This blog was originally uploaded on the previous version of the www.sajidumar.com website on February 11, 2018.

Over the past few months, I have been occupied with numerous questions regarding cryptocurrencies in general and Bitcoin in particular. This stream of correspondence increased further following the release of several fatāwā declaring these currencies to be forbidden (ḥarām).

Additionally, some of you came across a few of my posts on Twitter related to Bitcoin, and an assumption began circulating that I had issued a fatwā declaring it permissible (ḥalāl).

Given the sensitivity of this topic and the nature of these questions, I would like to share the following brief guidance points to address the most common queries.

Disclaimer: This is not a detailed article or a comprehensive fatwā, but a guidance piece.

1. My Position on Bitcoin (So Far)

Regardless of any private advice I may have offered, I have not issued a fatwā declaring Bitcoin inherently forbidden, nor have I declared that buying or selling it is impermissible, provided it is conducted within the framework of Islamic commercial law (Fiqh al-Muʿāmalāt).

It is also true that I have refrained from publicly expressing a definitive view. This is due to the sensitive, evolving nature of cryptocurrencies and the fact that considerably more time, research, and deliberation are required before scholars can arrive at a conclusive position.

Islamic jurisprudence will, over time, continue to examine both Bitcoin and the mechanism of its exchange. This will naturally shape future fatāwā. Hence, it is currently difficult, and premature to form a firmly rounded conclusive ruling.

Scholars specialising in economics and financial transactions have offered several perspectives regarding Bitcoin’s status:

Firstly: Its Reality (Ḥaqīqah)

a) Bitcoin as a currency

Some argue that Bitcoin is a currency, based on its objectives and the reason it was originally created; though it does not yet fulfil all the criteria of a currency in Islamic jurisprudence.

b) Bitcoin as a product

Others view it as a tradable product, not a currency, and therefore subject to rulings of trade in commodities.

c) Bitcoin as neither currency nor product

A third group argues it does not satisfactorily meet the definition of either.

d) Abstention

Some abstain from giving any view due to insufficient grounds for a clear position.

Secondly: Trading in Bitcoin

a) Permissible

Some consider trading in Bitcoin permissible as it may be viewed as a currency or product. If viewed as a currency, riba rules apply to its transactions.

b) Impermissible

Others view its trade as Islamically impermissible due to volatility, uncertainty, and other factors.

c) Permissible but not during “bubble periods”

A third view aligns with the first but adds that trading during extreme periods of volatility (“bubbles”) is not permissible.

This is the view I highlighted previously, which some mistakenly interpreted as a blanket permissibility ruling.

2. Respect for Differing Scholarly Positions

I respect the fatāwā of scholars and duʿāt who have declared Bitcoin impermissible and acknowledge the validity of parts of their reasoning. However, I also disagree with some aspects of their arguments, which is part of natural scholarly discourse on new and complex matters.

3. My Current Contemplation

I currently consider Bitcoin to be a “distorted currency” — meaning:

1. It does facilitate trade to some extent.
2. It is viewed by some groups as a type of currency.
3. However, it has not yet met, in a complete or satisfactory manner, the criteria of a currency in fiqh.

Over time, it may develop the necessary characteristics.

4. Zakāh on Bitcoin

I believe Zakāh must be paid on Bitcoin, irrespective of whether one views it as a currency or a product.

Two reasons:

a) Precaution (iḥtiyāṭ) — As Zakāh is a pillar of Islam, paying on such assets is the safer Islamic approach.

b) Fiqh precedents — Jurists recognise cases where Zakāh applies to commodities but not ribā, and vice versa (e.g., gold jewellery).

Zakāh should be calculated based on Bitcoin’s market value when one’s Zakāh year completes.

5. A Better Fiqh Question

Instead of asking:

“Is Bitcoin ḥalāl?”

The more appropriate question is:

“Is there any fiqh-based factor that makes Bitcoin ḥarām?”

In fiqh, all worldly matters are considered permissible until proven otherwise.

6. Blockchain’s Benefit

Blockchain technology aims to prevent double-spending, a flaw inherent in fiat currencies.

This is a valuable objective that could correct several modern financial problems.

7. Decentralisation

Bitcoin aims to decentralise exchange, making every individual a kind of “micro central bank”.

This may help address certain systemic issues in global finance.

8. Bitcoin as Investment

For those who consider trading permissible:

I do not believe Bitcoin should be treated as an investment.

Just as fiat money is not recommended as an investment, Bitcoin should be used as a medium of exchange, allowing it to grow naturally and meet its intended objectives.

9. Impermissible Use of Bitcoin

It is forbidden to use Bitcoin for:

1. impermissible activities,
2. speculative gambling-like behaviour,
3. price betting,
4. risky short-term speculation.

This applies to any commodity or asset subject to such misuse.

Separating Bitcoin from speculation will help scholars arrive at clearer rulings.

10. For Those Following the Fatwā of Impermissibility

If you accept the view that Bitcoin is impermissible, you may:

1. liquidate coins purchased before the fatwā, and
2. keep any profits earned.

11. The Future of Cryptocurrencies

I believe cryptocurrencies are the future and will remain a major discussion point.

For now, the matter requires time, research, and scholarly collaboration.

Bitcoin could become:

1. a macroeconomic miracle, or
2. a microeconomic disaster.

It is a double-edged sword that has disrupted long-standing monetary norms.

We must avoid tunnel vision, speculation, and impatience.

12. Differences of Opinion

Where legitimate scholarly differences exist, you must follow the stance of your own trusted shaykh in matters of fiqh.

I pray these twelve points provide clarity and guidance.

I will continue to update this discussion as my research develops, in shāʾ Allāh.

And in Allah Almighty do we place our trust. And Allah knows best.

Your brother

Sajid Umar

Location: 'somewhere en route to the hereafter'

25/05/1439 (AH) - 11/02/2018