Is Bitcoin Halal? 10 Scholars’ Opinion on Bitcoin.

Assalaamu Aleikum everyone! Back in 2017, I wrote a series of blog posts addressing the question, is Bitcoin halal or haram? And in 2017, I was not able to find a single scholar that mentioned whether Bitcoin was either halal or haram. In fact, many simply said, “I don’t know.”

So now, what do our scholars have to say? Is Bitcoin halal?

The answer is, there is still no consensus among the scholars as to whether Bitcoin is halal or haram but we are seeing some movement with scholars having a better understanding of cryptocurrency where some scholars now say it is halal while others still say it is haram and some say it is makruh (disliked). As for scholars who say it is halal, they fall into two groups, one who sees bitcoin as an asset and the other that sees bitcoin as a currency. For those who see bitcoin as a currency, then the rules of Riba Al Buyu would apply.

The chart below gives a quick overview of scholars and their opinions on Bitcoin. Let’s take a more detailed look at what our scholars have to say about Bitcoin. Insha’Allah this will help you make a decision as to how to proceed when it comes to Bitcoin and cryptocurrencies in general.

Dr. Salah Al Sawy and Bitcoin

Dr. Salah Al Sawy is currently the Secretary General for the Assembly of Muslim Jurists in America (AMJA) as well as President of Mishkah University. Dr. Salah takes a very balanced approach with Bitcoin and adheres to the general Islamic principle that when it comes to business transactions, all transactions are considered halal unless we have clear proof that it is haram.

When it comes to Bitcoin, it is the position of Dr. Salah that we cannot say that Bitcoin is haram as he sees no direct proof that it is haram. He even notes that he sees many positives and benefits of Bitcoin such as, it can be easy to use, can be an inexpensive way to send money, it can be faster to send money with Bitcoin as opposed to wiring money, and its secrecy is a positive `and also other benefits.

However, even with these positives, he does see some negatives such as, there is no supervising body over the currency, there is no authority backing the currency, and one can make huge profits but can also experience huge losses.

He also notes that even though it is not necessarily haram to attain huge profits from cryptocurrencies, making huge profits as such is not something that is normally found in other products. Also, the secrecy of the coin could be used for money laundering, buying illegal items, and financing haram things.

Dr. Salah also notes that one of the principles of Islamic economics is that money has some tangible benefit to the country such as creating jobs and businesses, and he does not see cryptocurrencies adding work or jobs to the economy at this time. Rather, it is just an investment that people are putting their money into.

As of now, Dr. Salah Al Sawy sees Bitcoin and cryptocurrencies as very “shaky and dangerous territory” where people could potentially lose all of their money by investing in it and that we must proceed with caution and be very careful when using cryptocurrencies.

His opinion is that even though we cannot say that Bitcoin is haram, at this time, he sees it as makruh. You can watch his talk on Bitcoin here.

Grand Mufti Shawqi Allam Bitcoin Fatwa

Shawqi Ibrahim Abdel-Karim Allam is the current Grand Mufti of Egypt and a Ph.D. graduate of Al Azhar University where he earned his degree in Jurisprudence and Sharia Law. Mufti Shawqi has taken a more stern stance with Bitcoin and has issued a fatwa stating that Bitcoin is haram.

“Dr. Shawqi Allam, the Grand Mufti of the Republic, affirmed that it is not permissible according to Sharia to trade in the currency of “Bitcoin” and deal in it through buying, selling, leasing, and so on. Rather, it is prohibited to participate in it because it is not considered as an acceptable medium for exchange by the competent authorities, and because of the harm it entails resulting from deception, ignorance and fraud in its bank, standard and value, in addition to the high risk that its practice lends to both individuals and states.” Read his fatwa here.

Mufti Shawqi was also interviewed by the Egyptian magazine, Egypt Today, and had the following to say,

“Allam told Egypt Today that he met with a group of economic experts to reach his final ruling. He clarified his findings on the cryptocurrency, stating that Bitcoin could allow for tax evasion, piracy, money laundering, fraud and corruption, and therefore is forbidden in Islamic Sharia Law.” See the article here.

Mufti Shawqi also sees Bitcoin as haram because of its price volatility as well as being a high-risk investment where investment is focused on speculation. He also notes that Bitcoin is not controlled or issued by a government bank and that this can be problematic for the state.

In short, Mufti Shawqi has not noted any good that Bitcoin or cryptocurrencies can offer to humanity.

