Is Investing in Cryptocurrency or Bitcoin Halal? (late-2021)
There’s been proclamations on both sides, some scholars saying cryptocurrency is not halal, but in truth generally it is halal, so long as you don’t engage in certain yield-seeking activities using it.
We’ll explain this later, and why some scholars in the past have said Cryptocurrency is not Halal — however first we’d like to summarize the situation in a straightforward manor. We’ll also cover specific cryptocurrencies below in the article.
Investing and/or using Cryptocurrencies like Bitcoin or Ethereum is Halal, as is staking them — so long as you aren’t gambling with your money and doing so irresponsibly with debt; however placing your cryptocurrency on interest-bearing platforms such as Celsius or Blockfi, or a decentralized platform such as Aave isn’t nessecarily Halal.
What Makes Something Halal vs Haram?
Something that is Halal is quite simply just something that is permissible (acceptable) under Islamic Law — In regards to Finance like is related to here we’d recommend reading this article for detailed information about this — but essentially what makes something Halal vs Haram is if your investment either supports non-halal companies/business-practices, or if it’s gambling/extremely-speculative.
Ultimately this means generally lending out your cryptocurrency is not Halal, but purchasing it is as is staking it — as it doesn’t fuel speculative behavior, but rather provides a Halal service of processing transactions on the blockchain. Margin-trading or taking out loans, getting in debt to invest, and other such activities would be considered Haram under pretty much all interpretations of Islamic law.
Why Do Some Scholars Think Bitcoin & Cryptocurrency's Aren't Halal?
Many have claimed Bitcoin & Other Cryptocurrencies such as Ethereum are not Halal because they’re sometimes used for illegal activities that are not permissible under Islamic law (haram); however this is honestly nonsense in our view — while bitcoin and other cryptocurrencies have been used for such nefarious activities all currencies have been and continue to be used as such, US dollars for example are the most-used for criminal activity, yet it’s Halal to use and possess them.
Others have claimed Investing in Cryptocurrencies is not Halal because they are speculatory and “investing” in such a thing is no different than gambling — this is a valid point if you buy cryptocurrency with debt or with greed in your heart — but if you’re doing so to use it as a currently, or general investment, or to hedge the risk of your countries currency and potential shifts in the global economy, then this is not at all gambling — it’s much like buying some gold, which is absolutely halal.
In general while there are critics saying it isn’t halal to use cryptocurrencies like Bitcoin or Ethereum, most scholars agree with us that it’s Halal to use cryptocurrencies, and invest in them. This is evident by Cryptocurrency’s like Bitcoin & Ethereum being legal in countries that follow Islamic law — Examples being the Gulf Countries, Saudi Arabia, and Iran — although they follow different interprentations of Islam and Islamic law they all agree on a nation-level that Bitcoin is Halal.
Is Crypto-Lending Halal or Haram?
Lending out Cryptocurrency is not Halal currently as the only platforms to do so are centralized platforms (and a few DeFi ones) that do not follow Islamic banking practices and thus lend out to anyone for any reason; be it speculation, gambling, or normal just activities.
Ultimately they also charge a set (revolving) interest to the borrowers and do not share in the risk and rewards of borrowers. Because of this there’s no real dispute that Crypto-Lending and Crypto Backed Loans are not Halal, but rather are Haram.
Is DeFi Halal or Haram?
While it’s still early in it’s development, the vast majority of Defi is Haram (lending, loans, etc), however DeFi isn’t necessarily Haram and there will definitely be Halal Defi Apps in the future — in fact it’s a great business opportunity to start such a thing today when there aren’t many if you have the know-how and motivation to do so.
What Cryptocurrencies aren't Halal?
While most are Halal as we have covered above — some aren’t, namely certain centralized ones such as Wrapped-BTC may not exactly be Halal depending on your interpretation of Islamic law — ultimately though most are Halal — the only other big exceptions we can think of is BNB may not be Halal, and Tron may not be Halal, again depending on your interpretation as they sort of sit in a “grey area” zone.
Ultimately all the big coins, such as Bitcoin, Ethereum, Polkodot, Monero, Chainlink, Cosmos, Cardano, etc, are definitely Halal — and most others are as well.
Is Staking Cryptocurrencies Halal or Haram?
While many people have this question, as they’re worried staking may violate the anti-usury principles of Islam, the staking rewards are not being generated from interest from a party that’s under duress of some sort — instead the income (earnings) generated comes from fees for completing transactions (validating them), which is no different than providing any verification service or business activity.
So to put it clearly — staking cryptocurrency tokens like cardano or ethereum or vechain via their own block-chain based staking system is Halal — however this is not the same as staking in defi or on platforms such as Celsius, such platforms give you a ‘gauranteed interest rate’ that isn’t generated for you providing a service (verifying transactions), but instead it’s generated from lending the tokens out, usury — aka such things, as covered above, are not Halal but instead are haram.
Is Cardano Halal or Haram?
Owning Cardano and staking it on their own blockchain is Halal — however lending Cardano out on defi platforms or centralized interest-baring platforms like celsius or blockfi are haram as such platforms/behavior involves usury, just like non-islamic banks.