Shariah Screening for Halal Crypto
As there are several types of crypto coins and projects, screening digital assets for Shariah compliance is essential before Muslims start investing. The following screenings are widely acceptable for digital assets and generally this is the methodology applied. You will find details in each crypto that has been analysed above measured against this criteria:
- Legitimacy screening – ensuring that the crypto-asset is a genuine project and not a scam.
- Project screening – ensuring that the project is Shariah compliant.
- Financials screening – ensuring that it meets the financial criteria for Shariah compliance if it is an equity-based token.
- Token screening – understanding the Shariah compliance of the token.
- Staking screening – understanding the Shariah compliance of the staking mechanism.
With the lack of general consensus from Islamic Scholars on Crypto, our opinions may develop in line with further guidelines issued and we will, of course, update this accordingly.
What Makes a Crypto Halal or Haram?
There is no definitive answer, as there is still much debate and discussion on blockchain technology and crypto trading among Islamic scholars across the world. However, some key factors that are considered include whether the currency is backed by a physical asset, whether it is used for speculative purposes or for actual goods and services, and whether it complies with Islamic banking and finance principles.
For example, some scholars argue that Bitcoin is haram because it is used primarily for speculation and does not have a physical asset backing it. Others say that it is halal because it can be used to purchase goods and services, and because it complies with principles of Islamic finance such as the prohibition of riba (interest).
Ultimately, it is up to each individual Muslim investor to make their own decision on whether to invest in cryptocurrencies or not. However, it is essential to do your research and seek guidance from a qualified Islamic scholar before making any decisions. Our halal crypto list should be used as a reference and questioned.
Are all Cryptocurrencies Halal?
No, not all cryptocurrencies are considered halal according to islamic rules. Some crypto projects are created and owned by entities that are not compliant with Islamic law. The ecosystem may involve a loan, riba, possibly even pork or alcohol in future (using smart contracts for instance). Therefore, it is important to research before investing to ensure that it is halal.
Is Crypto Lending Halal?
With the rise of cryptocurrency, exchanges and defi protocols, there has been much speculation about whether or not crypto lending is halal. In 2021, many islamic banking and financial institutions have begun to offer crypto lending services, but there is still some debate about whether or not it is permissible under Islamic law.
Some scholars argue that crypto lending is haram because it involves speculation and gambling, while others argue that it is permissible if done on a platform that is regulated and transparent. Ultimately, the decision about whether or not to lend crypto will depend on the individual’s interpretation of Islamic law.
Gambling and Uncertainty in Islam
Gambling is not allowed in Islamic faith because it is a form of speculation and it is not known what the outcome of the gamble will be. This makes gambling an uncertain transaction and an investor may be at a loss. Gambling is also deemed to be haram (forbidden) by sharia (Islamic law) because it encourages people to take risks with their own money. Risk management is one of the key factors when trading and Islam encourages Muslims to consider all risk factors when building a crypto portfolio.
When trading or investing in coins that are deemed halal, Muslims should also stay away from margin trading, lending or staking that may involve interest. Basically, think of the application of sharia-compliant stocks and use a similar screening methodology to stay away from coins that are considered haram. If you have any comments or doubts about our views please share so all Muslims may benefit IA.
Do You Have to Pay Zakat on Crypto?
Yes. Zakat is a charity that is required to be paid by Muslims. It is a percentage of one’s assets that must be given to those in need. There is some debate as to whether or not crypto counts as an asset for the purposes of zakat, but generally it is considered to be an investment and therefore subject to the same rules.