Sheikh Assim Al Hakeem Bitcoin Haram Fatwa

Sheikh Assim Al Hakeem is a prominent scholar and imam based out of Jeddah, Saudi Arabia who takes the position that Bitcoin is haram and lists a number of reasons as to why he holds such a position. Here are the 10 reasons why Sheikh Assim sees Bitcoin as haram.

• The origin of Bitcoin is unknown and it has sustainability and security issues.
• The price of Bitcoin fluctuates too much.
• Bitcoin is not physical. You cannot hold it and it is not real.
• Bitcoin is a Ponzi scheme and/or is similar to a multi-level marketing scheme.
• People are only using Bitcoin to make fast money.
• Bitcoin is not backed by people or a central bank.
• Bitcoin’s price is inflated and Bitcoin is in a price bubble.
• It is unknown what will happen after all 21 million bitcoins are mined.
• Bitcoin is used for criminal activity.
• There is ambiguity with Bitcoin.

After closely reviewing his reasons as to why he sees Bitcoin as haram, I can see that he has some slight errors in his understanding of Bitcoin and I have written a blog post commenting on his fatwa. Please see my following blog post here, 10 Reasons Why Bitcoin is Haram. Sheikh Assim Al Hakeem Bitcoin Fatwa.

Shaykh Haitham al-Haddad Bitcoin Fatwa

Dr. Haitham al-Haddad is an Islamic jurist and judge for the Islamic Shariah Council in the United Kingdom and has given a fatwa stating that Bitcoin is haram.

Shaykh Haitham believes that Bitcoin is haram because it (Bitcoin) is not backed by anything. It is not backed by gold or any commodity. Bitcoin also has no government backing and when a currency has no government backing, then no one can be forced to use it as legal tender.

Price volatility within the market is yet another reason why Shaykh Haitham sees Bitcoin as haram and since it is not backed by the government, the currency could fall to zero value and thus be a hardship on people.

He also notes that Bitcoin is created out of nothing and that there is nothing real or tangible to hold and says that it is haram to have money that is created out of nothing.

His conclusion is that all aspects of Bitcoin are haram. Therefore, it is haram to use it, to manufacture it, to mine it, to trade it, to buy it, and to invest in Bitcoin.

You can read his fatwa here and also watch a video on his fatwa here.

Mufti Faraz Adam and Bitcoin

Mufti Faraz Adam holds a Master’s degree in Islamic Finance, Banking and Management. He is currently President of Amanah Advisors where he works as a finance and fintech consultant.

Mufti Faraz is one of the few scholars I have found to have a very deep and solid understanding of Bitcoin and cryptocurrency as a whole, yet you will not find him giving fatawa on Bitcoin. He will defer that to other scholars.

Instead, he looks at the overall technology of cryptocurrency, its features, and if it is in harmony with an Islamic paradigm that could be of benefit to humanity.

If I was to summarize my understanding of Mufti Faraz’s position on Bitcoin, I would say that he does not view Bitcoin as haram but rather holds the view that at this time,

“Bitcoin is not ideal as a long-term investment and neither should the Islamic finance industry consider its use in exchange unless there is a specific need to until a regulated and transparent framework is established.

At this current time, Bitcoins are just another investment which are for individual profit maximisation. Nevertheless, returns on Bitcoin investment would be lawful and Shariah compliant according to this understanding.” Read the full paper here, “Bitcoin: Shariah Complaint?” Page 6

In addition to his statement above, there are also six key areas in his research that he touches on that have led me to the conclusion that he does not see Bitcoin as haram.

1) Bitcoin does exist and it is real:
Mufti Faraz offers a counterargument to scholars who say that bitcoin is not real and is made out of nothing. He argues that even if you cannot see or touch something, this does not mean it is non-existent or not real.

As for Bitcoin, he notes that we can see digits [addresses and transactions] on a blockchain and we can see the results of these digits in real life [purchasing coffee, buying a house, paying for a service, etc.] so therefore we know that Bitcoin is real.

2) Bitcoin is mal:
Mal is commonly translated as, “money”. However, in Islamic law, the technical meaning of mal is something that is retrievable.

Mufti Faraz argues that bitcoin is mal. He notes that bitcoin can be stored and retrieved when needed from a Bitcoin wallet, therefore, we can say that Bitcoin holds the characteristic of mal.

3) Bitcoin has taqawwam:
Taqawwam means, legal value. Islamic law states that valid trade can be done only with items that have legal value.

Mufti Faraz makes it understand that we cannot conduct trade with a bottle of wine and/or pork because they are considered haram; therefore, wine and pork do not hold legal value.

Mufti Faraz argues that Bitcoin is nothing more than software code and software code in and of itself is not haram; therefore, we can say that Bitcoin passes the test of having taqawwam, legal value.

