Crypto and Shariah compliance: Experts weigh in

Once seen as contradictory to Islamic beliefs, crypto is now being structured in forms that adhere to religious guidelines

As cryptocurrencies continue their march toward mainstream adoption, a critical question remains for billions of Muslims worldwide – does crypto align with Islamic principles?

“The debate regarding the compatibility of cryptocurrencies with Islamic principles is ongoing, but some religious scholars — including ‘The Gatekeeper’ of Islamic Finance, Sheikh Dr. Nizam Mohammed Saleh Yaquby — have concluded that certain crypto products can be considered halal investments,” said Islamic Coin co-founder Mohammed AlKaff AlHashmi .

Scholars argue that certain digital assets can be halal if they meet specific criteria. These include the crypto being used as a financial asset, avoiding speculation, not involving prohibited activities, having a limited supply, allowing for zakat payments, incorporating risk-sharing, and providing real value. They can also be traded for legitimate services and zakat can be applied to purchases, mining and holdings for community benefit.

Ultimately, a formal ruling is needed to designate something halal, requiring a thorough analysis of blockchain tech and smart contracts through an Islamic lens. “From my perspective as the co-founder of Islamic Coin, ensuring Sharia compliance was a critical consideration during the development of our project,” said AlHashmi.

The project differentiates itself by offering a comprehensive ecosystem adhering to Sharia at every level. Many crypto projects claim Islamic principles neglect broader lifestyle aspects or proper advisory guidance.

Islamic Coin’s HAQQ ecosystem bridges Islamic finance and crypto , empowering over two billion Muslims to participate in blockchain markets without compromising traditions. It also obtained a fatwa (a ruling by a recognised Islamic authority) affirming its coin as a halal asset with a philanthropic structure allocating 10 per cent of issuances to community initiatives.

Islamic finance adheres to the principles of Shariah law, which prohibits interest and gambling. Instead of interest-based products, this ethical banking framework has spurred the growth of Shariah-compliant financial instruments based on profit and loss-sharing arrangements. At the core of Islamic values are ideals around fairness, justice, community, and caring for the less fortunate.

One way these values are embraced is through Zakat, one of the five pillars of Islam, which mandates that Muslims distribute 2.5 per cent of their annual savings via compulsory alms-giving. This emphasis on wealth distribution to the community has helped Islamic finance appeal to those wishing to invest according to religious beliefs.

In the past, many religious scholars viewed cryptocurrency and crypto trading as non-compliant with Islamic principles because the assets lacked backing in real goods and their valuation was deemed too speculative. There were also concerns about potential fraud and lack of oversight in crypto markets.

However, as the sector has matured, certain digital assets and trading may now align with Shariah guidelines if they meet criteria such as representing assets, limiting speculation, and avoiding prohibited activities. With blockchain technology advancing and regulation improving, some digital offerings are increasingly seen as potentially permissible.

“We are focusing on adding more transparency to both Islamic finance and halal products,” said AlHashmi.

The company is building out a comprehensive halal ecosystem by incorporating Shariah-compliant smart contracts for peer-to-peer lending and developing the halal products sector from certification through supply chain tracking, logistics and shipping.

Islamic Coin is gradually integrating these initiatives by combining certifications, financing platforms and supply chain components. “Step by step, we are integrating these elements and are committed to offering a complete halal ecosystem encompassing both finances and products,” he added.

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