Is Crypto Trading Halal or Haram?

Is Crypto Trading Halal or Haram? Cryptocurrency trading can be both halal and haram, depending on the specific coins and practices involved.

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Main Rules of Islamic Finance

Islamic finance is governed by strict rules derived from the Quran, which every Muslim trader should adhere to. Muslims are prohibited from investing in businesses associated with haram activities, such as alcohol, gambling, pornography, tobacco, insurance, weapons manufacturing, or pork production. Due diligence is required before investing in a company to ensure its activities and financial statements are halal. Earning through interest (riba) is strictly forbidden, and any business venture must share profit and loss without involving interest.

Investing in companies with significant debt or those involved in interest-driven ventures is also considered haram. The 5% rule prohibits investing in companies that earn more than 5% of their income from haram activities. Additionally, a company's accounts receivables should not exceed 45% of its total assets.

? Is Cryptocurrency Halal or Haram?

The permissibility of cryptocurrency trading varies among scholars and depends on specific practices. Futures trading, akin to gambling, and staking, which involves earning interest, are generally considered haram. However, spot trading, where a trader buys and holds cryptocurrency, is deemed halal by some scholars.

Halal and Haram Cryptocurrencies

Most established cryptocurrencies are considered halal by Muslim theologians, as they are proven means of payment. These include Bitcoin, Ethereum, Binance Coin, Litecoin, Polkadot, Chainlink, and Monero. Conversely, high-risk and speculative coins that promote gambling are deemed haram. These include Compound, UMA, SushiSwap, Kusama, Celsius, and Uniswap.

Crypto Trading as Usury

Interest (riba) is forbidden in Islam, and staking in cryptocurrency is considered a form of usury. The Quran explicitly condemns interest, likening those who engage in it to individuals beaten into insanity by Satan. Hence, staking, which involves earning interest on stored cryptocurrency, is deemed haram.

? What Islamic Authorities Say About Crypto Trading

Islamic authorities hold differing views on cryptocurrency trading. Some, like Sheikh Shawki Allam, the Grand Mufti of Egypt, consider it haram due to its decentralized nature and potential for fraudulent activities. Others, such as Mufti Faraz Adam and Maulana Jamal Ahmed, argue that cryptocurrencies are permissible, viewing them as assets with legal value.

Conclusion

Cryptocurrency trading remains a contentious issue in the Muslim world. While many scholars see no problem with using cryptocurrency, certain practices like staking and futures trading are considered haram. Muslim traders are advised to ensure their investments and trading practices align with Islamic finance principles, avoiding interest and gambling-related activities. Using halal cryptocurrencies for transactions and payments is generally acceptable.