Shariah perspective on cryptocurrency

Throughout the history of human civilisation, transformations in financial systems have profoundly influenced society, states and human lifestyles. In ancient times, trade was conducted through barter systems. Later came gold and silver coins, paper currency, banking systems and electronic transactions, each gradually reshaping the modern economy. Today, the technology-driven world faces yet another emerging reality— cryptocurrency. Particularly after the invention of Bitcoin, a new debate has arisen within the global financial landscape: Is cryptocurrency the currency of the future, or merely an unstable speculative system? Does Islamic Shariah permit such digital assets, or do they fall under prohibition? These questions have become a major subject of discussion among Muslim scholars, jurists and Islamic economists across the world.

Islam is a complete way of life that seeks to regulate human economic activities through morality, justice and public welfare. The primary objective of the Islamic economic system is not merely profit-making; rather, it aims to establish an interest-free, deception-free, balanced and humane financial order. Allah says in the Holy Qur’an, “Allah has permitted trade and forbidden usury.” (Surah Al-Baqarah, Ayat 275). This verse clearly establishes the foundation of Islamic economics. Economic activities become lawful only when they are just, transparent and beneficial for humanity.

Cryptocurrency is essentially a form of digital currency that operates through blockchain technology without direct control from any central bank or state authorities. Blockchain is a decentralised system in which transaction records are stored across numerous computers, making manipulation extremely difficult. As a result, it creates a unique structure of transparency and security. From a technological perspective, blockchain is considered one of the most significant innovations in the modern financial system. However, from the perspective of Islamic Shariah, the permissibility of any system cannot be judged solely by technological advancement; its purpose, usage, consequences and ethical implications must also be examined.

Among Islamic scholars and thinkers, two major opinions have emerged regarding cryptocurrency. One group considers it a potentially Shariah-compliant innovation, while another views it as highly risky and contrary to Islamic principles. Those who support its permissibility argue that Islam does not restrict money to a specific physical form. During the early Islamic period, gold and silver were commonly used as currency, but throughout history, various societies adopted different mediums of exchange. Imam Malik (R) famously stated that if people accepted leather as currency and it gained social value, it could also function as money. Based on this principle and through qiyas (analogical reasoning), many contemporary jurists argue that if society and markets recognise digital assets as a medium of exchange and store of value, they cannot be dismissed entirely as invalid.

On the other hand, scholars opposing cryptocurrency argue that most cryptocurrencies lack intrinsic value and are not backed by tangible assets. Their prices are extremely volatile and heavily dependent on speculation. In Islam, excessive uncertainty, known as gharar, is prohibited. The Prophet Muhammad (PBUH) forbade transactions involving excessive uncertainty (Bay‘al-Gharar). (Sahih Muslim). Critics argue that the dramatic fluctuations in cryptocurrency markets resemble gambling behaviour. Many people invest not for genuine economic activity, but for quick profit through speculation. This brings cryptocurrency close to maysir (gambling), which the Qur’an explicitly prohibits. Allah says, “O you who believe! Intoxicants, gambling, idols, and divining arrows are filth from the work of Satan, so avoid them.” (Surah Al-Ma’idah, Ayat 90).

An important question, therefore, arises: Should all cryptocurrencies be judged under the same ruling? In Islamic jurisprudence, legal rulings depend upon the nature, usage and objectives of a matter. For this reason, many researchers believe that issuing a single universal fatwa regarding Bitcoin and other digital assets is difficult. If a digital currency becomes a tool for fraud, gambling, money laundering or interest-based transactions, then it is undoubtedly prohibited. However, if blockchain technology is utilised to establish transparent, secure and interest-free financial systems, then it may hold significant promise for Islamic finance.

The primary sources of Islamic jurisprudence are the Qur’an, Sunnah, Ijma (consensus), and Qiyas (analogical reasoning). Since there is no direct textual evidence regarding cryptocurrency, contemporary scholars rely largely on ijtihad (independent reasoning) to formulate rulings. One important legal maxim here is: “Al-aslu fil-ashya’ al-ibahah” (The default ruling regarding things is permissibility unless proven otherwise). Based on this principle, some scholars argue that technological innovations should not automatically be declared haram; rather, their harmful aspects should be regulated and controlled.

Nevertheless, in Islamic economics, one essential characteristic of money is stability and widespread social acceptance. Historically, gold and silver served as standards of value because of their intrinsic worth. Even modern paper currencies are accepted due to state backing and public trust. However, most cryptocurrencies operate outside state regulation, and their values largely depend on market sentiment and speculation. As a result, many scholars hesitate to recognise them fully as “mal” (legitimate wealth or valuable property) within the framework of Islamic law.

The International Islamic Fiqh Academy under the Organization of Islamic Cooperation (OIC) has not yet issued a unanimous final verdict regarding cryptocurrency. Various Shariah boards and research institutions across different countries have expressed differing opinions. Egypt’s Dar al-Ifta described Bitcoin as highly risky and inconsistent with Shariah principles. Meanwhile, researchers in Malaysia and some Gulf countries have shown conditional openness towards its use under certain regulations. This demonstrates that the matter remains within an evolving sphere of ijtihadi discourse.

Compared to cryptocurrency itself, Islamic economists have shown greater interest in blockchain technology. This is because blockchain can significantly enhance transparency, data security and fraud prevention in financial transactions. In Islamic banking and takaful systems, smart contracts may facilitate automated and Shariah-compliant agreements. For example, contracts such as murabaha, musharakah, and ijarah could potentially be managed more transparently through blockchain systems. Such applications may reduce corruption and strengthen accountability. One of the fundamental objectives of Islam is the protection of wealth. Under the framework of Maqasid al-Shariah, if technology helps secure people’s assets and rights, it may be viewed positively.

Today, the global digital economy is expanding rapidly. Central banks around the world are also researching digital currencies. Central Bank Digital Currency may significantly transform future financial systems. This presents an important opportunity for Islamic economics. If the Muslim world fails to conduct timely research and formulate Shariah-compliant policies, it risks falling behind in the future global financial order.
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The writer is a MPhil Researcher, Islamic Studies, University of Rajshahi and teacher of Gazipur Cantonment Public School and College. He can be reached at [email protected]