Cryptocurrencies and Islamic finance: scholarly views
Get an overview of the main scholarly positions on cryptocurrencies and a structured way to check a crypto activity for riba, gharar and maysir.
What you will learn
- The main questions scholars ask about cryptocurrencies: money, commodity or neither
- Examples of published positions and why they differ
- How common crypto activities (spot buying, lending, staking, derivatives) are assessed
- A simple screening scorecard you can use before any crypto decision
Explanation
How blockchains, wallets and stablecoins work is covered in the courses on Bitcoin and on crypto beyond Bitcoin. This lesson is about how Islamic scholars evaluate these assets. There is no single agreed ruling; views differ between countries, institutions and individual scholars, and they continue to develop.
The key questions
- Is it mal (property of value)? Something must have recognised value and be capable of ownership to be traded. Some scholars accept this for widely used cryptocurrencies; others see the value as purely speculative.
- Is it money (thaman) or a commodity? If treated like money, the spot exchange rules from the gold lesson apply. If treated as a commodity or digital asset, it must still have a clear, lawful use.
- Is there excessive gharar (uncertainty)? Extreme volatility, anonymous issuers and unclear rights can create excessive uncertainty.
- Is there maysir (gambling)? Buying mainly to bet on short-term price moves, or using lottery-like products, is close to gambling.
- What is the token used for? A token used for an interest-based lending platform or a gambling application is affected by that activity.
Examples of published positions
- In January 2018, Egypt's Grand Mufti (Dar al-Ifta) said that trading Bitcoin is not permissible, citing risks such as uncertainty and harm.
- In November 2021, Indonesia's Council of Ulama (MUI, Majelis Ulama Indonesia) ruled that using crypto as a currency is haram, citing uncertainty, wagering and harm. Reports said it could be traded as a commodity or digital asset only if it meets Sharia conditions and has a clear benefit. The ruling is not legally binding in Indonesia.
- Other contemporary scholars and Sharia advisory firms allow spot ownership of some cryptocurrencies, with conditions: no leverage, no interest-based products, and a token whose purpose is lawful. Some firms publish token-by-token assessments.
Positions can change, so check the latest view of the scholar you follow and note the date.
How common activities are assessed
| Activity | Main concern | Typical assessment among scholars who permit crypto |
|---|---|---|
| Spot purchase, own wallet | Value, gharar | Often permitted for tokens with a lawful use |
| Lending for a fixed yield ("earn" products) | Riba | Generally not permitted when the return is interest on a loan |
| Staking | Source of reward | Disputed; some see validator rewards as payment for a service, others raise concerns |
| Futures, perpetuals, margin | No ownership, leverage, financing fees | Generally not permitted |
| Interest-bearing stablecoin products | Riba | Generally not permitted |
Remember that crypto can lose value quickly, and that regulation and tax rules (covered elsewhere) apply in addition to Sharia rules.
Worked example
Hypothetical example: Karim has €2,000 he wants to put into crypto. He compares three options. Assumptions: all figures are hypothetical; fees and taxes are excluded.
Option A – spot purchase: He buys €2,000 of a token used as a payment network and keeps it in his own wallet. If the price falls 40%, his loss is €2,000 × 40% = €800. There is no leverage and no interest. Scholars who permit crypto generally accept this; those who do not would still reject it.
Option B – "earn" product: The exchange lends his coins to borrowers and promises 6% per year. Income: €2,000 × 6% = €120 per year. This return comes from lending, so it is interest-like (riba) and is generally not permitted.
Option C – 10x leveraged perpetual future: His €2,000 margin controls €2,000 × 10 = €20,000 of exposure. A 10% adverse move costs €20,000 × 10% = €2,000, which is his whole margin. In fast markets the position may be liquidated earlier, and losses can occur in minutes. He also pays funding fees and never owns the coins. Generally not permitted, and very high risk.
Conclusion: only Option A can pass a Sharia screen, and only under the scholarly view that permits crypto. It still carries a large risk of loss.
Common mistake
Practice activity
Use this scorecard for a hypothetical token. Give 1 point for each "yes": (1) The token has a clear, lawful use beyond speculation. (2) You buy on the spot and hold it yourself. (3) No leverage or derivatives are involved. (4) No interest-based lending is involved. (5) A named Sharia review is available and dated. A token for a betting application, bought on the spot without leverage, with no review: what is the score, and what is your conclusion?
Show solution
(1) No – a betting application involves maysir, so the use is not lawful. (2) Yes. (3) Yes. (4) Yes. (5) No. Score: 3 out of 5.
Conclusion: the score is not the main point. Question 1 is a knock-out criterion, like the business screen in lesson 2. A token whose main purpose is gambling fails, even if the way you buy it is clean.
Limitations: a simple scorecard cannot replace a scholar's opinion, and views on staking and on crypto in general differ.
Key takeaways
- There is no single ruling on crypto; published positions range from impermissible to permissible with conditions.
- Scholars ask whether crypto is property, money or a commodity, and whether gharar and maysir are excessive.
- Interest-based lending, leverage and derivatives are generally rejected even by permissive scholars.
- Treat the token's purpose as a knock-out criterion and check the source and date of any "halal" label.
Next step
The next lesson moves from theory to practice and looks at which Islamic finance products and providers are available in Germany and Europe.
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