Islam is the second most widely practiced religion in the world, with over 1.8 billion followers. Like many religions, Islam provides guidance for every aspect of life, and these rules are rooted in Sharia law.
This includes important areas such as personal behavior, hygiene, health, finances, and investment decisions.
While countries like the United States have national laws and regulations to control and monitor financial systems, Muslims also follow an extra layer of religious financial rules.
These Sharia-based principles help guide Muslims in making decisions that align with their faith.
In recent years, the rise of cryptocurrency has sparked wide discussions in the Islamic world. Scholars, Islamic banks, and financial experts have shared different views on whether crypto is halal (permissible) or haram (forbidden).
Some believe that many areas of the crypto world can be accepted under Islamic law, while others strongly argue that some crypto activities go against Sharia and are therefore not suitable for Muslims.
The decision made by Islamic scholars regarding crypto can significantly impact the growth of the crypto industry, especially considering the large global Muslim population.
If Islamic communities widely accept cryptocurrency as halal, it could result in massive growth for crypto-related products and services.
This article aims to break down the core ideas of Islamic finance and how they relate to crypto lending — a fast-growing area in the crypto space.
We’ll explain what halal and haram mean, explore key financial rules in Islam, and assess whether crypto lending aligns with those rules.
What Do Halal and Haram Mean?
In Islam, the words halal and haram are fundamental. Halal means something that is lawful or permitted, while haram refers to anything that is prohibited or sinful.
When it comes to cryptocurrency, if a crypto service is considered halal, it means Muslims can use it or invest in it without going against their religious beliefs. On the other hand, if it’s seen as haram, it means it’s not allowed, and Muslims must avoid it.
Sharia Laws That Apply to Finance
Sharia law covers not only how Muslims live and worship but also how they handle money and conduct business. Before issuing any opinion on financial matters, Islamic scholars must ensure their views are completely in line with Sharia guidelines.
One key rule in Islamic finance is the complete ban on interest, also known as riba. This means Muslims are not allowed to participate in any form of interest-based lending — whether that’s in the form of traditional bank loans, mortgages, or even crypto loans.
Also, under Sharia law, making profits through gambling or investing in industries such as alcohol, pork, tobacco, and pornography is strictly forbidden. These activities are clearly identified as haram.
Even though there are no specific Sharia laws that directly mention cryptocurrencies, Muslims can use the broader Islamic finance principles to evaluate whether a crypto-related activity is halal or haram.
Are Cryptocurrencies Like Bitcoin Halal?
Many Muslims often ask, “Is Bitcoin halal?” The answer isn’t black and white, but many scholars agree that cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin are not inherently haram.
However, how they are used plays a big role in determining their permissibility under Islamic law.
For a cryptocurrency transaction to be halal, it must be fair, ethical, and not exploit others. Activities like fraud, bribery, or manipulation would make the transaction haram, even if the asset itself is halal.
Cryptos used for payments or cross-border money transfers at low costs are more likely to be accepted as halal by Islamic scholars.
In 2017, Mufti Muhammad Abu-Bakar, a former Sharia advisor at Blossom Finance, stated in a report that Bitcoin and other cryptocurrencies can be considered halal.
He explained that like gold or fiat currencies, cryptocurrencies are subject to market supply and demand and can serve as a store of value and a medium of exchange.
While some critics argue that cryptocurrencies are used for illegal activities, Abu-Bakar responded by saying that using something for a bad purpose doesn’t make the item itself haram.
For example, grapes can be used to make wine, which is haram, but grapes themselves are not haram.
What Other Islamic Scholars Say
Many Islamic scholars have shared their views on crypto. For example, Mufti Faraz Adam, a UK-based Islamic fintech expert, considers Bitcoin to be halal.
He uses Islamic terms such as “Maal” and “Taqawwum”, which suggest that Bitcoin has real value and can be legally owned and traded.
Likewise, Mufti Muhammad Abu-Bakar (associated with SilkBank Limited) believes that cryptocurrencies can be lawful in countries where they are recognized as legal forms of payment. In such cases, Muslims are allowed to buy, sell, and trade them.
Is DeFi Halal?
Decentralized finance (DeFi) platforms operate without centralized control and use smart contracts to execute transactions. DeFi has grown rapidly and has become a major focus of debate among Islamic scholars.
Many DeFi projects reward users with interest for staking crypto — a process similar to earning interest from savings accounts. Because earning or paying interest is strictly forbidden in Islam, these types of DeFi protocols are not considered halal.
However, not all DeFi platforms are the same. Some developers are now building Sharia-compliant DeFi solutions, aiming to offer financial tools that align with Islamic principles.
If such platforms continue to grow, they could open the door to a new era of Islamic-compliant digital finance.
Is Crypto Lending Halal or Haram?
As mentioned earlier, Sharia law strictly prohibits interest-based lending. This rule applies across all forms of lending — whether in fiat currency or cryptocurrency. Therefore, if a crypto loan involves the borrower repaying with interest, it is not considered halal.
The primary purpose of this rule is to prevent exploitative financial practices, which often take advantage of those in need.
Some Islamic financial institutions have begun offering interest-free crypto loans, but these are still very rare and not widely available.
Additionally, many crypto lending platforms offer users the chance to earn interest by saving or lending their crypto.
From an Islamic point of view, this type of reward system would also be considered haram because it involves interest.
Before participating in any form of crypto lending, it’s advised for Muslims to consult with a qualified religious authority to ensure that their actions are Sharia-compliant.
Final Thoughts
The crypto industry has seen impressive growth over the years, but there is still huge potential for expansion — especially within the Muslim community.
One way to promote growth in this sector is to develop Islamic-friendly financial services that follow Sharia law.
While some parts of the crypto world — like using Bitcoin for payments — can be halal, others like crypto lending, gambling platforms, or staking for interest clearly go against Islamic principles and are considered haram.
As the crypto world continues to innovate, there’s a growing possibility that more Sharia-compliant crypto products and services will be created.
These innovations could open the door for Muslim investors who want to participate in crypto while staying true to their faith.
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