Bitcoin & Ethereum

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Salam Aleykum everyone.

Do you have any opinions on holding bitcoin or ethereum (only these two cryptos) because I don’t know if investing in them is licite or not. If allowed, is it also licite to trade these assets (without leverage)?

Thank you in advance for your answers !

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Yes generally scholars say it’s halal to invest and trade Bitcoin and Ethereum.
Obviously you can’t use any leverage (as normal with any financial market investing).

I’m not your financial advisor and you didn’t ask…but bear in mind of course that crypto can be very lucrative but you can also lose all your money by investing in it. It’s sort of like a startup in a sense.

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with regards to BTC, @Muslim_Bitcoiner wrote this piece for the Zoya Blog

The blog post did generate some lively discussion, worth checking out as well.

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I find it interesting that people who discuss whether cryptocurrencies are halal to trade rarely mention gharar. They just discuss Riba. However Islam bans participation in contracts with excessive risk and/or uncertainty. When you are trading cryptos, aren’t you taking on too much risk? It can go up 10X or drop 10X.
I am curious to know how people justify the absence of gharar.

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Asalamu alaikum.

There are certain fatawa that have deemed Bitcoin and crypto Halal and some have deemed them haram. I can’t speak for Ethereum and other altcoins, but I feel confident in saying that, Bitcoin is not only halal, but it’s imperative that Muslims study it as an alternative to the Riba based financial system of fiat that we all currently use. Bitcoin is open, permissionless, censorship resistant, actually decentralized, and has a fixed supply. Energy must be expended to “mine” more btc; no one can just print themselves more btc. And everyone that participates in using the Bitcoin network must abide by the same rules as everyone else. No one person has special privileges in the Bitcoin network like we observe with fiat. In this way, we can look at Bitcoin as a commodity that is digital in nature.

With that said, I’d personally recommend staying away from Ethereum and other altcoins, as they do not exhibit the aforementioned monetary properties of Bitcoin. For example, when Ethereum was launched, there was a “pre mine”, where the founders gave themselves over 70% of the initial supply before releasing Ethereum to the general public. Also, The Ethereum foundation has arbitrarily changed the consensus rules and monetary properties to benefit themselves and allow them to have more control over the network. For example, one of the changes made to Ethereum was the move from proof-of-work to proof-of-stake, where energy is no longer required to mine the token. Instead, the holders of ethereum can “stake” their holdings to receive more ethereum without requiring energy. This leads toward centralization as the biggest holders of ethereum have the most control of the network. Because of these properties, we can look at Ethereum and other altcoin projects as securities, and therefore, they are not money. They are more like stocks that can be controlled and regulated by government and central banks.

In short, I recommend learning and reading about Bitcoin only. Check out the article that I wrote for Zoya that @FarhanfromZoya has linked to. Also check out this podcast episode that talks about Bitcoin being the most Islamic form of money. I highly recommend listening to this:
https://saifedean.com/podcast/59-bitcoin-the-most-islamic-form-of-money-with-harris-irfan

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As a lay Muslim, I find your logic to be based on your personal feelings and opinions. Arabic is an incredibly precise language. That precision is then refined by adjectives e.g., fard ayn and fard kifayah. Unfortunately I view the analogy offered as simplification that I’d offer to my four year old but wouldn’t dare using with my ten and eight year olds. In the western world the lay Muslim is pretty educated, has some degree of proficiency in Arabic, and logical. Frankly I’m a beginner student of knowledge but I’m left very confused. Bitcoin and all cryptocurrencies are unstable and the currency of choice for criminals. Further confusion on my part is if Bitcoin is like a commodity the rules are even more complicated

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Some reads on this topic:

Egyptian Fatwa on bitcoin

Indonesian Fatwa on bitcoin

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I’ll flip this comment right back at you, and say why don’t Muslims mention the gharar or uncertainty in the current money that we’re using? Where is the certainty in fiat money? The price or purchasing power of all fiat currencies has massively depreciated (and fluctuated) in the last several decades. It’s so uncertain because we don’t know when or how much the central banks will print more fiat tokens. We don’t know when or how severe the next boom or bust will be. We don’t know how much the pound or yen will fluctuate relative to the dollar. Why aren’t scholars publicly denouncing the gharar in government issued monies?

If we’re going to mention the gharar in Bitcoin, I think it’s only fair to compare it to the existing monetary system, otherwise the discussion won’t be meaningful.

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