4) Bitcoin as a currency:
Is bitcoin a currency? To determine this, Mufti Faraz examines whether Bitcoin has what is called, thamaniyyah.

Please note that the video of his conversation was held sometime after he wrote his research paper, “Bitcoin: Shariah Complaint?”, so his conversation on thamaniyyah may differ slightly in the video when compared with his research paper.

You can find the video of his talk here, Bitcoin: Shariah Compliant? | Mufti Faraz Adam | AMAL.

Thamaniyyah can simply mean, the fundamental features of currency. Those features are a store of value, a medium of exchange, a unit of account, and a standard of debt repayment.

Mufti Faraz highlights that there are differences of opinion on this matter as some scholars have valid ijtihad that Bitcoin is an asset and not a currency while other scholars have valid ijtihad that Bitcoin is a currency.

He also notes that past scholars have made it clear that the Qur’an and Sunnah provide no characteristic or definition as to what is a currency. Allah has left it to mankind to define this for themselves.

5) Bitcoin is not issued by the government:
Mufti Faraz notes that Hanafi jurists have made clear arguments that the people of a society can determine what is a currency just as a government can determine what is a currency.

This would mean that we cannot say that just because Bitcoin is not issued by a government that this now makes Bitcoin impermissible.

6) Risk: 
Mufti Faraz notes that some scholars have noted that Bitcoin is haram because of the high risk that entails investing in bitcoin.

However, he notes that risk in and of itself does not make a matter haram due to the fact that the very nature of investing encompasses some risk, and risk sharing is permissible in Islam.

Rather, risk due to gharar (ambiguity) is what is prohibited, but not risk in and of itself. Investing in bitcoin is not in and of itself gharar so long as the person is clear of the risks and what it all entails.

These 6 points and his extensive research on the matter make it clear that he does not see Bitcoin as haram. Still, though, he would like to shift the focus away from only looking at Bitcoin.

Mufti Faraz holds a similar belief to my own which is, this new area of cryptocurrency is bigger than Bitcoin. Bitcoin is one small part of cryptocurrency. There are other aspects of cryptocurrency that we as an ummah should be exploring.

Over the past few years, his research and interest have extended beyond Bitcoin and have expanded into other areas such as ICO’s (Initial Coin Offerings), Blockchain, tokens, and crypto coins examining their usefulness from an Islamic and sharia perspective.

He would like to explore how we can utilize this technology to benefit not only the ummah, but humankind as a whole and this is in complete harmony with the goals of the Islam and Bitcoin website.

Dr. Ziyaad Mahomed and Cryptocurrencies

Dr. Ziyaad Mahomed is currently the Associate Dean of E-Learning/Online Programs and Director of Executive Education at The Global University of Islamic Finance, Malaysia, and has over 20 years of experience in Islamic Finance with a specialty in banking and investments.

Dr. Ziyaad does not provide a fatwa on Bitcoin but mentions the overall ruling from other reputable scholars noting that some say that it is halal, some say haram, and some say use with caution. He notes that unfortunately, not as many scholars provide an opinion on cryptocurrencies as he would like.

When it comes to assessing the permissibility of Bitcoin, Dr. Ziyaad mentions that there are 3 things that one must examine as it relates to the shariah.

(1) Is it considered mal.
(2) Does it pass the test of permissibility according to the shariah, taqawwam.
(3) Does it meet the objectives of the shariah, Maqasid al-Shariah.

His overall assessment of Bitcoin is that ”there are no clear serious standards on cryptocurrency so therefore one will have to exercise caution in the beginning and one will have to be very brave in entering into cryptocurrency assuming that he understands the necessary shariah parameters behind it before entering into it.” In other words, he does not see it as haram, but one must proceed with caution.

Dr. Ziyaad would love to see a more standardized approach to cryptocurrencies from the scholars as he believes that the future of cryptocurrencies lies in implementing cooperative programs that utilize cryptocurrencies to develop sustainable halal projects that can be of benefit to humanity while also allowing investors to earn a halal income from it.

He has provided a wonderful talk on the topic of Bitcoin and cryptocurrencies which can be found here, Cryptocurrency in Islam: Halal or not Halal? – Ethis Webinar.

Mufti Muhammad Abu-Bakar and Bitcoin

Mufti Muhammad Abu-Bakar is a Shariah Scholar of Product Development and Shariah Structuring at Emaan Islamic Banking and a Shariah Advisor at Blossom Finance. He holds a Master of Science in Islamic Finance from INCEIF, The Global University of Islamic Finance, Malaysia, and is also a Certified Shariah Advisor and Auditor (CSAA) from Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Bahrain.

