• Islam and cryptocurrency, halal or not halal?

    In Dubai’s decades-old Gold Souq, customers from around the world haggle over bangles and necklaces. Elsewhere in the emirate, the region’s top centre for gold trade, bullion is playing a new role in financial engineering.

    A local start-up company founded last year, OneGram, is issuing a gold-backed cryptocurrency – part of efforts to convince Muslims that investing in cryptocurrencies complies with their faith.

    The global surge of interest in bitcoin, ethereum and other cryptocurrencies extends into the Gulf and Southeast Asia, the main centres of Islamic finance.

    But because they are products of financial engineering and objects of speculation, cryptocurrencies sit uneasily with Islam. Islamic law principles, in addition to banning interest payments, emphasize real economic activity based on physical assets and frown on pure monetary speculation.

    Halal or not halal
    The speculative nature of cryptocurrencies has triggered debate among Islamic scholars over whether cryptocurrencies are religiously permissible. Cryptocurrency companies are seeking to sway the debate by launching instruments based on physical assets and certified as valid by Islamic advisors.

    Each OneGram cryptocurrency unit is backed by at least a gram of physical gold stored in a vault. The idea is to limit speculation.

    “Gold was among the first forms of money in Islamic societies, so this is appropriate,” said Ibrahim Mohammed, the Briton who founded the firm with other investors last year.

    “We are trying to prove rules and regulations from sharia are fully compatible with digital blockchain technology.”

    Tens of millions of dollars worth of the currency has been issued so far. About 60 percent of the planned number of coins remains to be sold; OneGram hopes to issue them all before listing them on exchanges around the end of May.

    OneGram obtained a ruling that its cryptocurrency conforms with Islamic principles from Dubai-based Al Maali Consulting.

    It is one of dozens of advisory firms around the world that offer their opinion on whether financial instruments meet Islamic law standards.

    In Malaysia, HelloGold launched an initial offer of its gold-backed cryptocurrency in October, receiving approval from Islamic scholars at Kuala Lumpur-based Amanie Advisors.

    Manuel Ho, HelloGold’s chief marketing officer, said its coin was Islamic as transactions occurred within a defined period, making them less volatile and addressing the issue of ambiguity of pricing.

    Among other experiments, United Arab Emirates-based Halal Chain conducted an initial coin offer in December which is linked to data on Islamically permissible goods.

    Islamic law committees
    Only around 20 to 30 percent of banking in the Gulf and Southeast Asia follows Islamic principles; many Muslims use conventional finance if it offers higher returns or more convenience.

    But the issue of religious permissibility is influential and could determine whether Islamic funds and institutions, which are formally committed to the principles of Islamic law, deal in cryptocurrencies.

    “One of the biggest difficulties is that there is so much to talk about, and so little certainty in the way crypto will be playing out,” said Ziyaad Mahomed of HSBC Amanah in Malaysia. He chairs its Sharia Committee, which oversees Islamic transactions.

    National “sharia authorities” have not ruled on whether cryptocurrencies are permissible, and while several global bodies recommend standards for Islamic finance, none has the authority to impose them. Many governments seem ambivalent, worried about the potential for instability, but unwilling to lose the chance of benefiting from new technology.

    The Saudi Arabian and UAE central banks warned their citizens about the risks of trading bitcoin but have not imposed outright bans.

    That leaves Islamic investors to choose between sometimes conflicting judgments by scholars at advisory firms, financial companies and academic institutions.

    One of the earliest rulings came in 2014, when California-based academic Monzer Kahf, a prominent author of Islamic finance textbooks, deemed bitcoin a legitimate medium of exchange, though vulnerable to manipulation.

    Since then, Islamic jurists in South Africa have ruled in favour of cryptocurrencies, arguing they have become socially acceptable and commonly used, said Mahomed.

    In October, however, the Durban-based Darul Ihsan Centre refrained from endorsing them, citing concern over potential pyramid schemes. Some scholars in Turkey, India and Britain have labelled them impermissible; Egypt’s Grand Mufti declared in January they should not be traded.

    Complicating the debate is the fact that there are hundreds of digital coins or tokens, each with unique features related to distribution, mining and trading, said Farrukh Habib, research officer at Malaysia-based International Shariah Research Academy for Islamic Finance.

