Crypto & Islam: Navigating Halal Investing in the Digital Age

Is Cryptocurrency Allowed in Islam? A Look at What Different Countries Think

Hi everyone, John here! Welcome back to the blog where we break down the big, confusing world of crypto into bite-sized pieces. Today, we’re tackling a really important and interesting question that many people are asking: Is using cryptocurrency “haram,” or forbidden, in Islam? It’s a hot topic, and the answer isn’t a simple yes or no. Let’s dive in and see how different parts of the Muslim world are figuring this out.

I’ve got my trusty assistant, Lila, with me. She’ll be chiming in with questions to make sure we keep things crystal clear.

Lila: Hi, John! This sounds complicated. I’ve heard the words “haram” and “halal” before, but I’m not totally sure what they mean, especially when it comes to money.

That’s the perfect place to start, Lila!

The Big Question: What Makes Money “Halal” (Allowed) or “Haram” (Forbidden)?

In Islamic finance, there are very old and important rules designed to make sure all financial activities are fair, ethical, and don’t harm anyone. Think of them as a moral compass for money.

For something to be considered halal (permissible or allowed), it has to follow these principles. If it breaks these rules, it’s considered haram (forbidden). Three of the most important rules when discussing crypto are:

• No Maysir: This means no gambling. Any activity where you’re just betting on chance, hoping to get something for nothing, is not allowed.
• No Gharar: This means avoiding excessive uncertainty or ambiguity. You should know exactly what you’re buying or selling. A classic example is trying to sell a fish that is still in the sea—it’s too uncertain.
• No Riba: This is the rule against charging or paying interest. The idea is that money shouldn’t just create more money on its own without any real economic activity or risk-sharing. It’s seen as an unfair gain.

Lila: Okay, so Maysir is gambling, Gharar is too much uncertainty, and Riba is interest. Got it. So, the big debate is whether cryptocurrencies break any of these rules?

Exactly! And because crypto is so new, scholars and leaders around the world are looking at it from different angles. Let’s see what a few key countries are saying.

Dubai (UAE): Paving the Way for Halal Crypto

Dubai, part of the United Arab Emirates, is known for being forward-thinking, and its approach to crypto is no different. They are generally taking a very positive and proactive stance.

Instead of an outright ban, Dubai is working hard to create a safe and regulated space for crypto to exist. They’ve even set up a special government body to oversee it.

Lila: A special government body? What’s that?

John: It’s called VARA, which stands for the Virtual Assets Regulatory Authority. Think of VARA as the official rule-maker for all things crypto in Dubai. Their job is to create a clear playbook that protects investors and ensures that crypto companies operate fairly and transparently. It’s a big step toward making crypto a legitimate part of the financial system.

The goal in Dubai seems to be to treat certain cryptocurrencies as a legitimate asset class, much like stocks or commodities. They believe that as long as a cryptocurrency is Sharia-compliant (meaning it follows the Islamic rules we talked about), it can be considered halal. They are essentially building a framework to help people distinguish between the good, compliant cryptocurrencies and the ones that might be considered haram.

Indonesia: A More Cautious and Divided Opinion

Now let’s fly over to Indonesia, the country with the world’s largest Muslim population. Here, the conversation is a bit more complex and the opinions are divided.

The main religious authority in the country has taken a close look at crypto and come up with a nuanced answer.

Lila: Who is the main religious authority there, John?

John: That would be the National Ulema Council (MUI). The MUI is Indonesia’s top body of Islamic scholars. Their rulings, or “fatwas,” are highly respected and guide many Muslims in the country on religious matters.

In 2021, the MUI declared that using cryptocurrency as a currency is haram. Their reasoning was that it has too much uncertainty (Gharar) and has elements of gambling (Maysir), making it unstable and not fit for use as everyday money.

However, they didn’t completely shut the door on crypto! The MUI also said that if cryptocurrencies are treated as a commodity or a digital asset to be traded, they could be halal. For this to be the case, a cryptocurrency would need to:

• Meet the rules of Sharia.
• Have a clear, real-world benefit.
• Have an underlying value or project behind it.

So, Indonesia’s view is: using crypto like you’d use dollars or yen? No. Trading certain cryptos as an asset, like you’d trade gold or coffee? Maybe, if it ticks the right boxes.

Turkey: From a Strict Ban to a Softer Stance

Turkey’s journey with crypto has been a bit of a rollercoaster. Initially, the government took a very hard line.

In early 2021, Turkey’s central bank banned the use of cryptocurrencies for making payments. They were worried about the risks, the lack of regulation, and the potential for illegal activities. Following this, the country’s top religious authority also stated that trading crypto was not permissible at the time.

Lila: And who is Turkey’s religious authority?

John: It’s called the Diyanet, which is the Directorate of Religious Affairs. It’s the official state institution that deals with religious matters in Turkey, so its opinion carries a lot of weight.

But things have started to change. While the payment ban is still in place, the Diyanet has softened its overall view. They later clarified that their initial ruling was a general one. They now say that a decision has to be made on a case-by-case basis. Some cryptocurrencies, especially those that have a real-world use or value and are not being used for anything illegal or purely speculative, could potentially be considered permissible to own and trade.

The Turkish government is also working on new laws to regulate the crypto market, which shows they are moving from a position of banning it to trying to manage it.

So, What’s the Final Answer?

As you can see, there isn’t one single answer to the question “Is crypto haram?” It really depends on who you ask, where you live, and which specific cryptocurrency you’re talking about.

Here’s a quick summary of the main arguments:

Arguments that crypto is HARAM (Forbidden):

• It’s highly volatile and uncertain, which is like Gharar.
• Its price swings can be driven by hype, making it feel like gambling, or Maysir.
• Many cryptocurrencies don’t have a physical asset or real-world project backing them.
• They can be used for illegal activities.

Arguments that crypto can be HALAL (Allowed):

• It can be treated as a digital asset or commodity, just like gold.
• If a specific crypto has a clear purpose and provides a real benefit, it has value.

– The underlying technology (blockchain) can be used for many ethical and useful things.

• With proper regulation, the risks can be managed.

My Thoughts and Lila’s Take

John: For me, this whole debate is a perfect example of how our world is trying to fit brand-new technology into long-standing traditions. It’s not about a simple “yes” or “no.” It’s about careful thought and understanding. The fact that these conversations are happening shows that the crypto world is growing up and being taken seriously on a global scale.

Lila: As a beginner, it’s really helpful to see it broken down like this. It makes sense that something so new and different would cause so much discussion. What I’m taking away is that you have to do your homework. The answer might be different for Bitcoin than for another coin, and it can change depending on the rules in your country. It’s definitely not a one-size-fits-all situation!

This article is based on the following original source, summarized from the author’s perspective:
Is Crypto Haram? Here’s How Dubai, Indonesia, and Turkey Are
Responding