Is crypto halal or haram?

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Is crypto halal or haram? In this article, we try to understand this point; first of all, I am not a mufti or qualified Islamic scholar, nor am I giving a fatwa in this article. I will present the point of halal or haram regarding cryptocurrency trading in the context of my opinion with my limited knowledge of Islam.

Usury in Islam

You can also agree, and if you don’t agree with the opinion, that is your fundamental right; before considering cryptocurrency trading as halal or haram, let us understand a little about interest in Islam. In the early days of Islam, all the rich people kept money with them, and whenever a poor man needed money, he would give him the money he had without any use. 

Is crypto halal or haram? They did not help anyone; if a poor man borrowed money from a rich man, he would say to him, “If we give you money.” So how much percentage of the interest will you give us when you return the money? So instead of lending money to the poor, rich people started charging them a percentage of interest which caused the usury system to be founded. 

Is crypto halal or haram?

But when usury was forbidden in Islam, this system was discouraged that if someone had more money than he needed, he should give an excellent loan to someone in need. And the same amount he will return to what a man would have received from another man for his need. Due to this, people who used to collect wealth with them were also discouraged. 

Is crypto halal or haram? When a person lends money to another person, and if in return he demands any percentage of the loaned money, it will be classified as interest. To understand the halal and haram concepts, we have divided cryptocurrency trading into two parts: sports trading and leverage trading. 

Spot Trading in the Context of Halal or Haram

First, we talk about spot trading; spot trading is halal in my view, and the money earned from it is also halal. Because just like we buy anything we need from the market with our regular currency notes or any transaction with money, whatever two people agree on the time, place, and price of a product, they transact in it. 

Is crypto halal or haram?

Is crypto halal or haram; In spot trading, two people similarly agree that one seller of cryptocurrency at a specific price and the other buys cryptocurrency from him at that particular price, day, time, and platform. And whenever two people agree on the price, place, and use case of a product and pay for it on the spot, then the transaction of that thing is considered halal that is why spot trading, in which you buy and sell on the spot, would be a halal concept. 

Margin Trading in the Context of Halal or Haram

Now we will talk about leverage trading; there are two types of leverage trading, one is called margin trading, and the other is called futures trading. For example, in margin trading, you have some BTC on an exchange, and you want to do a trade. The exchange will pledge your BTC and give a coin for trading to you, whatever you tell them to trade on. 

Is crypto halal or haram? the exchange will charge you a fee for what you have pledged, which will be determined by exchanges. In Islam, when you needed money, you used to borrow something valuable from someone else by pledging it, and after returning the loan, you used to take the pledged item back to yourself without paying any usury. 

So this concept is halal in Islam, but if you charge a percentage on the pledged item, then that item will be classified as usury. So it is haram, just like in margin trading when exchanges charge you some money on your pledged BTC, then it comes under the interest category, so margin trading is haram from an Islamic point of view. 

Margin Trading in the Context of Halal or Haram

Now let’s talk about futures trading; in futures trading, you take different buy and sell trades. So in this trade, also you take leverage from the exchange, i.e., suppose you have $1000, and the exchange lends you $5000. So that you trade with $6000, and if you set a trade with six thousand dollars, then whatever profit you get on it, you will get the same percentage, which is forbidden in Islam.

Is crypto halal or haram?

Is crypto halal or haram? the original amount you had was one thousand dollars, but the profit you earned was six thousand dollars, so this is usury in the eyes of Islam. Similarly, if those trades go into loss, your thousands of dollars will be lost in a few minutes, so the chance of loss here is also very high. Islam also does not allow you to harm yourself in the temptation of earning more money. 

Some people think there is profit and loss, so because of this argument, future trading is also called halal. As I said at the beginning of this article, I am not an Islamic scholar; I have formed an opinion regarding Halal and Haram. Many literate people understand Islam, yet they have yet to issue any fatwa. 

Is crypto halal or haram? The main reason is that cryptocurrency has not yet been accepted as a currency by almost all Islamic countries. Until cryptocurrency is introduced as a currency in an Islamic country and has the backing of a government, it is impossible to issue a full fatwa about it or declare its currency as halal and haram.

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