Cryptocurrencies: buying, selling, mining

Cryptocurrencies have been examined by the fatwa institutions with the classical grid: is it a valuable asset (mal)? is the contract free of gharar and riba? is the activity lawful? The verdicts issued diverge, from prudent reserve to prohibition.

The qualification of cryptocurrencies

• The International Islamic Fiqh Academy (OIC): its resolution No. 237 (24/8) on encrypted electronic currencies (24th session, Dubai, 2019) notes the great risks and the instability of dealing with these currencies, raises the question of their nature (commodity, benefit, financial asset or digital asset?) and of their legal value, and recommends deeper study before any definitive verdict.
• The Egyptian Dar al-Ifta: its Grand Mufti Shawki Allam declared bitcoin trading forbidden: gharar (uncertainty), maysir (speculation bordering on gambling) and the absence of a tangible and regulated counterpart.
• The Presidency of Religious Affairs of Turkey (Diyanet): its High Council of Religious Affairs (opinion of 28 November 2017) judged buying and selling virtual currencies not appropriate at this stage: high gharar, speculation, risk of fraud, absence of state supervision.

What may be lawful in cryptocurrencies

• Spot buying and selling: part of the contemporary scholars admits it at a known price, with actual delivery and no leverage; the institutions cited above keep reserve, even prohibition: the Muslim follows the reference body of his country and takes in the risk of total loss.
• Mining: a reward for technical work that delivers an asset: read as a ju'ala (reward on task) by those who admit it; the same question of the asset's qualification applies.
• Holding: zakat follows the qualification retained for the asset (see the zakat page).

What is excluded in cryptocurrencies

• Leveraged trading and crypto derivatives: gharar and riba combined: excluded.
• Ponzi schemes and pyramid trading: plain fraud: "do not devour your wealth among yourselves unjustly" (Quran an-Nisa 29).
• Tokens of unlawful activities (gambling, illicit platforms): excluded by their object.
• Staking with guaranteed yield: a promised fixed rate on capital = an interest structure: excluded.

Practical note on cryptocurrencies

The rule of risk remains: "do not hand your wealth over to the foolish" (Quran an-Nisa 5). On an asset that resolution 237 of the Academy (OIC, 2019) marks as a great risk and instability, that the Egyptian Dar al-Ifta forbids and that the Turkish Diyanet judges not appropriate (2017), prudence prevails: at most what one can afford to lose, understand the product, never leverage.