Is Bitcoin Haram? UAE Experts Say It May Be ‘The Most Islamic Form of Money

As Bitcoin’s influence continues to grow in global finance, the Islamic world faces a profound question: Is Bitcoin haram or halal? This debate, fueled by Islamic scholars, economists, and financial experts, revolves around whether the world’s most popular cryptocurrency aligns with Islamic principles of trade, wealth, and finance. In this article, we dive into the core arguments from both sides, referencing the latest insights, facts, and figures from 2024.

What Makes Money Halal or Haram in Islam?

To understand Bitcoin’s position, it’s essential to first understand what defines money as halal (permissible) or haram (forbidden) in Islamic finance. Shariah-compliant financial transactions must adhere to specific principles, including:

• Prohibition of Riba (Interest): Earning or paying interest is strictly prohibited in Islam, as it promotes unjust enrichment.

• Avoidance of Gharar (Excessive Uncertainty): Business transactions should not involve significant uncertainty, speculation, or risk.

• Prohibition of Maysir (Gambling): Speculative, high-risk transactions resembling gambling are not allowed.

• Asset-Backed Transactions: Economic activity must be linked to tangible, real-world assets to ensure the creation of actual value.

Bitcoin’s unique nature as a decentralized, digital, and non-physical currency presents challenges to these principles, making its halal or haram status a subject of intense scholarly debate.

Arguments for Bitcoin Being Halal

1. Bitcoin is Decentralized and Transparent: Unlike fiat currency, which is controlled by central banks, Bitcoin operates on a decentralized blockchain network. Each transaction is recorded on a public ledger, ensuring complete transparency. Islamic finance values transparency, making this aspect of Bitcoin potentially halal.

2. Absence of Riba (Interest): Bitcoin does not pay or earn interest. Unlike fiat money, which is often tied to debt and interest-based lending, Bitcoin’s creation and trade are not dependent on interest. According to many Islamic finance experts, this absence of riba aligns Bitcoin with the principles of halal finance.

3. Recognition as “Mal” (Valuable Property): According to Islamic jurisprudence, money must be recognized as “mal,” or something with value and utility. Bitcoin’s growing acceptance as a medium of exchange and store of value meets this criterion. Many Islamic scholars now argue that since Bitcoin can be exchanged for goods, services, and other currencies, it qualifies as “mal.”

4. Spot Trading Complies with Shariah Law: The hadith of the Prophet Muhammad (PBUH) mentions that commodities like gold and silver should be exchanged “hand to hand.” Bitcoin, when traded on spot markets, follows this principle since the transaction is settled instantly, rather than through delayed payments or futures contracts.

5. Potential for Ethical Use: Bitcoin’s use case extends beyond speculation. It allows for direct donations, remittances, and payments without the involvement of banks. In crisis zones like Gaza, humanitarian aid can only be sent via Bitcoin due to traditional banking restrictions. This real-world utility aligns with Islam’s goal of promoting ethical and charitable causes.

Arguments for Bitcoin Being Haram

• High Price Volatility and Gharar (Uncertainty): Critics argue that Bitcoin’s volatility contradicts the Islamic principle of avoiding gharar (excessive uncertainty). Bitcoin’s price can swing wildly, making it a speculative asset. This unpredictability has led some Islamic scholars to classify it as haram since speculation is akin to gambling (maysir) in Islamic finance.
• No Intrinsic Value: Opponents argue that, unlike gold, silver, or other commodities, Bitcoin has no intrinsic value. It’s a digital code whose value depends on perception and market demand. Traditional Islamic jurisprudence views money as a means of exchange backed by real assets, which Bitcoin’s critics claim it lacks.
• Association with Illegal Activities: Because Bitcoin transactions are anonymous, it has been linked to illegal activities like drug trafficking and money laundering. Some scholars believe this association disqualifies Bitcoin as halal, as Islam promotes lawful trade and prohibits illegal activities.
• Absence of State-Backed Authority: In many interpretations of Islamic finance, money must be issued and regulated by a governing body or state authority. Since Bitcoin is decentralized and unregulated, some Islamic scholars question its legitimacy as a currency.

Latest Developments in 2024

1. Adoption in Muslim-Majority Countries: Bitcoin adoption in Muslim-majority countries has surged. Nations like Indonesia, Malaysia, and the UAE are seeing more acceptance of Bitcoin, especially after notable Islamic finance scholars began accepting it as a form of halal money. Conferences like the “Bitcoin MENA Conference” have seen heated debates among scholars and industry experts about Bitcoin’s place in the Islamic economy.

2. Key Fatwas Issued on Bitcoin: Prominent Islamic scholars have issued fatwas (Islamic rulings) on Bitcoin. Some scholars from Indonesia’s National Shariah Council declared Bitcoin as haram, citing its speculative nature. However, in 2024, notable scholars from the UAE acknowledged that Bitcoin’s ability to promote financial inclusion and its alignment with spot trading principles could classify it as halal.

3. Global Price Surge: Bitcoin’s value hit $100,000 in 2024, according to AP News. The price increase fueled the perception that early adopters gained “unearned wealth,” which some scholars argue violates the principle of fairness in Islamic finance. However, proponents counter that early investments are not inherently haram, as long as the transaction is transparent and the risk is known.

The Role of Islamic Banking in the Bitcoin Debate

Islamic banking institutions face challenges in adopting Bitcoin. Unlike traditional currencies, Bitcoin’s fluctuating value makes it difficult to structure Shariah-compliant contracts like Murabaha (cost-plus financing) or Ijara (leasing). However, some Islamic fintech startups have introduced Bitcoin-backed financial products to attract Muslim investors.

One example is Islamic Crypto Exchanges, which operate under Shariah-compliant guidelines, offering spot trading only and excluding futures, options, and leveraged products.

Can Muslims Use Bitcoin? A Balanced Perspective

For Those Who Believe It’s Halal: 

• Intent Matters: If Bitcoin is used for ethical transactions (e.g., remittances or humanitarian aid) and not speculation, it’s seen as permissible.

• Trade on Spot Markets: Avoid derivatives, futures, or margin trading, as these are not Shariah-compliant.

• Consult with a Scholar: Seek guidance from Islamic finance experts to ensure you’re compliant with Islamic rulings.

For Those Who Believe It’s Haram

1. Avoid Speculation: Steer clear of speculative Bitcoin trading.

2. Look for Alternatives: Consider Islamic banking products that offer Shariah-compliant investments.

The debate on whether Bitcoin is haram or halal will continue in 2024. While some scholars argue it’s speculative, volatile, and lacks intrinsic value, others point to its potential for ethical use, transparency, and financial inclusion. For Muslims seeking guidance, it’s essential to consult with trusted Islamic scholars and stay updated on new fatwas and developments in Islamic finance. Ultimately, the answer may depend on the intent, use, and trading method employed by the user.