Meme Coins: Halal or Haram? (Part 1)

Introduction

“Meme coins are cryptocurrencies inspired by memes or jokes on the Internet and social media” (Binance Academy). They are a unique subset of cryptos that have recently gained substantial popularity within this space. Coins like DOGE, PEPE, and Shiba Inu, driven by humor, internet culture, and social media trends, lack the traditional intrinsic utility typically expected in such digital assets. This article assesses their compliance with Shariah principles emphasizing legitimate benefit, intrinsic value, and avoidance of excessive speculation and harm.

Shariah View on Assets and Meme Coins

The majority of scholars describe a valid asset or property as something that is pure, has value, it can be exchanged among people, its benefits are permissible in Shariah, and ownership rights can be established on it.[1] Based on this understanding, examples of invalid assets are blood (because it is impure), wine (because it is impermissible in Shariah), air in the atmosphere (because ownership rights cannot be established on it), etc.

When it comes to trade and exchange, only a valid asset can be exchanged or traded. The principles of Islamic law also stipulate that transactions should be free from excessive uncertainty (Gharar)[2] and gambling (Qimar).[3] Meme coins, however, often fall short of these requirements.

1. Lack of Valid Utility: Meme coins typically do not possess genuine use cases or intrinsic value. They rely heavily on social trends and hype-based trading rather than providing a product, service, or real economic solution with a tangible benefit. This raises concerns under Shariah principles, as assets without intrinsic value are not considered valid subjects of trade.
2. Speculation and Volatility: One of the defining features of meme coins is their extreme price volatility. This volatility is often driven by hype-based activities and FOMO (fear of missing out), which can lead to panic selling and price manipulation. From a Shariah perspective, such a situation may entail multiple prohibited factors, like excessive uncertainty, deception, ignorance in transactions, etc.
3. Encouraging Petty Behavior: Meme coins also promote non-serious behavior and irresponsible attitudes among investors. Their rise is often tied to speculative trading rather than engaging in genuine, beneficial economic activities. This can lead to a culture of frivolous investment and a disassociation from the real economy. Moreover, this trend may facilitate exacerbating inequalities and diverting resources away from meaningful and productive ventures. This is contrary to the objectives of Shariah, which encourages ethical engagement in activities that contribute positively to society and the economy.
4. Branding and Ethical Concerns: In some cases, the branding of meme coins can also raise ethical issues. For example, the use of a dog, as seen in Dogecoin and Shiba Inu, can be problematic under Islamic law, which discourages associations with certain animals in branding.[4] While these concerns may not invalidate the tokens at a technological or issuance level, they contribute to the overall perception of the asset being questionable under Shariah.

Shariah Reviews of Prominent Meme Coins

• Dogecoin (DOGE): Dogecoin was originally launched as a joke, with no serious use case or economic value. While it functions as a decentralized cryptocurrency, its primary value derives from speculative trading and social media hype. It also has branding issues, as it promotes a specific dog breed. Therefore, Dogecoin is not compliant with Islamic principles due to its speculative nature and lack of defined utility.
• WAWA Coin ($WAWA): WAWA Coin, another meme token, does not have branding issues like DOGE, but it lacks utility beyond its community-driven nature. The token entails a speculative nature and features extreme volatility raising concerns under the principles of excessive uncertainty and deception. The absence of a legitimate Shariah-compliant use case makes WAWA Coin impermissible for investment.

Conclusion

In summary, meme coins present significant Shariah compliance challenges due to their speculative nature, lack of bona fide utility, and high volatility. While their humorous appeal and viral growth have attracted large communities, from an Islamic perspective, they do not meet the stringent requirements for legitimate assets. Investors seeking to comply with Shariah law are advised to avoid meme coins and instead focus on assets with clear utility and value, aligned with Islamic ethical principles.

The speculative, risky nature of meme coins, coupled with their often frivolous branding, makes them problematic in the eyes of Shariah. The Muslim community needs to remain cautious and consider ethical alternatives when venturing into the crypto space.

Note:

This article is the first in a two-part series on the Shariah compliance of meme coins. In Part 2, we will delve into practical guidelines for identifying halal meme coins, explore subtle distinctions between meme coins like Dogecoin and assets like Bitcoin, and discuss principles for structuring Shariah-compliant meme tokens. Be sure to check out Part 2 for a deeper understanding of how meme coins can align with Islamic finance principles.

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???? ??????? ?? ???????? ????? ???? ?? ??? ?????? ??? ?? ?????? ??? ????? ?? (??????? ?? ??????? ??????? 3 / 222). ???? ??????? ?? ??????? ??? ???: ?? ??? ??? ????? ??? ??? ?? ?? ???? ???? ???? ????? ?????? ??? ???? ??? ?? ????? ?????? ??? ????? ??? ???? ??? (??????? ???????? ??????? ?327).

???? ????????: ????? ???? ?? ???? ???? ?????? ?? ?? ?? ???????? ?? ???? ??????? ??? ???? (??? ????? ???????? 2 / 142).

[2] ???? ????? ??????????? ????? ????? ??????? ??????? ??? ???? ???? ???? ???? ?????? ?????????? ?????? ?????? ?????????.

Abu Huraira (Allah be pleased with him) reported that Allah's Messenger (?) forbade a transaction determined by throwing stones, and the type which involves uncertainty. (Sahih Muslim, 1513)

[3] ????????????? ????????? ??????????? ???????? ????????? ????????????? ????????????? ??????????????? ??????? ????? ?????? ????????????? ?????????????? ??????????? ???????????

O believers! Intoxicants, gambling, idols, and drawing lots for decisions1 are all evil of Satan’s handiwork. So, shun them so you may be successful. (Al Ma’idah, 5:90)

[4] ???? ?????????? ??? ???? ???? ???? ????? "???? ???????? ??????? ?????? ???????? ????????? ???? ?????????? ?????? ????? ?????? ???? ???????? ???????????"

Narrated Ibn `Umar: The Prophet (?) said, "Whoever keeps a (pet) dog which is neither a watch dog nor a hunting dog, will get a daily deduction of two Qirat from his good deeds." (Sahih al-Bukhari, 5480)

???? ????????????? ????? ??????????? ????? ???????????? ????? ????????????? ???????????? ????? ??????? ??????? ??? ???? ???? ???? ????? ???? ????????? ???????? ?????????? ???????? ??? ???????? ??????? ????? ?????? ????? ???????.

Ibn As-Sabbaq said: "Maimunah told me that Jibril, peace be upon him, said to the Messenger of Allah 'We (Angles) do not enter a house in which there is a dog or a picture. (Sunan an-Nasa'I, 4276)