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Can/Should Muslims Invest in Bitcoin and Cryptocurrencies?

Muslim invest in crypto

Money is an essential part of everyone’s life. If you are religious and a devout Muslim, money matters can have eternal consequences. Belief systems do impact financial decisions, business perspectives, and economies. Amongst other classic opportunities, like gold, many muslims invest in Bitcoin and cryptocurrencies nowadays. Is it sharia or Islam compliant thought?

If you are a crypto-enthusiast and your day-to-day life is guided by Islamic religious laws (Sharia or Shariah or Shari’a, literally meaning “the way”), you must know whether cryptos are “haram” (forbidden and unlawful) or “halal” (permissible and lawful)? Should you invest in Bitcoin? This article will try to guide you on whether cryptos are Shariah-compliant or not.

What do Shariah Experts say about Cryptocurrencies?

Cryptocurrency is considered as a legit commodity that can be exchanged, as per Datuk Dr. Mohd Daud Bakar, the current chairman of the Shariah Advisory Council at Malaysia’s central bank, Securities Commission of Malaysia (SC), the Labuan Financial Services Authorities, a shariah board member at many financial companies, and a shariah compliance expert.

Adoption as well as investments in cryptocurrencies remains low in most Muslim countries. This is mainly because people in those countries are not sure whether investing or holding this commodity will be compliant with Islamic laws, also called Shariah or Sharia laws.

Datuk Dr. Mohd Daud Bakar has recently said at the SCxSC Fintech Conference 2020 that the Muslim investors need more time for a proper understanding of cryptocurrency from the perspective of Shariah. Bakar is also a shariah board member at a number of financial institutions, which includes the Accounting and Auditing Organisation for Islamic Financial Institutions, the Accounting and Auditing Organisation for Islamic Financial Institutions, Salama Islamic Insurance, Saudi Arabia’s Jadwa-Russell Islamic Fund, Dubai’s Morgan Stanley, Dubai’s Noor Islamic Bank, and London’s Bank of London and the Middle East.

The SC Shariah Advisory Council in Malaysia has said that Muslims can invest in and trade cryptos (which includes Bitcoin) on any government-registered cryptocurrency exchange. Datuk Dr. Mohd Daud Bakar went on to underscore the point that cryptocurrencies are not legal tenders but they are legitimate commodities that you can exchange within the market. However, he also said that Muslims can deal with cryptos as long as they are not backed by gold, silver, and other similar “ribawi items”.

In an interview, Bakar has emphasized that cryptocurrency is a medium of exchange and Muslims can’t be stopped from using these commodities as a medium of exchange. He drew its parallel to e-tickets or any other commodity in the market. The Sharia expert, chairman of the Shariah Advisory Council at the central bank of Malaysia, and Securities Commission of Malaysia has elaborated by saying:

“This new development can open up so many interesting areas in Malaysia, in which crypto can be deemed as investment assets where people can buy and hold for trading.”

Some Muslim countries and scholars issued “fatwa” (a formal ruling or interpretation on a point of Islamic law) 2-to-3 years back against Bitcoin and other cryptocurrencies. However, times have changed a lot since then. With the enormous changes in the crypto industry, the views of most Islamic scholars have changed.

While most consider cryptos as permissible or “halal” in principle, some still consider it forbidden or “haram”. Let’s check both the views:

View #1: Cryptocurrency is “Halal” or Permissible in Principle

The Islamic scholars who consider Bitcoin and other cryptocurrencies as “halal” say that these digital currencies satisfy both criteria and definition of property (called “mal”) and money. These scholars highlight the famous legal maxim that says everything is permissible in financial and business transactions until and unless it is clearly found contradictory to Shariah principles.

The scholars who say cryptocurrency is halal say that cryptos are permissible in principle. These digital currencies can be considered as money because of the following attributes:

  1. Cryptos are considered valuable things among people.
  2. They are considered as a medium of exchange by everyone or a substantial group of people.
  3. Bitcoin and other cryptocurrencies are considered as a measure of value.
  4. These digital currencies serve as a unit of accounts.

Since Bitcoin (BTC), Ethereum (ETH), and other altcoins fulfill most of these conditions, they are acceptable as money.

Mufti Faraz Adam, Mufti Muhammad Abu-Bakar, Ziyaad Mahomed (Shariah Committee Chairman of HSBC Amanah Malaysia Bhd), and many other scholars are in favor of cryptocurrencies.

The fatwa center of South African Islamic seminary, Darul Uloom Zakariyya, has underscored the point that Bitcoin and other cryptocurrencies fulfill the conditions of a commodity (called “mal”) and therefore it is permissible for trade. However, they also say that cry[ptos must be approved by relevant government authorities for them to be qualified as currency.

