Muslims venturing into the crypto space must be wondering if there exists a halal cryptocurrency list. I am no expert in the Muslim culture, but the little I have learned from the folks around me is that it's mostly about what the religion greenlights as permissible.
So, could there be a list of cryptocurrencies positively recognized in the Muslim culture, or have they branded the entire tech as haram? Am sorry to throw in random Arabic jargon in the text as if it should be obvious to know what they mean. Well, read on to get a 360-degree perspective of the topic.
Halal vs. Haram
The two Arabic words are quite the opposite of each other. Halal means permitted or lawful. It's a term popularly used under Islamic law, mostly expressing how different issues are solved. However, it refers to the legality of a subject.
Haram is the complete opposite of halal. When used in any subject, haram refers to illegality or the forbidden nature of the issue. The question is, in the crypto space, what is haram and what is Halal?
Is there a Halal Cryptocurrency list?
The halal and haram nature of cryptocurrency depends on various factors. Among the factors include;
- Legality. Some argue that because governments do not issue crypto, it's haram. The legitimacy of crypto in a country can determine whether it's halal or haram. In some Islam countries, cryptocurrency is legal; hence the assets are halal. In countries where crypto is illegal, it will be haram to hold them since it's against the law.
- Services offered. The type of services provided or funded by cryptocurrencies or crypto projects can also help determine whether it's halal. If the services include haram activities like gambling or interest charging, then the crypto is haram.
After identifying the two main factors determining whether crypto is halal or haram, let's look at some crypto services to see whether they are on the halal cryptocurrency list.
One of the most popular activities within the crypto landscape is staking. Crypto staking refers to the act of collateralizing some amount of coins in a crypto network with a mission to earn good incomes.
Take this example. You stake 10 ETH coins in a staking wallet. After seven days, the wallet receives a bonus reward of 1 ETH, meaning your wallet has 11 coins. The wallets earn a new lot of tokens because of participating in securing the integrity of a blockchain.
Since it's investing money to secure a network, nothing about staking is haram. But, when considering a staking project, you must look to see if it's Sharia compliant.
Sharia compliance of a crypto project is a subject of thought when considering an app for crypto staking. You must ensure that the project or website you chose complies with Islamic Sharia. If a crypto-staking project participates in such illegal activities as gambling, it's haram.
Another aspect of crypto to look into is trading. Trading involves the continuous purchase and sale of assets and taking advantage of changing prices. Take, for instance, Bitcoin. Bitcoin trading means purchasing BTC at friendly prices and selling them at higher prices. There are many ways of trading, but the idea is to gain profits from the continuous circulation of cryptocurrencies across markets.
Many argue that any form of trading, Forex or crypto, can be deemed haram and not adhering to Sharia. Swaps, immediate executions, roll-over fees, and interests were the main issue of concern. But many other reasons include;
- Opening a trading deal is executing a speculative option contract to go higher or lower. You are investing on the speculation that a currency (EUR) goes higher or lower.
- Leverage also appears to be a questionable activity, according to experts. It involves getting a loan that you can only use for trading on the same exchange. It's impossible to withdraw, order or leverage. According to some, leverage in crypto may be against the Hadith.
One expert quoted the Prophet (PBUH) at Sunan an-Nasa'i 4611 and said, "It is not permissible to lend on the condition of a sale, or to have two conditions in one transaction, or to sell what you do not have."
What is the application of Islamic Finance Laws within the crypto lending ecosystem? If there is one subject that triggers lots of uncertainty and attention in the Muslim community, it's crypto lending.
The Islamic Shariah illegalizes anything that deals with interest lending options. In all their existence, Muslims have entirely rejected the idea of lending and borrowing, where the borrower must pay some interest rates. The whole reason Sharia prohibits interest borrowing is to offer protection to borrowers from being exploited.
The crypto space is also subject to the Sharia in that Muslims will not participate in lending practices that involve borrowers paying interest rates. However, some Islamic financial institutions are offering crypto loans with zero interest as an alternative.
According to the Sharia, investing money in deposit savings accounts to earn interests is also considered unlawful.
Crypto mining is one of the most popular activities across the general crypto ecosystem. It has been widely adopted by a wide array of investors in the crypto space because of the good incomes it helps generate.
Different people have different views concerning what should be included in the halal cryptocurrency list. Some scholars argue that mining cryptocurrency is haram because;
- Bitcoin is free from government control. Hence, every aspect is haram since governments do not support it.
- Crypto mining is an environmental problem because of the massive power and resource consumption.
However, the two arguments lose meaning if you consider that decentralized money is not a problem for many investors. Some governments, including in the UAE, and Muslim-dominated regions, are legalizing crypto-focused platforms.
Moreover, when it comes to environmental problems, crypto mining networks have been improving their systems recently. Some are adopting more carbon-neutral solutions due to increased calls from the global community.
Others argue that mining crypto is getting free money disallowed in Sharia. However, nothing about bitcoin mining is free. You invest a lot to mine the coins.
Another user claims that Kaafir, a non-believer, founded Bitcoin. Mining, therefore, forces believers to use procedures of non-believers, which 'is against Shariah.'
Countries Crypto Mining Stands
So, what are the stands of Muslim countries when it comes to crypto mining? Is it legal to mine crypto in Muslim countries?
In countries where bitcoin and crypto are prohibited, activities such as mining are also illegal. Countries like Algeria, Egypt, Libya, Bangladesh, Uzbekistan, Iraq, and Qatar have illegalized crypto. The legal implication is that crypto mining is illegal in those countries. Hence, every activity associated with crypto mining is also not permitted.
Well, in other countries, Bitcoin and crypto assets are considered legal. Countries like Pakistan and Kazakhstan have not only allowed mining but also have their initiatives for crypto mining. Turkey, UAE, and others do not have laws against mining; hence people can mine BTC. In such countries, crypto mining is lawfully right.
Author's Opinion: What’s in the Halal Cryptocurrency List
There are many conflicting opinions among scholars, believers, and investors about crypto's haram or halal nature. The question comes down to understanding a few basic concepts about halal (permissible). It's important to note that assets in the halal cryptocurrency list encompass financial instruments that comply with Islamic principles.
For example, stealing someone else's private key to access their virtual wallets is prohibited because stealing is haram. That said, it's never recommended to engage in illegal activities. If dire uncertainty arises, consult with reputable scholars specializing in Islamic finance.
Note: I am not a big believer in religion, but I have done my best to research the topic. Please be sure to reach out in case you want to clarify something.
Frequently Asked Questions
Can a Muslim Invest in Crypto?
Yes, a Muslim can invest in cryptocurrency. However, it all depends on the legal state of crypto in a country and the adherence to Sharia.
How can you invest in crypto?
The process of investing in crypto is simple. Get a crypto wallet, and purchase coins from exchanges such as Binance.
Is Crypto Lending Acceptable in Islam?
Not a single crypto lending institution was free from Riba (interest) when writing this guide. However, you can use their lending options if you find a lending institution that does not charge interest. Some fiat financial institutions already have interest-free crypto lending solutions.
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