What's covered in this article?
First of all, what are the factors that make your investments (including Crypto) Shariah Compliant?
Have you heard of the Islamic Capital Market (ICM)? It functions as a parallel market to the conventional capital market in Malaysia. In the ICM, market transactions are carried out in ways that do not conflict with the conscience of Muslims and the religion of Islam.
In general, according to InvestSmart (an investment education initiative by the SC), all ICM instruments and institutions must comply with Shariah principles, namely:
Prohibition of riba (interest)
- Application of al bai’ (trade and commerce)
- Prohibition of gharar (ambiguity) in contractual agreements
- Prohibition of maisir (gambling)
- Disengagement from the production of prohibited commodities, such as liquor, pork, tobacco, etc.
Hence, if your investments have elements of riba (interest), maisir (gambling) and gharar (uncertainty), then it’s considered as NOT shariah compliant.
So, does crypto investment comply with Shariah principles?
We were intrigued as well. So we dug a little deeper and found that in 2018, there’s a fatwa from the Mufti of Federal Territory’s Office that said crypto investment is PROHIBITED. This is because they viewed cryptocurrencies as a payment instrument (currency) and it doesn’t meet the characteristics of currency in Islam.
However, later that year Bank Negara Malaysia (BNM) issued a statement that cryptocurrencies ARE NOT viewed as legal tender (general payment instrument) as they do not exhibit the universal characteristics of money and face some limitations like price volatility and vulnerability to cyber threats.
Fast forward to 2021, the SC’s Shariah Advisory Council (SAC) has concluded that it is PERMISSIBLE, in principle, to invest and trade cryptocurrencies on registered exchanges in Malaysia, including Luno.
The SAC viewed digital currency as ‘mal’ (assets) from 2 perspectives:
i. Digital currency that is based on technology without any underlying
Digital currency in this form is categorised as ‘urudh’ (goods) and it is not a currency from Shariah perspective. Such digital currency is not categorised as ribawi items. Therefore, the trading of such digital currency is not subject to the principle of bai` al-sarf (currency exchange).
ii. Digital currency that is backed by ribawi items
a. Digital currency that is backed by gold, silver and currency
If a digital currency is backed by ribawi items comprising gold, silver and currency, it is categorised as a currency from Shariah perspective. Hence, the trading of such digital currency is subject to the principle of bai` al-sarf.
b. Digital currency that is backed by ribawi items other than gold, silver and currency
If a digital currency is backed by ribawi items other than gold, silver and currency, it is categorised as amwal ribawiyyah (ribawi items). Therefore, the trading of such digital currency is subject to the Shariah requirements of ribawi items.
In short, the SAC concluded that investment and trading of Digital Assets that fulfill the above requirements and are traded on SC’s registered DAX are PERMISSIBLE.
That said, this resolution is NOT applicable to any Digital Assets which are outside the jurisdiction of SC.
SIDE NOTE: Investing in Shariah compliant securities is not limited to Muslims only as they’re part of the securities listed on Bursa Malaysia.
Now, are you ready to start your financial fitness journey through crypto?
Perhaps you’re feeling more confident to give crypto investment a try now after knowing that investing in cryptocurrency is permissible so long as you do it on registered exchanges.
If you’re unsure about which cryptocurrency to invest in, check out this article that talks about factors you should consider before investing in a coin: Which Cryptocurrency To Buy in Malaysia?
And, if you’re still scouting around for the best-regulated exchange platforms with the most coin offering in the country, we’d like to suggest you to #MoveWithLuno.
Not only is the platform easy to use, you can also start investing in cryptocurrencies from as low as RM1. And, since Luno is SC regulated, you can rest assured that your investment will be safe.
Plus, there’s an exclusive promo for new Luno users wanting to invest from now till the 31st of December 2022. Just use this referral code: LNSTRT30 to get RM30 worth of BTC, when you buy RM100 in BTC.
To learn more about Luno's Terms of Use and risks associated with cryptocurrencies, click here: www.luno.com.
Join the community today!