View #2: Cryptocurrency is “Haram” or Prohibited

The Islamic scholars who consider Bitcoin as “haram” or prohibited say so because of the following reasons:

  • It is not legal tender.
  • Its issuer is not known.
  • No central authority or government backs it.
  • It is highly speculative in nature and therefore not stable.
  • It can be easily used for money laundering as well as illegal processes.

This view is held by the Grand Mufti of Egypt Shaykh Shawki Allam, the Turkish government’s religious authority, Fatwa Center of Palestine, Shaykh Haitam From the UK, and others.

Should Muslims Invest in Bitcoin and Cryptocurrencies?

Yes, Muslims should invest in cryptocurrencies, including Bitcoin. Let’s analyze and give counter arguments (as per Shariah laws) on a point-to-point basis to prove why Bitcoin and other cryptocurrencies are legitimate (halal) and not impermissible (haram).

1. Bitcoin is not a Legal Tender: Does that make it Haram?

As per Shariah laws, the main criteria for being considered as money is its acceptability by people (either through widespread voluntary acceptance or forced upon people through laws). It is not necessary to have the legal tender status in principle for being acceptable as money. Therefore, the premise of this argument to consider Bitcoin and other cryptocurrencies as “haram” is debunked.

2. Bitcoin’s Issuer is Not Known and it is Not Backed by any Central Authority or Government: Does that make it “Haram”?

The naysayers say that Bitcoin doesn’t have any central authority for monitoring and guaranteeing it. However, their apprehension is debunked by the advocates of Bitcoin and other cryptocurrencies because they say there is a governing framework that includes a set of rules. These rules are voluntarily adopted by the users of the digital currency as well as the stakeholders through mutual acceptance. The advocates of Bitcoin say that these rules are available in a published format and are openly available for everyone. This framework is subjected to criticism or revision from anyone and at any point in time.

Mathematically, it is impossible to manipulate the laws and rules governing BTC mining as well as the process of the transaction. This is because cryptographic technology that underlies the currency prevents any such manipulation. It is important to note that the blockchain technology used by Bitcoin and other cryptos is much more secure than any centralized system employed by a central bank or government.

The SWIFT network is the inter-bank payment system used widely across the globe by the traditional financial system. A mega digital money heist took place in February 2016. US$1-billion was stolen from the central bank of Bangladesh’s account of the Federal Reserve Bank of New York. This proves that support from a government or central bank doesn’t guarantee to stop money heist.

Preservation and protection of wealth ( Maqasid al-Shariah) is one of the major concerns of Shariah.

In many cases, wealth is destroyed by governments and central banks through inflation. Many historical instances are there:

  • Weimar Germany (1923)
  • Greece (1944)
  • Hungary (1946)
  • Yugoslavia (1994)
  • Indonesia (1999)
  • Zimbabwe (2008)

In recent times, a similar case happened in Venezuela. A major economic crisis erupted from the country’s failed monetary policy as well as artificially low enforced exchange rates. Extremely high inflation, estimated at around 500%, has been recorded. At one point in time, Venezuelan people had to carry a barrel full of paper currency to buy a loaf of bread.

Bitcoin’s strength lies in the lack of a central authority. That’s why some Venezuelans have started using Bitcoin over the government-mandated Bolivar. They consider BTC more reliable in terms of a store of value as well as a unit of an exchange than fiat money.

3. Cryptocurrencies are Not Stable, They are Highly Volatile: Does that make them “Haram”?

The Islamic scholars who consider Bitcoin and other cryptos as haram or impermissible say that the exchange rate of Bitcoin is highly volatile and they are not stable.

Yes, trading Bitcoin and other cryptocurrencies are speculative in nature just like any other financial assets such as precious metals (gold, silver, etc.), fiat currencies, and other commodities. It is also true that the exchange rates of Bitcoin and other cryptos are higher than more volatile and therefore riskier than the fiat currencies. That’s why it is always advised that any investor or trader lacking professional experience and

sophistication with regard to foreign exchange trading should avoid crypto trading.

However, does that mean Bitcoin and other cryptocurrencies would be called “haram” or impermissible? No, they can’t be declared haram just because they are speculative in nature. If that is so, then the same logic should apply for trading other speculative financial assets such as fiat money (US Dollars, Euros, etc.), precious metals (gold, silver, etc.), and others. This is because fiat money and precious metals also experience extreme levels of speculation.

If the Islamic Scholars highlight volatility and speculative aspects of Bitcoin and other cryptos to consider them as haram then they should also call fiat currencies, gold, silver, and other speculative financial assets as haram too. If gold, silver, USD, Euros are considered halal for trading, then BTC, ETH, and other altcoins should also be considered halal (permissible).

