Halal is an Arabic word that means permissible or lawful. However, the term Halal in relation to cryptocurrency has to do with whether cryptos are lawful under the Sharai law. The Islamic community has some concerns related to whether cryptocurrency trading is Halal.
Although the Islamic community have started adopting the blockchain technology, cryptocurrency is still viewed with a wary eye. Muslims scholars hold debates revolving around the status of cryptocurrency as money. According to Shari’ah laws, usury is ‘Haram’-not permissible or lawful. So, acts making profits through interest on the money you lend is forbidden.
Is Cryptocurrency Haram?
Cryptocurrencies are not backed by physical assets like gold. This means that traders can make profits through interest. Thus, this makes cryptocurrencies haram. However, there have been many steps taken to clarify the whole issue. For one, Amanie Advisors published a white paper that states that ether is a utility token and since it is mostly used to power its network, the Shari’ah laws do not apply to it.
Equally, a report published by Muslim legal expert, Muhammad Abu Bakar titled, ‘Is Bitcoin Halal or Haram: a Sharia Analysis’ reveals that Bitcoin is halal. However, cryptocurrencies should only be used as a payment system when it offers “specific benefits and advantages over conventional systems.” What this means is that the usage of cryptocurrency as digital currency is halal, but buying and holding cryptocurrency with the aim of making a profit may be haram.
Different Views on whether Cryptocurrency Trading is Halal
On the other hand, there are two schools of thought in the Islamic community. Some have rejected cryptocurrencies as a medium of exchange while some are open-minded towards digital currencies. A typical example of the school against cryptocurrency is the Grand Mufti of Egypt, Shawki Allam. Earlier in 2018, the Grand Mufti of Egypt issued a ban on cryptocurrencies. The concerns were over the potential usage of cryptocurrencies for fraud, tax evasion, money laundry and the likes. Egypt recently raised the ban it placed on cryptocurrency this year.
The second school of thought has the United Arab Emirates (UAE) as its lead. The region is accepting cryptocurrency and has launched a blockchain campaign. The UAE has launched a blockchain campaign to place 50% of all governmental transactions on the blockchain. Meanwhile, Shaikh ’Abdul Sattar Abu Ghuddah is of the school that believes that cryptocurrency trading is sandwich between permissibility and prohibition and caution needs to be exercised when using them.
Cryptocurrencies that are Halal
Some cryptocurrencies have been identified to be Sharia-compliant. Ether, for instance, has been identified to be used to power its network making it compliant. Also, Lumen (XLM) is Sharia compliant and has even received a compliance certificate from the Shariyah Review Bureau (SRB). Another complaint token is OneGramCoin (OGC) which is backed by a minimum of one-gram gold. TSwiss Fin-tech X8 is a stable coin which has been certified by the Shariah Review Bureau(SRB).
According to a projection by the Pew Forum, the Islamic population is expected to hit 1.95 billion by 2020. For a population that takes almost 25% of the globe, a financial model that suits the foundation of the principles of Islam will be welcome. We cannot totally say that cryptocurrency trading is halal because there are still regulations to be put in place to make it Islam compliant.
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