All speculative investment, which contains uncertainties, is prohibited in Islam. Muslims are also encouraged to be prudent in their spending to avoid falling into debt or making extravagant expenditures, which is also one of the reasons why trading is Haram. What about cryptocurrency? Here are the details.

Are cryptocurrencies prohibited?

Islamic finance specialists declare that crypto is a speculative investment. It is therefore prohibited because it contains “gharar” or uncertainty, danger, or risk, in other words, the sale of what does not exist.

Moreover, Alkaff AlHashmi, the co-founder of Islamic Coin, stated that:

“Sharia prohibits and considers transactions based on chance or speculation rather than on an effort to produce a return as null and void.”

However, he insists that the principle does not prohibit commercial speculation in business transactions. Indeed, the laws of Sharia are sufficiently intelligent and flexible to adapt to technological changes at every era.

And Bitcoin: Is it Haram?

Interest on financial debt, commonly known as “Riba,” is Haram for ethical reasons. However, Bitcoin is halal. In fact, it is unlikely that debt would arise to a large extent in a bitcoinized world. This is for economic reasons. The risks are correctly assessed, and they can be shared legitimately instead of being transferred dishonestly.

Furthermore, the ethics of Bitcoin users rests on the principle of low preference for the present. It thus shows a clear resemblance to the cultural norms of the Islamic economy. According to Abul Ala Mawdudi:

“It is the responsibility of every member of the Muslim community to live within their means. They are prohibited from allowing their spending to exceed their income, which would compel them to seek help from others to finance their extravagant expenditures, to resort to immoral means to seize the wealth of others, or to incur debt from others to help finance their incessant needs, ultimately consuming their resources to repay their debts and joining the ranks of the impoverished.”