4. BTC can be used for Money Laundering and Illegal/Illicit Purposes

The Islamic scholars who call Bitcoin and other cryptocurrencies “haram”, say that these digital currencies are widely used for money laundering and other illegal purposes, making BTC and others impermissible.

  • First of all, this is an external factor that doesn’t affect the Islamic legal criterion of currency directly.

  • Secondly, something lawful when used for any unlawful purpose doesn’t make the thing unlawful.

This aspect can be explained with the support of a Hadith. The concerned Hadith says that Prophet Muhammad (peace be upon him) once forbade the selling of grapes to a wine merchant because making wine is considered haram or impermissible. However, he didn’t forbid either the production or trading of grapes for lawful purposes.

In fact, fiat currencies have also been used for illegal commerce, fraud, and money laundering many times. The US Dollar is most widely used for money laundering and other illegal purposes. Does Shariah call the US Dollar or other such fiat currencies haram? No. Then why should some Islamic Scholars call Bitcoin haram? The same argument should be used for all financial assets alike.

Therefore, it can be concluded from the above arguments that Bitcoin and other cryptos are all Sharia-compliant and can be used for investment and trading by devout Muslims.

When is the Right Time to Invest in Cryptocurrencies?

There is no best time to buy or invest in Bitcoin or other cryptocurrencies. It is never too late to buy Bitcoin despite the fact that it is currently trading at levels never seen before. 2021 is the right time to invest in cryptocurrencies.

Reason #1: The Bitcoin price is expected to rise to US$50,000 by 2021-end, Nexo co-founder Antoni Trenchev has said.

Reason #2: Ali Mizani (Founder of FiCAS AG), who had rightly predicted the bullish price rise of BTC in 2016, 2017, and 2020, has yet again predicted a massive bull run in 2021. By the end of December 2021 to March 2022, he expects the BTC/USD pair to reach around US$200,000-US$300,000.

Reason #3: Willy Woo, a renowned crypto statistician, has said that the US$200,000 price looks like a conservative estimate by 2021-end. He went on to say that the BTC/USD pair can rise as high as US$300,000 by the end of 2021.

Reason #4: JPMorgan Analysts believe that investors have started considering Bitcoin as a better store of value than gold. They believe billions of dollars worth of investment can potentially flow from gold to Bitcoin. As more and more institutional investors move their capital from gold to Bitcoin, the price will go up exponentially.

Reason #5: Guggenheim Investments (an asset management firm with over US$230 billion under management) has said, on the basis of their fundamental analysis that “bitcoin should be worth about $400,000.” When asked about the basis of such prediction, Guggenheim’s chief investment officer, Scott Minerd, has said: “It’s based on the scarcity and relative valuation to things like gold as a percentage of GDP. Bitcoin actually has a lot of the attributes of gold and at the same time has an unusual value in terms of the transaction.”

Reason #6: Institutional investors have started parking their capital in Bitcoin and are buying heavily at every low. Cointelegraph Markets analyst Michaël van de Poppe and many others believe that big investors such as Paypal, Square, Grayscale, MicroStrategy, and many others are buying at lower levels as the small crypto “traders, shitcoiners, and weak hands” sell-off. Recent Chainanalysis data has confirmed that institutional bitcoin investors have led the price rally in 2020.

Reason #7: If you look at the historical price of BTC against the US Dollar, you’ll find that Bitcoin has always provided an investment return that most funds would boast about. If you invested US$1,000 back in 2017, you would have received around 2,300% ROI (return on investment) till now (in 3-years).

Even if you invest a small amount of money (say, US$100) every week by following the dollar-cost averaging (DCA) method (a “safer” method of investing suggested by the likes of Warren Buffet), you would have received a return on investment (ROI) of 160% in 3-years.

If you invested US$100 every week in BTC/USD since December 2017, your BTC investment till now would have been US$15,700 and its total value at the current Bitcoin price would have been US$40,867. This means your ROI would have been 160% by 2020-end. The Bitcoins value is expected to increase at an exponential rate in the coming 10 years.

The meteoric rise of Bitcoin price since 2020 can be attributed to increased participation of institutional investors including hedge funds, corporates (such as Tesla, Microstrategy, etc.), pension funds, insurance companies, and more.

In fact, El Salvador became the first country in the world to recognize Bitcoin (BTC) as a legal tender beside the US Dollar. This has boosted the prospects of mass adoption of Bitcoin and other virtual currencies.

Once you are ready to invest in Bitcoin, you can do so in a legit way by investing through a cryptocurrency exchange. You have to open an account with such an exchange, verify details (including basic personal information), and then fund your crypto trading account. You can fund your crypto exchange account connecting your bank account & bank transfer, credit cards, debit cards, and other payment options.

