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Author: Mohamed Hamza Ghaouri

The most disruptive and innovative application in the Islamic financial services industry, which is gradually gaining momentum and generating tremendous debates over its permissibility, is cryptocurrency. In this blog, we will present the arguments of scholars who assert the permissibility and those who support the illegality of Bitcoin as an example of cryptocurrencies.

Generally, scholars and Shariah experts have two different opinions. Some of them adopt the opinion that cryptocurrency is prohibited (Haram) by Sharia law. Others argue that cryptocurrency is allowed (Halal) by principle.

Those who see Bitcoin as haram, have based their opinions primarily on the following arguments:

  • Bitcoin (as an example of cryptocurrency) is easily used for illegal activities. Therefore, people largely use it for illegal and non-Shariah compliant purposes to avoid governments and relevant authorities.
  • It allows for money laundering and fraud.
  • It is not tangible (not material). It can only be used over the Internet and can’t be touched, smelt or stored physically.
  • It is decentralized (not governed by the ruler). It does not have any central authority that oversees its system. It destroys the control of central banks and governments to monitor and control the monetary system.
  • It contains an excess of Gharar as its valuation is open to speculation.
  • It is untrustworthy and unreliable.
  • Its issuer is unknown.
  • Uncertainty and random process of rewarding miners. It can be considered as a type of gambling. People invest in creating it without any guarantee of its success. Miners try to solve complex mathematical puzzles by consuming high levels of electricity and computing power, if they succeed, they will be rewarded with coins, but if they did not, they get nothing.
  • It is not backed by anything. Cryptocurrency is created from nothing.
  • It has no intrinsic value.
  • Its price is high volatile.
  • It cannot be considered as Mal (Money).
  • It has a harmful impact on the environment (High levels of electricity consumption). 
  • There is no standard fatwa allowing Bitcoin or other crypto currencies.

On the other hand, scholars who believe that cryptocurrency is allowed in principle, base their opinion on the following:

  • USD is considered as the most used currency for illegal activities. More than 90% of paper dollars have drug leftovers on them, meaning that they were transmitted through someone who sold or bought drugs. This didn’t make from the dollar an illegal (non-shariah compliant) money. Same argument can’t be used for Bitcoin.
  • Similar to Bitcoin, most of the Fiat money (more than 90%) is scriptural (Virtual, represented by figures and numbers on accounts).
  • Everything that acquired the status of Money in ‘Urf (Custom, Tradition) becomes a money (According to Ibn-Taimiyyah).
  • Cryptocurrency value is subject to the market law of supply and demand. Many Fiat currencies have been volatile throughout their history (Venezuelan bolívar, Turkish lira, Lebanese pound, Zimbabwean dollar, Syrian pound).
  • Since the end of the gold standard system, like bitcoin, the current money has no longer an intrinsic value. It is backed by the trust in the central bank (Government).
  • The original rule in financial and business transactions is permissibility.
  • There is a market for it (a demand). It can be bought and sold.
  • It can be subject to Zakat and can be inherited.
  • There is a real Qabd (taking possession) in crypto transactions. This is the main character of blockchain which came to solve the problem of security, traceability double spending.
  • Ju’ala contract may be the solution to the random aspect of miners’ reward (Whoever finds the solution first will get a reward).
  • Admittedly, the Proof-of-Work system makes bitcoin mining process consuming a high level of electricity, as high as the consumption of some countries (e.g., Argentina, Morocco, etc). But if we combine the amount of energy required by all the central banks of the world to produce Fiat money, the difference will not be that remarkable.
  • Some bitcoin miners rely on renewable energy and others are willing to convert from fossil energy.
  • Some currencies are using other consensus mechanisms that do not require high energy consumption.
  • Some of the cryptocurrencies fulfill the conditions of money “Mal”. Any cryptocurrency is authorized principally and can be considered as money, if it has the following attributes:
    • Treated as a valuable thing among people.
    • Accepted as medium of exchange by all or substantial group of people,
    • It is a measure of value.
    • Serves as a unit of account.

At the end, I would like to mention that not all cryptocurrencies are the same. Unlike bitcoin, there are many cryptocoins and cryptocurrencies that are not created to be a money, they don’t represent any value, any asset, share or service and have a great Gharar level that leads to pure speculation which is not allowed by the Shariah.

Having said that, means that it is impossible to issue a Fatwa that allows or prohibits all the cryptocurrencies. Each cryptocurrency needs to be evaluated separately by shariah scholars who are not only experts in Shariah law but have a deep knowledge and understanding of finance and the computer science behind the underlying technology of Crypto currencies, the blockchain. In this context, Finterra, a leading Fintech has become a true Blockchain enabler in the Fintech space. Its capabilities extend beyond just building and implementing of blockchains and covers the building smart contracts, tokenization sales systems, exchanges, digital wallets, payment gateways and more. Learn how your organization can leverage on our technical expertise by visiting

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