting from high interest loans.
Sharia Compliant Cryptocurrencies
Developing a Sharia cryptocurrency involves collaboration among experts, in both finance and technology. This interdisciplinary team comprises scholars, financial specialists and developers who work together to design and incorporate features into the cryptocurrency that align with the principles of Islamic finance.
This team’s goal is to establish a coin that operates on a system of profit and loss sharing instead of relying on interest based lending. This implies that investors will partake in both the gains and losses of the business endeavor than receiving a predetermined return, on their investment.
Scholars Opinions on Trading Cryptocurrency
Islamic scholars have differing opinions, on cryptocurrency. Some scholars consider it to be haram (forbidden) because it lacks approval from authorities, such as State Treasury Departments as a form of exchange. They argue that these currencies facilitate trade and money laundering resembling gambling.
Other scholars believe that cryptocurrency can be considered halal (as long as the underlying project aligns with Islamic principles. They argue that investing in crypto can be halal if the project itself’s deemed halal. Evaluating which cryptocurrencies are halal requires some level of nuance.
UAE Court Official Religious Opinion
In a case involving OneCoin cryptocurrency, a court in the United Arab Emirates ruled to invalidate and annul a cryptocurrency sales contract based on the grounds that the transacted cryptocurrency (OneCoin) did not meet the criteria of being a recognized currency or commodity according to Shariah rules and Civil Transactions Law.
The court referred to Fatwa No. 89043 issued by the General Authority, for Islamic Affairs and Endowments in 2018 which specifically addressed Bitcoin and cryptocurrencies in general. This Fatwa discussed Bitcoins status by highlighting its lack of specifications for it to function as a tradable currency like globally accepted fiat currencies.
It doesn’t meet the legal criteria to be considered a tradable item, in exchange, for other commodities.