His area of specialty is Shariah, Islamic Banking and Finance, Takaful (Islamic Insurance), and Islamic Fintech.

Mufti Muhammad has not given a fatwa on Bitcoin, but he does hold the view that Bitcoin is halal and permissible to use and has written a research paper on Bitcoin that you can find here, Shariah Analysis of Bitcoin, Cryptocurrency, and Blockchain.

However, he does note that one of the objectives of the shariah is the protection of wealth and because of this, Mufti Muhammad believes that is it necessary to exercise caution and to be mindful of risks when using cryptocurrency.

He also does not advise buying cryptocurrency as an investment just as one would buy stock in a company, but rather, use cryptocurrency networks as a payment system particularly in areas where the benefits of utilizing cryptocurrency outweigh that of conventional payment methods.

Mufti Muhammad does note that Bitcoin,

(1) Meets the characteristics of mal
(2) Can be classified as money/currency
(3) Money/currency does not need to have intrinsic value

His argument is based on the ijtihad of prominent scholars in the field of Islamic jurisprudence such as Shaykh Zuhayli, Shaykh Khalid Saifullah Rahmani, Shaykh Taqi Usmani, Turki, Al-Mausuah, Al-Fiqhiyah, and Al-Kuwaitiyah.

Finally, he examines the arguments made by scholars who note that Bitcoin is haram because of the following reasons:

(1) Bitcoin is not a legal tender
(2) Bitcoin’s issuer is unknown and has no central authority or government backing
(3) Bitcoin is highly speculative and not stable
(4) Bitcoin can be easily used for money laundering and illegal purposes

To summarize Mufti Muhammad’s counterargument against these points he notes:

(1) Bitcoin is not a legal tender
“The main criteria for money in Shariah is its acceptability by people – whether it comes about by forcing it upon people through laws, or through widespread voluntary acceptance of people.” Page 17

(2) Bitcoin’s issuer is unknown and has no central authority or government backing
Mufti Muhammad argues that even though the inventor of Bitcoin is unknown, the framework of how Bitcoin works, “is a set of rules adopted by voluntary mutual acceptance by users of the currency, and that these rules are published and open for anyone to critique or suggest revision.” Page 17

And even though there is no central bank or government to back Bitcoin, he notes that the blockchain technology of Bitcoin has been, “more secure than any centralized system employed by a government or central bank.” Page 17

He also cites the case where $1 billion USD was stolen from the central bank of Bangladesh in 2016 to note that a centralized bank or government backing alone does not promise security of wealth.

(3) Bitcoin is highly speculative and not stable
Mufti Muhammad notes, “Bitcoin and cryptocurrency cannot be declared haram (impermissible) based on the fact that they experience speculation. In fact, if this principle was valid and applied, then trading in gold, silver, US Dollars, and Euros would all be ruled impermissible, since those assets also experience extreme levels of speculation.” Page 18

However, Mufti Muhammad does acknowledge that cryptocurrency prices in the market are more volatile than many cryptocurrencies and because of this he says, “it is not advisable to trade in cryptocurrency, especially for laypeople who lack professional experience and sophistication with regard to foreign exchange trading.” Page 18

(4) Bitcoin can be easily used for money laundering and illegal purposes
Mufti Muhammad makes the argument that Bitcoin or cryptocurrencies being used for illegal purposes is not an Islamic criterion of currency.

He makes the argument that utilizing something lawful for an unlawful purpose does not make the thing itself unlawful.

“An example from the Hadith can be found in that the Prophet Muhammad (peace be upon him) forbade the selling of grapes to a wine merchant, since making wine is haram (impermissible), but did not forbid the production or trading of grapes for lawful purposes.” Page 18

He also notes that fiat currencies are regularly used for illegal activities with the United States Dollar being the most widely used fiat currency for illegal activities.

Dr. Mohamed Ali El Gari

Dr. Mohamed Ali El Gari holds a Ph.D. in Economics and is a shariah scholar with a specialty in Islamic Finance. He serves on numerous Shariah advisory boards and is currently the Chairman of the Amanie Shariah Supervisory Board.

Dr. Mohamed believes that the advent of cryptocurrency is merely the natural evolution of money as we have already been utilizing digital currency for decades and sees cryptocurrency as the “grand finale” of money.

Dr. Mohamed notes that from the shariah perspective, there is nothing in the shariah that dictates exactly what medium of exchange Muslims must use. The decision is left to the community.