    “They are also very different in terms of their underlying commodities, projects or businesses, so it’s not appropriate to have a blanket sharia ruling for all,” said Habib. He is involved in a project to categorise cryptocurrencies based on sharia-compliance criteria.

    “Most of the existing sharia rulings either deal with only bitcoin or include all types of cryptocurrencies, disregarding their peculiarities.”

    Another problem is that many Islamic law scholars have trouble understanding the complexities of digital currencies, said Harris Irfan, managing director at Cordoba Capital in London.

    “I would caution against accepting any fatwas from community scholars on the subject of fiqh al-mu’amalat, the jurisprudence of transactions, which is a highly complex area of sharia.”

    Irfan chairs the UK Islamic Fintech Panel, a think-tank that is drafting guidelines for accreditation of sharia-compliant fintech products, including cryptocurrencies.

    Mahomed said some degree of consensus had emerged globally that cryptocurrencies were a form of wealth, or maal – one step towards acceptance.

    But scholars have yet to rule conclusively on whether cryptocurrencies are in fact currencies. This is important for Islamic tax payments called zakat, and for inheritances.

    “Overall, more evidence is needed to reach a consensus, at least until higher bodies pronounce themselves on the issue, such as the Islamic Fiqh Academy,” Mahomed said, referring to an influential Jeddah-based institution.

    Abdulqahir Qamar, director of the Fatwa Department at the Fiqh Academy, told Reuters that the academy had not issued any resolutions on cryptocurrencies but was planning to discuss the subject during one of its official sessions this year.

    While there is no firm timeframe, the academy will also seek to organise seminars with scholars on the matter, he said.

  • Dividing an Estate for Inheritance

    (1) In general, every heir, regardless of which household he/she belongs to, has a specific share of the total estate. The default is that each individual part of the estate (like each plot of land, for example) is divided among all heirs based on respective shares. However, if the heirs mutually agree, then the estate could be divided in a way such that one person or family has one entire plot while another one has another plot, as long as everyone still receives his/her respective share.
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  • Basic Principles

    You are not allowed to allocate your wealth to whomever you wish as estate division; rather, the Sacred Law prescribes inheritance laws that are obligatory.

    For a precise division of your estate, you would have to consult a scholar and provide details of which of your family members are alive. For example, you did not mention your mother. If she were alive, it would affect the estate division as the mother is entitled to either one-third or one-sixth, depending on the number of siblings or children of the deceased.

    For example your husband would get one-half of the estate, and your father would get the other half. Your brothers would receive nothing due to the presence of your father.

    If You Had Children…

    In ALL of the cases listed below, your husband would get one-fourth, and your father one-sixth. Now…

    –If you had only one daughter and no sons, she would get one-half of the estate, and that which remains would go to the father [in addition to his one-sixth mentioned above].

    –If you had two or more daughters and no sons, those daughters would equally share two-thirds of the estate.

    –If you had one son and no daughters, the son would receive the remaining amount.

    –If you had two or more sons and no daughters, those sons would equally share the remaining amount.

    –If you had one or more sons along with one or more daughters, then the remaining amount is shared among those children, each son receiving double of each daughter, as is explicitly stated by Allah Most High in the Qur’an, “And for the male is a portion equal to that of two females” (4:11).

    [Maydani, Lubab; Razi, Tuhfat al-Muluk]

    And Allah alone gives success.

  • Walaikum assalam,

    There are a few possibilities here:

    If the wealth of the other person is more than 50% haram, it is not permitted to transact with them or accept their gifts;

    If their wealth is less than 50% haram, it is permitted;

    If you know that the very item you received was acquired in a purely haram way (such as with 100% haram money), it would not be permitted to accept such an item;

    When in doubt, or uncertain, we assume that the other person’s wealth is mostly halal, even if they are non-Muslims, and we can deal with them. However, whenever there is genuine reasons to doubt, it would be more cautious to avoid dealing with the person. At the same time, it is obligatory for us to have a good opinion of all, even non-Muslims, and we cannot spy on others or assume the worst of them. [Based on texts from Ibn Abidin, the Fatawa al-Hindiyya, and Ahsan al-Fatawa.]

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