Is Bitcoin Halal or Haram?

Md. Motiur Rahman

Introduction to Cryptocurrency

Is Bitcoing halal or haram?Cryptocurrency is a virtual currency that is secured using cryptography. Most cryptocurrencies are decentralized networks based on blockchain technology. Cryptocurrencies allow for secure online transactions using “tokens”. There are many cryptocurrencies in the market, but the most popular one is Bitcoin. Bitcoin was the first cryptocurrency to use blockchain technology. Bitcoin is a peer-to-peer (there is no central administrator) cryptocurrency that facilitates instant payment.

With Bitcoin and other cryptocurrencies changing the financial universe, many Muslims would like to invest in it or explore the option of using it as a new way of transacting value. Since the creation of Bitcoin in 2009, there have arisen several questions concerning cryptocurrency and Islam: is cryptocurrency halal? Is cryptocurrency haram? Is Bitcoin halal or haram in Shariah analysis? Is Bitcoin mining or trading haram? Is it halal to invest in Bitcoin? Is Bitcoin mining halal?

This article will answer all these questions and create a fresh understanding of Bitcoin and other cryptocurrencies regarding what Shariah law allows or disallows concerning their usages.

Is Bitcoin Halal or Haram? A Shariah Analysis

Many Muslims are conflicted on whether bitcoin is haram or halal. The Quran for obvious reasons has no specific writings addressing cryptocurrencies, making it a contentious topic. Islamic concern over Bitcoin stems mainly from its bouts of extreme growth and the very high volatility which has been seen in cryptocurrencies over recent years.

Is Bitcoin Halal?

Scholarly interpretations have determined most uses for Bitcoin as halal. Islamic laws outline guidelines to ensure your investments are halal. For instance, money acquired in haram ways, e.g., extortion, bribery, or profiteering, is haram.

There is still no official mandate on whether Muslims should be investing in Bitcoin. However, several Islamic scholars have given their interpretation of the Islamic canonical law and how it applies to Bitcoin.

Former Shariah advisor Mufti Muhammad Abu-Bakar made an argument that all currencies are speculative and subject to changing supply and demand. These currencies are admissible by shariah; thus, Bitcoin should be too.

On the matter of Bitcoin being used for illegal reasons, Mufti Muhammad Abu-Bakar writes that this itself should not render bitcoin haram.

Islamic finance and fintech consultant Mufti Faraz Adam stated enthusiastically that Bitcoin is fair, atomic, and transparent. He was optimistic that Sharia should not prohibit it.

Is Bitcoin Haram?

Although most uses for Bitcoin can be stated as halal, there are some haram ways one could use Bitcoin.

Firstly, there is gambling, which clearly is not allowed by Sharia law. Thus, gambling using Bitcoin too, is haram. Cryptocurrency trading is considered gambling by some, as traders often effectively guess short-term market movements, which is arguably gambling.

Another aspect of Bitcoin that could be considered haram is its use with margin and decentralized finance lending. Since earning or paying interest is considered ‘riba’, Muslims would not be able to take out a loan or charge interest using most decentralized financing Bitcoin protocols as it would be haram.

Shaykh Haitham al-Haddad says that most scholars would consider Bitcoin haram due to its decentralization and lack of physical backing. It cannot be permissible as a valid form of currency in his opinion, therefore making it haram.

Coinfluencers founder Jamal Aezaz tends to gauge whether a particular use of Bitcoin is halal or haram by questioning whether using fiat currencies to do the same thing is permissible according to Shariah law. If something is permissible with fiat currency, so too it should be permissible using Bitcoin.

Is Bitcoin Mining Haram or Halal?

Successful Bitcoin mining requires being able to perform two key requirements. The first is to be a blockchain auditor to ensure correct payments, no double counting, etc. The second is to be the first to discover the next block in the blockchain’s 64-digit hexadecimal number. This is mostly done by brute force computational power with the computer making guesses until it is correct.

The first aspect of bitcoin mining is permissible in a very straightforward way, thus rendering bitcoin mining seemingly halal. The second one is not so straightforward but is still halal on the premise that the luck required is mitigated by three factors. These factors being:

  1. You must be an auditor providing a service.

  2. The mathematical calculations required for the discovery of the block cancel out the aspect of blind chance.

  3. The predictability of mining and difficulty is constant, so you can quickly calculate the code to gain some free Bitcoin.

Bottom Line

Bitcoin and other cryptocurrencies have not yet been conclusively determined by religious rulings as either halal or haram in Islam. Religious scholars are continuing to study the different properties of Bitcoin to reach a conclusive answer to this question. It can be said that it has been widely and quite convincingly argued that using Bitcoin for halal investments should be permissible under Shariah law.

Bitcoin mining is clearly halal under Islamic law as it does not involve haram activities.

Blockchain technology contains most of the Islamic requirements for a halal transaction such as the recording of all transactions and the availability of witnesses as blockchain is open, fair, and transparent.

Any Muslim considering investing in Bitcoin should carry out their personal research concerning Bitcoin and how to use it in halal ways.

In conclusion, Bitcoin mining and investing seem to be halal. Bitcoin trading, gambling, and decentralized finance lending are arguably haram and therefore not permissible in Shariah law.

FAQs

Is Cryptocurrency allowed in Islam?

Cryptocurrency itself is not haram. What would make it haram is when Muslims use it for haram purposes.

Is mining Bitcoin haram?

Bitcoin mining is permissible according to Shariah as it does not involve haram actions while mining.

Is currency trading halal?

Currency trading is not halal if it involves riba, which is haram in Islam.

Md. Motiur Rahman
Motiur is a fintech writer and digital marketing specialist based in Stockholm. He has a Masters Degree in Information Systems from Linnaeus University in Sweden. Motiur is passionate about cryptocurrency and blockchain technology. Since 2016, he has been working with several fintech publications and companies as an author.

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