Assessing the Compatibility of Cryptocurrencies and Islamic Law
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Cryptocurrencies and Islamic Law
ARYA TAG HDIRI*
INTRODUCTION
Economic globalization has precipitated the widespread usage and
adoption of cryptocurrencies in countries all throughout the world, present-
ing a viable monetary alternative and investment opportunity for Islamic
financial institutions and Muslim individuals alike. In the wake of Bitcoin
and other cryptocurrencies' blossoming popularity and usage, Islamic reli-
gious authorities and governments are increasingly confronted with the is-
sue of whether the use, sale, purchase, and transfer of these cryptocurren-
cies' are compliant with Islamic law.2 Over the course of the past few years,
influential Muslim authorities and scholars in nations such as Egypt, Tur-
key, England, and Palestine have issued opinions-in some instances, legal-
ly binding-regarding the impermissibility of Bitcoin (and other cryptocur-
rencies)3 as a financial vehicle.4 Amongst the key reasons why, these
religious (and in some cases, sovereign) authorities chiefly argue that cryp-
* J.D., University of Texas School of Law.
1. See infra Part Il.
2. See Mufti Muhammad Abu-Bakar, Shariah Analysis of Bitcoin, Cryptoeurrency, and Blockchain,
BLossoM LABS, INC. (Apr. 5, 2017), https://islamicbankers.files.wordpress.com/2019/02/2017-
shariah-analysis-of-bitcoin-cryptocurrency-blockchain.pdf [https://perma.cc/7YVL-PWTU].
3. Id. Bitcoin (BTC) is the most commonly referred to cryptocurrency in opinions, fatwas, and
decrees banning cryptocurrencies written by Muslim scholars and authorities. Id. Bitcoin is the most
popular of all cryptocurrencies- -behind Bitcoin are other widely used and popular cryptocurrencies
such as Ethereum (ETH) and Ripple (XRP). See All Cgptocurrencies, COINMARKETCAP (Aug. 18,
2020), https://coinmarketcap.com/all/views/all/ fhttps://perma.cc/3YWH-7XJF[. The author be-
lieves that references to Bitcoin in these statements that lack references to any and all other cryptocur-
rencies is intended to mean all cryptocurrencies. Seemingly, Bitcoin is the only named cryptocurrency
because that is the only one that authorities are familiar with or because, in many areas of the world,
Bitcoin is or was the most prominently used cryptocurrency, at least as of a year or so ago.
4. A paper recently released by prominent Muslim scholars stated that Ether (Ethereum's native
cryptocurrency) is compliant with Islamic law if used as a utility token because utility tokens are mostly
used to power the network, and thus traditional Islamic laws and the laws governing Islamic Finance
would not apply. See Robert Stevens, Ethereum Is Halal, Conclude Prominent Muslim Scholars, YAHOO! FIN.
(Sept. 3, 2019), https://inance.yahoo.com/news/therum-ala-conclude-prominent-muslim-
152931567.html [https://perma.cc/5SJ-ECAT]. However, the discussions in this paper will solely
revolve around whether cryptocurrencies' use as currency is prohibited as gharar, and thus impermissible
under Islamic law, and whether they have rightly or wrongly been classified as so by several prominent
Muslim religious authorities and scholars.
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Assessing the Compatibility of Cryptocurrencies and Islamic Law
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