How Does Sharia View Crypto-Currencies?

Crypto-currencies and Islamic finance

Mufti Abdul Kadir Barkatulla

At a recent workshop of Islamic Finance practitioners and crypto/digital currency developments organized by a newly formed body, the Islamic Finance and Crypto-Currency, IFCC, leadership summit in London, participants spoke their mind about the topic. As an Islamic Finance Sharia Scholar, I expressed my feelings.

Firstly, as is the case with media, regulators, bankers, and financial institutions, current vocabulary fails to properly express an emerging phenomenon of Blockchain technology and digital/virtual/crypto currencies. Attitudes vary between high hopes and sceptics. Sharia opinions are no exception. Cursory fatwas, or Sharia opinions, from Malaysia and Qatar are sceptical.  Some declare it outright impermissible, due to its intangibility, volatility, and non-convertibility into goods or services. There is no shortage of Sharia opinion on the internet.

Many scholars are comfortable treating a crypto-currency as being at par with fiat currency notes and coins. Those include (fatwa # 251170, 231460 and 11074) and Dr Munzir Kahf of Qatar Faculty of Islamic Studies.  Some enthusiasts declare it most akin to be compatible with principles of Islamic Sharia law and more suitable to Islamic modes of finance such as Blossom Finance, a microfinance firm based in Indonesia. Matthew J. Martin is the founder of the entity.

The history of money began well before the  advent of Islam and Islamic Civilization. Roman and Byzantine gold, silver and copper coinage were common in pre-Islamic Arabia. During 40 years of Caliphs and early 30 years of the Ummayad period these foreign coins remained in circulation. It was during Hijra years 70s (CE 690s) onward that Islamic coinage came into circulation.  For the best early part of Islamic civilization, means of payment remained neutral to the system of Islamic moral guidance into the realm of money.  Consequently, it is safe to assert that Islamic Sharia Law is more concerned with morality of financial transactions rather than its form or modus operandi.  Any money or currency is neither halal – permissible – nor haram – impermissible. Guidance is about its value which it represents.  If money is transacted in a lawful manner then it is halal. Values or rights of people represented by a real/virtual currency or coin should not be violated or undermined. The exchange and transfer of values with justice and through legitimate means is the main concern of Sharia, not the form or shape of the medium.

The basic Sharia requirement for a means of payment for goods and services to be recognized as an acceptable tender of settlement is that it should be acceptable to substantial number of counterparties in a given demography or community. As such crypto-currencies vary in their qualification for that status. This is why there are conflicting views among regulators, merchants, and Sharia scholars.

Among Islamic activists, there exists the ‘metallist’ school, which see money as a commodity, a thing with its own inherent value – and one which governments should leave alone as much as possible. They are represented by ‘Gold Dinar’ promoters in the Far and Middle East.  By contrast, for the ‘chartalist’ school, money is a complex system of credit relationships, which allows value to flow within a society. For these people currency is just the token around which the monetary system is arranged. Governments have a role to play in managing this system and, thus, the economy.

Classic Islamic Jurists contemplated that: ‘Anything that is generally accepted by the public can fulfil the role of money’. Thus money is, primarily, a medium of exchange and not a commodity. The price of this money (interest) must be zero.

I argued that a Bitcoin-style crypto currency may constitute an effective instrument for the further development of Islamic finance. Islamic finance imposes different requirements compared to conventional financial policies on a monetary instrument concerning its use as a tool for achieving social and economic justice. Most eminent Sharia scholars are keeping their minds and hearst open and maintain a close observation on developments in the crypto-currency world.

What we need is not a burst of cursory fatwas and other brief remarks, but the sponsorship of scholarly research papers on the position of crypto-currencies and Sharia.

The crypto-currency market is still in its infancy and as a whole remains a niche within the global financial system . A 2015 report by PriceWaterhouseCoopers (Money is no object) on crypto currency concludes:

‘Clearly, there are challenges for crypto-currency in the near term. With so many of its characteristics falling between a currency, a financial asset, and a technology protocol, the pace of growth and adoption may splinter the industry.  As a disruptive technology, it will continue to divide opinion and face scepticism’

As regulatory standards are adopted and refined, creative products enter the market, and the prices of the various crypto currencies stabilise, we will see greater confidence on the part of all market participants in including Islamic Finance practitioners, promoters and Sharia Scholars, who are the gate keepers of industry.

Professor Charles W. Evans in his recent research (published in Journal of Islamic Banking and Finance) concludes that Bitcoin or a similar system might be a more appropriate medium of exchange in Islamic banking and finance than interest-bearing central bank fiat currency, especially among the unbanked and in small-scale cross-border trade.

As an optimist onlooker, I am delighted to note Professor Evans’ assertion that:  ‘A group of Islamic Banks could organize a virtual currency exchange under the principle of musharakah, in order enable those banks’ customers to buy and sell crypto-currency efficiently, in order to transfer value amongst themselves and to bypass the inefficiencies of the status quo banking system. If this exchange maintained a very narrow bid/ask spread and charged no other fees, and restricted access to customers of the member banks, this could create an incentive for Muslims and non-Muslims alike to bank with member banks’.