As for Bitcoin, through his research, Dr. Mohamed notes that Bitcoin does fulfill the shariah requirements to be considered mal and classifies Bitcoin as a currency, and states that the rules of riba al buyu apply. Dr. Mohamed also believes that Bitcoin does pass the test of permissibility to use according to the shariah, and it is in harmony with the objectives of the shariah.

Therefore, according to Dr. Mohamed, Bitcoin is considered permissible (halal) to own, buy, sell, use, keep, and invest in, and that cryptocurrency issued by a government is also halal.

He goes on to note that even though he considers Bitcoin and cryptocurrencies halal, he does mention that cryptocurrencies that are not issued by a central bank will have characteristics such as high speculation in the marketplace.

And cryptocurrencies that are not controlled or monitored by a government can end up being used for gambling, embezzling, to steal money from the weaker of those in society, and could also be prone to collapsing and this will end up casting doubt on using such cryptocurrencies as a measure of value or a store of value.

To hear his commentary on Bitcoin, please see here and also here.

Dr. Mohd Daud Bakar

Dr. Mohd Daud Bakar is a shariah scholar receiving his shariah degree from the University of Kuwait. He is also a serial entrepreneur whose professional career now lies within the world of Islamic Finance and is now the President and CEO of Baker Investment company (Financial Investment Company) and also the President and CEO of the International Institute of Islamic Finance (IIIF) Inc.

He is also the current Chairman of the Central Shariah Advisory Council of the Central Bank of Malaysia and a member of the Shariah Advisory Council of the Securities Commission of Malaysia.

Dr. Mohd Daud actively researches fintech applications such as Bitcoin and other cryptocurrencies to gain insight as to how these technologies fit into an Islamic paradigm and can be of benefit to the Muslim world and humanity at large.

Dr. Mohd Daud has worked with a group of scholars researching Bitcoin and cryptocurrency for two years and came to the conclusion that Bitcoin does meet the shariah requirements to be considered mal regardless of whether it is tangible or intangible and classifies Bitcoin and digital currencies in general as an asset and not as a currency.

Dr. Mohd Daud acknowledges that even though he classifies Bitcoin as an asset, he is well aware that people use it as a medium of exchange. However, even though Bitcoin is used as a medium of exchange in the market, he does not classify it as a currency because he believes Bitcoin falls short of fulfilling the requirements of a currency in two key areas:

(1) At this time, it falls short of serving as a unit of measurement
(2) At this time, it does not fulfill being a store of value as the market still pegs Bitcoin to fiat currency and not the other way around

He also notes that since Bitcoin can be classified as an asset, then the rules of riba al buyu do not apply. The only exception would be is if the cryptocurrency is backed by a commodity such as gold, silver, fiat currency, etc., then the rules of riba al buyu would apply. Please find Dr. Mohd Daud commentary on Bitcoin, here.

Sheikh Mustafa Umar and Cryptocurrency

Sheikh Mustafa Umar holds a B.A. in Islamic Studies from the European Institute of Islamic Sciences and an M.A. in Islamic Studies from the University of Gloucestershire, UK. He has also studied under scholars from as far as Nadwatul Ulama in India as well as at Al-Azhar and Darul Ulum in Egypt and is the founder and Director of California Islamic University.

I had a wonderful interview with Sheikh Mustafa where we discussed Bitcoin and its permissibility which can be found here, Is Bitcoin Halal or Haram? Sheikh Mustafa Umar Has the Answer.

To summarize, Sheikh Mustafa agrees with the opinion of Dr. Salah Al Sawy which is, at this time, we can say that Bitcoin might be permissible or it might be makruh (disliked), but we definitely cannot say that it is haram. He also notes that there are other scholars who hold the opinion that Bitcoin is halal and is also a currency and as such, Sheikh Mustafa says that if we are to say that Bitcoin is a currency, the rules of riba al buyu must apply.

Final thoughts

After reviewing the opinions of multiple scholars, I lean more towards the scholars who view Bitcoin as halal or even makruh as I find their ijtihad and arguments to be more sound than those who argue that it is haram.

I also find that the scholars who hold the opinion of Bitcoin being halal or makruh have a deeper understanding of the technology of cryptocurrencies as a whole.

I also want to correct myself. I had posted a blog article called, Is Bitcoin Trading Halal or Haram?, where I mentioned that since there is no consensus among scholars that Bitcoin is halal or haram, then there is no need to follow the rules of riba al buyu when dealing with crypto.

I have changed my position on this due to the understanding that there are scholars who make sound arguments that Bitcoin and certain cryptocurrencies can be categorized as a currency and as such, the rules of riba al buyu would most certainly apply.

And in the end, Allah knows best.

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