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Yes, Cryptocurrency Is Halal and Here's Why

by Pralines and Cream 2 months ago in cryptocurrency

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Yes, Cryptocurrency Is Halal and Here's Why
Photo by André François McKenzie on Unsplash

A lot of people have been wondering if cryptocurrencies are halal or haram. So I decided to explain why cryptocurrencies are halal.

Cryptocurrency can be halal if used for halal means

When it comes to cryptocurrency, some people think that it is haram, or forbidden. However, there are some who believe cryptocurrency is halal under the right circumstances. The truth is that cryptocurrency can be halal if used for halal means. Here’s a look at the why, when and how of this perspective.

Why Cryptocurrency May Be Haram

Some people believe that cryptocurrency may not be halal because it is a form of currency that is not regulated by a central bank or government. As such, there is no way to ensure that the funds are being used for good means rather than bad ones.

However, according to Coin Telegraph, Bitcoin and other cryptocurrencies are also not issued by governments or banks. In fact, they aren’t even backed by any kind of physical commodity like gold. Instead, this digital currency is created through electricity and processing power. This introduces an element of risk into the picture that cannot be controlled by anyone.

When Cryptocurrency May Be Halal

The most important thing to understand about whether cryptocurrency is halal or not is how it is being used.

Bitcoin is mined from computers, so it’s halal

Cryptocurrencies are a new asset class and halal investors have been clamoring for a decision for years.

However, that’s not the case.

As a matter of fact, the Shari’ah Advisory Board (SAB) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) released its standards on virtual currencies back in 2017. But here is the catch: The SAB did not release any statement as to whether or not cryptocurrencies are halal. It just released sharia-compliant standards that can be used if they are halal.

In other words, we can’t say that everything is halal unless sharia scholars issue a fatwa that explicitly says so. And since there has not been such a fatwa issued by any serious sharia scholars, we cannot say that cryptocurrencies are halal in general.

However, it’s also important to note that cryptocurrencies don’t have an intrinsic value like fiat currencies do. Fiat currency has value because it’s guaranteed by the government, while cryptocurrencies only have value because people think they have value. This difference is significant when it comes to determining whether or not something is halal or haram in Islam.

Earning cryptocurrency is halal because you are providing a service

Cryptocurrencies are halal. Why? Because the value of any cryptocurrency is purely in the market, backed by demand for it. This might sound like a very simplistic way to look at things, but it’s important to note that all currency has no inherent value. The US dollar isn’t actually worth anything, it’s just worth what people believe it is worth.

People have been speculating on whether or not cryptocurrencies are halal due to the addition of cryptocurrency-related products on Shariah Law-compliant exchanges and indices.

The discussion has been ongoing for a while now, with strong opinions on both sides of the fence. Some say that holding crypto is haram because you can’t use them as a means of payment in most places, but others say that they’re halal because they’re backed by nothing but supply and demand (which is one of the most basic principles of economics).

The idea that cryptocurrencies are haram has been perpetuated by mainstream media outlets calling them an investment bubble or a scam. It’s true that many early investors in Bitcoin were scammed out of their money, but this was largely due to lack of understanding about how blockchain technology works and how cryptocurrencies operate.

Investing in cryptocurrency is halal and often encouraged by scholars

To answer the question of whether cryptocurrency is halal or haram, it’s important to look at the definitions and functions of these digital currencies.

Permissible and Impermissible

The term “halal,” which comes from the Arabic word meaning “permissible,” refers to anything that’s allowed under Islamic law. The opposite of halal is haram, which means “impermissible.”

With most things, it’s pretty clear whether they’re halal or not. So, for example, pork is a no-no for Muslims, but chicken is considered halal. But with some things — like investing in cryptocurrency — it can be more difficult to determine if they’re permissible under Islamic law.

Islamic Law

According to Islamic law, individuals need to pay zakat (a charity tax) on wealth they accumulate during the year. This includes earnings from cryptocurrency investments.

Islamic finance is based on Sharia law and principles derived from the Quran and Sunnah (the teachings and practices of the Prophet Muhammad).

Accepting cryptocurrency is halal because you are providing a good or service

The use of cryptocurrency is halal if it is used in a halal manner and not for illegal purposes. If you only use it to buy goods or services that are halal, then it is permissible. However, if you use it for haram things, then it is not permissible to use.

The halal standards for cryptocurrency are similar to the standards of cash and credit cards. For example, if you buy food with cash and then use that cash to buy alcohol, the money itself has become haram. The fact that you earned the money through halal means (e.g., working at a halal job) doesn’t make the money itself any more halal because we cannot ignore what happens to the money afterwards.

Similarly, a credit card is a tool that can be used in both a halal and haram manner. It is not haram itself – it just depends on how it’s used by the person who owns that card.

The same would apply to cryptocurrency as well: if someone uses cryptocurrency to purchase an illegal drug or weapon, then they have committed a crime which makes their actions unlawful according to Islam (and also every other religion).

In a nutshell

So if TRX and other cryptocurrencies are not considered to be money even by the fatwa that was issued for digital currencies in 2014, then there has been no change in stance since Islam does not prohibit currency since it does not possess a tangible form, so what remains is the need for the Shariah Commodities Authority to issue another fatwa based on these facts.

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About the author

Pralines and Cream

Hi there,

I'm Pierre, a freelance writer, serial blogger and speaker who enjoys enlightening others about unknown and little known facts.

I'm also head of Praline and Cream Media, a publishing company that shares sweet knowledge to the world!

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