Top 10 Best CryptoCurrencies in 2020-2021

  1. Bitcoin (BTC)
  2. Chainlink (LINK)
  3. Ethereum (ETH)
  4. Bitcoin Cash (BCH)
  5. TRON (TRX)
  6. Cardano (ADA)
  7. Tezos (XTZ)
  8. IOTA (MIOTA)
  9. Zcash (ZEC)
  10. Stellar Lumens (XLM)

Other than these cryptocurrencies, there are other digital currencies too that you can buy and they are Bitcoin Gold, stablecoins, Central Bank Digital Currencies (CBDCs), ERC20 tokens, and many more. Once you buy cryptocurrencies, you can either put them there on the exchange’s cryptocurrency wallet and keep on buying and selling them through regular trading.

If you are bullish on the future prospects of Bitcoins and other digital assets, you can transfer them to hot wallets or cold wallets (including most secure hardware wallets) and put future hold for cryptocurrency. This will help you get higher returns in the long run. In fact, many retirement funds or IRA accounts such as Roth IRA are allowing investors to incorporate Bitcoin and other digital assets of investment in the portfolio so that the prospects of these funds increase due to the higher returns of BTC and other cryptos.

With the rise of smart contracts and an increase in the use-value of different cryptocurrencies and altcoins (such as Cardano ADA, Polkadot DOT, Chainlink LINK, etc.), the dominance of Bitcoin is slowly but surely decreasing in the cryptocurrency market. Smart contracts enhance the capabilities of block chains. This has led the investors to see beyond Bitcoin.

Currently, Bitcoin’s dominance in terms of market capitalization has come down to around 45%. The price of these alternate crypto currencies are increasing fast because of their use-value in real-life and faster transactions.

If you want better guidance on improving your personal finance and also need investment ideas, you can get help from financial advisors and wealth management professionals, especially the ones who deal with Bitcoin and other cryptocurrencies. While day trading, you should always try to invest only that much which you can afford to lose. Financial protection must always be there in your mind always. While investing in cryptos, try to invest through Bitcoin exchanges and reliable online brokers.

Trade with Cryptocurrency Trading Bots

If you are new to cryptocurrency trading, you can take the help of Cryptocurrency Trading Robots to earn regular passive income. These bots automatically scan the market in real-time and trade for you.

They run 24/7, which means that you can keep earning your passive income even when you are sleeping. This gives you an edge over other investors as it enables the bot to book profits on your behalf when other investors are sleeping. The same Shariah law that is applicable for trading other speculative financial assets also holds good for NapBots. Therefore, Muslims can use these automated crypto trading robots to earn money.

Smart crypto investors always remain prepared to get the best of a big market move. They don’t wake up suddenly. To remain alert round the clock, they use cryptocurrency trading bots so that they don’t miss any big market movement.

NapBots.com is a Trading Bot, cloud-based platform, on which you can connect to major exchanges such as Binance, Bitmex, Bitfinex, OKEX, Kraken, Bitstamp, and Bitpanda.

The best thing about the Napbots trading software is that you don’t have to monitor charts and candles to predict your next move. Any novice trader with zero skills can also start trading like a pro and earn money with this unique trading tool. Let Napbots take full control over your trades in just a few clicks. Now, sit back and enjoy earning money.

Is there any Risk associated with NapBots?

Though NapBots has a proven record of providing great returns to investors, it doesn’t guarantee profit all the time. It can provide you astonishing returns with hourly strategies. As the crypto market is very volatile, you should expect to see losses from time to time too. If you’re not ready for that, you shouldn’t get into crypto trading in the first place.

If you are a novice in the cryptocurrency market, you can put your cryptocurrency trading on autopilot, get excellent ROI, and keep earning your passive income round the clock, even when you are sleeping. However, always keep in mind that NapBots is not a get-rich-quick scheme. Please check the Reviews on NapBots.

What are the Differences Between Investing in Cryptocurrencies with Napbots and Without?

NapBots crypto trading software is special because it comes with:

  1. A unique trading algorithm that processes market data for you
  2. A unique crypto trading bot library so that you can create your own mix of trading strategies
  3. Autopilot mode that enables you to automate trading 24×7
  4. An easy-to-use interface so that you can copy the proven strategies of NapBots to make successful trades and make money

NapBots offers complete trading automation solutions through the use of its own tested trading strategies; offering quantitative trading strategies previously reserved for hedge funds to the public.

The setup and installation process are easy. So, the non-experts can also use it. The simple and special approach of NapBots helps it provide you with excellent ROI.  

The team of professionals behind NapBots has extensive experience in the financial market. They have put their years of experience in place so that you can easily automate the management of your funds with no technical skills. This service can run 24/7 and work as your passive source of revenue even when you sleep. Muslims can easily and safely use crypto trading bots.

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