I wholeheartedly support all such endeavours to advance the scope and reach of new phenomenon, such as virtual/crypto currencies based on Blockchain in the next wave of innovative Islamic banks.

(Disclaimer: this is personal opinion of Mufti Abdul Kadir Barkatulla. It neither seeks to endorse a particular crypto currency product nor declares its Sharia compatibility or otherwise.)

WATCH: Cryptocurrency: The Digital Coin (Documentary)

Islam Channel explores the growing phenomenon of digital currencies, whilst meeting some of the people trying to forge an alliance between cryptocurrency and Islamic finance.

Mufti Abdul Kadir Barkatulla is a prominent Islamic Sharia law scholar with a strong background in economics and finance. He has been trained extensively both in traditional Islamic and modern Western educational traditions in India and UK.

As a director of Islamic Computing Centre, the Mufti published (1986) electronic databases of Qur’an, Hadith, History and Islamic Law on CD-ROMs.

As one of Sharia Judges at the Islamic Sharia Council, the Mufti acquired wide experience of dealing with socio-cultural and economic issues of Muslims living in UK and Europe.

Mufti Barkatulla contributes regularly to ethnic and mainstream print and electronic media.

Mufti is a member of the Sharia supervisory boards for a number of leading international financial institutions.

Mufti Barkatullah is a lecturer at Ebrahim College on the Dawrah Al-Hadith Programme.


  1. Edriss Rassuli

    I would to react about your article, as I was also at the beginning very enthusiastic about crypto currencies.

    I would like first to ask you from the classical book of fiqh: 1) Is the first condition of money to have an intrinsic value? 2) Do the classical books of fiqh say that common acceptance is enough (without intrinsic value)?

    I believe deeply of one fundamental: if money that people own don’t have an intrinsic value (means that the value of money is within the coin itself and not defined by outside, like gold for example), then people will get stolen, like fiat currency. Therefore, money must have an intrinsic value.
    Having an intrinsic value for money is the definite and rock solid way to protect the wealth of people.

    Blockchain is a very interesting technology, it’s implementation is at the hand of people, who can get corrupted.

    Banks succeeded to impose to the states of this world their fake riba based money. I don’t see why they cannot manipulate the cryptos in the same way.

    It is not true to think that crypto are completely decentralized, they are centralized by the one who create them. The Bitcoin Foundation and the big miners control Bitcoin, they act as powerful shareholders. Some of them have a huge amount of bitcoin, speculation must continue to get it higher and higher.
    The Etherium foundation as well control the ETH token, they will change the protocol from Proof of Work to Proof of Stake by end of 2017. The latter will reward the people who have the most ETH.

    More than 30 big banks and corporations are officially supporting the Etherium development.

    Another issue is the generation of bitcoin or etherium out of thin air every minutes. Even though it is not as bad as fiat currency riba based, it is still an issue, it is very arbitrary at the hand of people, to control the “value” of the token.

    So as a conclusion, I see as a great wisdom from the book of fiqh that money must have an intrinsic value. People can get easily manipulated. The masses still don’t understand that fiat currency is nothing.

  2. Edriss Rassuli

    About BTC: around 0.02% of BTC users have almost 50% of all the BTC in the market (

    The cost of the transfer fees for more than 50% BTC users is higher than the BTC that they own. So we create new BTC out of thin air to pay the miners, it is complete non sense in my point of view.
    Cost of electricity of BTC to maintain the blockchain is 1,000,000$ per day and as much as the consumption of Ireland.

    As a conclusion: WE MUST BE CAREFUL and the only way to protect people is to have a money with an intrinsic value. End of the story.

  3. Matthew J. Martin

    Matthew J. Martin here – Jazak allah kheir for your writing on this matter and discussion of this important topic. With respect, I felt you misrepresented my opinion on the subject of cryptocurrency. I’ve tried my best to always be quite clear on this issue: Bitcoin and other cryptocurrencies don’t meet the strictest definition of money, but they eliminate two of the worst problems with modern fiat money: creation of money through usurious debt (reba) and fractional reserve banking. The issue of Bitcoin being backed by something with intrinsic value given by Allah swa is a grey area, since it could be argued that electricity (used in bitcoin mining) is an intrinsically valuable commodity with its value being given by Allah swa. Regardless of where scholars find themselves on that side of the debate, they should appreciate that bitcoin and similar cryptocurrencies have advanced modern digital money two giant leaps away from the completely haram reba and fractional reserve based monetary system. First, the Bitcoin algorithm ensures that money cannot be issued simply through usurious debt, but rather by a demonstrated proof-of-work. Second, Bitcoin guarantees mathematical ownership of the value transferred and therefore the principle of “hand to hand” is enforced.

  4. Abdulquadri Mumuney

    I would argue that in a Digital World a piece of data has a lot of intrinsic value.

    Data is the Gold of the Digital Age.

  5. Abdul Muhaimin Rahman

    Salam. I couldn’t find the mentioned fatawa of Islamweb in their website. Can you help?

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