Islamic Finance: Is cryptocurrency halal?

There has been much debate on the use of cryptocurrencies such as bitcoin and ethereum as a legitimate form of currency and investment in Islam. Shariah law emphasises real economic activity based on physical assets and frowns upon pure monetary speculation, even though several shariah-compliant digital coins have been launched in the market.

Dr Ziyaad Mahomed, associate dean of executive education and e-learning at the International Centre for Education in Islamic Finance (INCEIF), observes that Islamic scholars around the world have mixed views on the use of digital currencies. They range from being permissible to something that requires caution to being prohibited outright.

To give context to the debate among scholars, Ziyaad says it is important for investors to understand the basic concept. “Cryptocurrencies are recognised as a medium of exchange within a community and are identified as tokens with digital signatures, instead of banknotes or physical coins. It requires some…