Fatwa ID: 05131
Answered by: Maulana Syed Johir Miah
Assalamu Alaikum, Mufti sahib.
I have a question. This cryptocurrency name Etharium.
It is regulated crypto under the custody of ‘Gemini Custody’ which is a trusted company. Is it halal to buy this currency?
In the name of Allah, the Most Gracious, the Most Merciful
Bitcoins and other forms of cryptocurrencies are electronic modes of currencies.
Bitcoin or any other digital currencies are just imaginary currencies. They do not exhibit the fundamental qualities and conditions of real currencies, at all. And these days the trade adopted with such currencies over the internet and web applications does not really involve any actual buying and selling, neither does it fulfill the basic Shar‘ai conditions for the provision of bay‘ (transaction). Instead, in reality, it is a form of interest and gambling which is based on an ambiguous transaction and fraud as e already have seen in the past with many of these schemes which launched and collapsed due to their “Pyramid Scheme”.
Therefore, the businesses running in form of buying and selling of bitcoins or any digital currencies on the internet are not Halal (i.e. impermissible) in light of the Islamic Shari‘ah and it is also impermissible to invest money in them.
None of the current prevalent ways in which cryptocurrencies are being issued and used are considered permissible at this time.
It is impermissible to get involved in any transactions related to any types of cryptocurrencies including bitcoins etc.
For an item to be accepted in shariah as money (medium of exchange) it needs to fulfill three conditions.
1. It needs to be considered as Maal in Shariah. Maal is “what is normally desired and can be stored up and can be retrieved for the time of need.
2. It must possess legal value (Taqawwum). This refers to an item being lawful to use in shariah.
3. It must have monetary value (Thamaniyyah). This means that money must have two critical functions.1) Independent standard of value, this means that it should independently price and valuate goods along with having stability and widespread acceptance. 2) Unit of account, this refers to being a primary reference point and yardstick for people to use to post prices and record debts. It is a thing that goods and services are priced in.
It is difficult to argue at the current stage that Bitcoin is currency proper in Islamic law due to the following reasons:
1. Bitcoin falls short of possessing monetary value (Thamaniyyah)
2. There is doubt in Bitcoin being money. The legal maxim states that the origin (Aṣl) and foundational premise in temporary attributes and changeable state (Sifat Ariḍa) is that of non-existence (Al-Adm) thus, for other than gold and silver, the currency is a changeable state; it is not a permanent attribute. Considering the legal maxim, currency cannot be attributed to Bitcoin unless there is sufficient evidence to suggest otherwise.
3. The number of risks associated with Bitcoin undermines the very reasons and objectives money was created to serve.
4. Bitcoin fails to uphold the Maqāṣid al-Shariah (objectives of Shariah) with respect to wealth which is to create stability in the society.
5. The tendency to invest in Bitcoin as opposed to using it as a medium of exchange shows that there is no overriding and encompassing ‘Urf (custom) to consider Bitcoin as money.
6. Bitcoin was further assessed in terms of the principles of the Islamic moral economy. A key theme and objective of the Islamic moral economy are embedded financing and investments linked to the real economy. Bitcoin and cryptocurrency investments do not serve the real economy and do not promote the real growth of an economy. Therefore, considering the overarching principles of the Islamic moral economy and the established principles of investing in the real economy, one should consider the different arguments before making long-term, concentrated investments in digital assets which are not linked to the real economy. Concentrating all of one’s wealth into digital assets can have more harm for society than good. Investing in such assets is fuelled by profit and utility maximization. Investing in Bitcoin does not benefit the society nor the real economy; Bitcoin investments do not boost services, labor nor the production of goods.
In the aforementioned, my personal advice would be to abstain from all sort of paperless and electronic modes of currencies including Etharium.
Only Allah knows best
Written by Maulana Syed Johir Miah
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham