The Legality Of Cryptocurrencies In Islam By Halima Ummi Isma’il

Digital/virtual currencies (Cryptocurrencies) have in modern times captured the attention of many people including financial experts, capitalists, regulatory bodies, and government administrations. The European Central Bank explains virtual currency as “a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat money or currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically”1. Cryptocurrencies are arranged on the blockchain in a manner that makes it very difficult to tamper the operating protocols. These protocols are close to or equivalent to government laws that regulate fiat money. However, these protocols are not regulated by a central authority, making it is a decentralized network.

Digital or virtual currencies have the characteristics of money. However, they do not possess all of the features of money. Economists have opined that for it to be regarded as money, it must gain wide acceptability, digital currencies on the other end have not been widely recognized as such. It should also be easily divided so that people can use it as a means of exchange. Above all, money should be regulated in order to avoid the abuse of such. As a result of the danger and risks associated with cryptocurrencies, various countries across the globe have banned the usage of these currencies.

This article sets to dive into the stand of Muslim jurists as regards the legality or otherwise of cryptocurrencies in Islam.


Legality of Digital/Virtual Currencies in Islam
In Islam for it to serve as a tool of exchange, money must be safe, stable, and effective. The legality of cryptocurrencies in Islamic law is still a matter of contention among Muslim scholars, this is as a result of the speculative nature of cryptocurrencies. This have left many Islamic financial institutions and the generality of the Muslims worried as to the issue of investing and getting involved with cryptocurrencies because they are unsure of what the faith of their investments will be in Islamic ruling. With around 1.9 billion Muslims in the world, equivalent to almost a quarter of the world’s population, a clear consensus on the Islamic view of Bitcoin could be a major boon for adoption.2 In Islam, the legal components of a currency are as follows;

Mal (Property/Wealth)

The fundamental requirements for something to serve as a consideration is that it must have the status of Mal. Jurists have given various and distinct definition of Mal. Some jurists opined that Mal are tangible assets only, while other jurists are of the view that Mal includes both tangible and intangible assets provided such assets are desired and are of value to people. However, the majority of the jurists opined that Mal is not limited to tangible things, and that Mal includes intangible things as well as benefits and rights with certain conditions attached, it should also be something that can be use as consideration.

Mutaqawwamm (Legal Value)
Another important factor for something to serve as property is that it must be of legal value. Thus for anything to be tradable and exchangeable it must be legally recognized for the transaction to be legally binding.
Thamaniyyah (Monetary Value)
Any assets that is use as a form of exchange must have monetary value. It must possess independent standard of value and also unit of account. The functions of money stems from the need to facilitate transactions without having to refer to any other benchmark in order not to undermine the purpose of currency. Thus, the system of money needs to be stable and to be of benefits.


Urf (Customary Practices)
In Islamic law the customary practices of people are given wide recognition provided such practices are not in conflict with Islamic principles. Therefore, scholars have opined that anything that is acceptable in a given community as a means of exchange can legally be referred to as money.
Over the years, various scholars across the globe have given divergent opinions as to the legality of cryptocurrencies in Islamic law. These scholarly opinions are grouped into three, those who opined that cryptocurrencies are legal thereby permitting it usage, those who consider cryptocurrencies as illegal thereby prohibiting it usage, and those who took a neutral stand. These opinions will be considered below;

Scholars who consider Cryptocurrencies as Halal (Permissible)
One of the earliest rulings came in 2004, when the California-based acedemic[ian] Monzer Kahf, a prominent author of Islamic finance textbooks, deemed bitcoin a legitimate medium of exchange, though vulnerable to manipulations.3
Mufti Muhammad Abu-Bakar,4 made a detailed analysis of this topic in one of his writings where he came to a personal conclusion that bitcoin is permissible in Islam as it is regarded by people as something valuable, available on currency exchanges, and it serves as a medium of exchange in a number of platforms. However, he noted the fact that the cryptocurrency industry is an emerging one, thereby subject to the risk of volatility and loss.

The fatwa Center of South African Islamic Seminary, Darul Uloom Zakariyya also opined that Bitcoin in particular fulfills the conditions required for them to be regarded as money and permitted trading in Bitcoin. They further opined however, that for it to qualify as a currency, it must be duly regulated by the appropriate authorities.
The scholars who opined that cryptocurrencies are permissible hold this opinion because to them, it fulfills the following conditions;
It is valued among people
It serves as a unit of account
It is a measure of value

Some people or group of people regard cryptocurrencies as a means of exchange.

Scholars who Consider Cryptocurrencies as Haram (Prohibited)
Shaykh Haitham Al-Haddad has argued that bitcoin is haram because it has no central authority enforcing it value and it is not backed up. However, he further opined that a gold backed-up cryptocurrency would be permissible since it inherits the features of gold. He based his opinion on 3 grounds;
•Cryptocurrencies are not backed-up by anything, it is rather created out of nothing.
•Cryptocurrencies are not legal tender because they are not under the supervision of any authority.
•Cryptocurrencies can easily be used for money laundering and other illegal purposes.

In January 2018, the Grand Mufti of Egypt has banned cryptocurrencies while stating that they are similar to gambling, they facilitate money laundering, and basically have no governing authority. The Saudi government has also warned its citizens to stay away from dealing and investing in cryptocurrencies due to the risks associated with it. Similar position has been taken by the Turkish Religious Authorities.
Those who took this stand are of the opinion that cryptocurrencies are prohibited because;
•Cryptocurrencies have no central authority and that they are not regulated,
•The exchange rates of cryptocurrencies compared to many other fiat currencies are more volatile and very unstable, this makes it very much riskier,
•Cryptocurrencies are mostly used for money laundering and other illegal purposes.

Scholars who took a Neutral Ground
Those who neither classify cryptocurrencies as neither permitted nor prohibited opined that for it to fall under any of the above classifications, further research and studies need to be made to see the suitability of cryptocurrencies in Shari’a, this is because cryptocurrencies are filled with complexities, and as such it is not easily understood. To them, cryptocurrencies and bitcoin especially fulfills the requirements of money as Mal(wealth), and mutaqawwam (legal value) but do not fulfill the requirement of thamaniyyah (monetary usage) because of it high risks of volatility. Scholars in this category stated that since cryptocurrencies are nascent, if all the requirements are duly followed, cryptocurrencies may likely become permissible in Islam.

Conclusively, the jurists are yet to reach a consensus regarding the legality of cryptocurrencies in Islam, this is due to various reasons including the fact that cryptocurrencies have no central authority, and are mostly unregulated. Also, a lot of countries have made cryptocurrencies illegal, thereby making scholars to follow same. However, the rate at which cryptocurrencies are gaining wide recognition and acceptance is a fact that is inevitable, and as such, there are high chances of legalizing cryptocurrencies both in Islamic law, and also across the globe. Cryptocurrencies if duly regulated, and if it fulfills the requirements of money can become very much acceptable in Islam, thereby serving as a means of exchange between people.

Halima Ummi Ismail is a Law Student from Bayero University, Kano. She can be contacted via email; [email protected]


1.Virtual currency schemes: a further analysis (2015). The European Central Bank

2. Is Bitcoin Halal?’ accessed 17 March 2021

3. Islam and Cryptocurrencies, Halal or not Halal?’ accessed 17 March 2021

4. Mufti Muhammad Abu-Bakar ‘Shariah Analysis of Bitcoin, Cryptocurrency, and Blockchain’ accessed 17 March 2021


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