Glossary
Note: This article is for informational and educational purposes only and you should not construe any such information as investment or financial advice. Investing in cryptocurrency is high risk and may result in the loss of capital as the value can fluctuate. We recommend individuals to consult with a licensed financial planner for detailed financial advice on whether cryptocurrency is a good investment option.The SC's approval of the listing of digital assets on Luno does not amount to nor indicate that the SC has recommended or endorsed the product or service.*The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the article.
FAQs
As long as there is no illegal activity, then trading or investing in crypto should not be deemed to be contrary to Shariah principles. There has been some discussion amongst Muslim scholars around the use of cryptocurrencies for illegal activities such as gambling, drugs, and money laundering.
How do I know if crypto is halal or haram? ›
Arguably, the cryptocurrency system can involve both Halal and Haram elements. You can assess any digital currency from both technological and Islamic perspectives to check their Shariah-compliance. Islamic law provides a set of certain conditions that must be met for an asset to be considered Halal.
Is crypto future trading haram? ›
Futures trading is considered haram (forbidden) in Islamic finance and law (Shariah) for several reasons: 1. *Speculation*: Futures trading involves speculating on the future price of an asset, which is considered a form of gambling (Maysir).
Which type of trading is halal in Islam? ›
Forex (Currency Pairs)
Some scholars consider forex trading to be permissible (halal) under Sharia law, provided that it is conducted without the use of leverage and the transactions are based on the actual exchange of currencies.
Is crypto trading gambling? ›
Buying cryptocurrency can be both an investment and a form of speculation or gambling, depending on how you approach it. When you invest in cryptocurrencies with a long-term strategy, based on research, analysis, and understanding of the technology and market trends, it's considered an investment.
What crypto is halal to invest in? ›
Halal Cryptocurrency List
| Name | Ticker | Halal/ Haram Status |
|---|
| Dogecoin | DOGE | Dogecoin: DOGE is Halal |
| Dusk Network | DUSK | Dusk Network: DUSK is Halal |
| eCash | XEC | eCash: XEC is Halal |
| ECOMI | OMI | ECOMI: OMI is Halal |
157 more rowsIt is strictly forbidden in Islam, in any form. For the purposes of efficiency and security, consensus protocols are used to ensure the network operates smoothly with every user having a common version of the blockchain avoiding conflicts and attacks from opponents.
Is investing in stocks halal? ›
Muslims can invest in stocks, provided that the investment is in accordance with Islamic principles. Shariah law guides Islamic finance and specifies which types of investments are permissible (halal) and which are not. This doesn't mean that every type of stock is considered halal.
Is crypto staking halal or haram? ›
Therefore, it is not a valueless activity. Hence, staking cryptocurrencies is not haram. Nevertheless, Muslims are advised to do their due diligence when it comes to staking crypto. It is important to verify that the crypto project itself complies with sharia law before staking its coins.
Is crypto trading gambling Islam? ›
But, according to one research paper, “most [cryptocurrency] users have a speculative motive to gain profit, instead of exchanging it as with money.” That means trading cryptocurrency is essentially similar to gambling — you purchase crypto and hope it will increase in value. Gambling is forbidden in Islam.
Futures trading is generally considered haram in Islam according to many scholars. There are two main reasons: Sale on a future date: Islamic finance emphasizes buying and selling things that already exist. Futures contracts involve agreements on prices at a future time.
Is Binance halal or haram? ›
"Crypto in general is halah to buy, sell or keep as an asset, but for binance (or any other exchange) only spot trading is halal, so margin trading, futures, staking, defi staking, earn services, loans, dual investments, borrowing ALL are Haram, and binance in particular even for normal staking gives you the rewards + ...
Which investment is halal in Islam? ›
One example of halal investment is Islamic business financing, which works using new models of profit-sharing, sharia-compliant insurance and sukuk, an Islamic financial certificate that represents a share of ownership.
Which type of crypto trading is halal? ›
Spot trading may be considered permissible if it does not involve interest or speculative elements, whereas futures and margin trading often include aspects like leverage and speculation, making them potentially problematic under Islamic law.
Which app is halal for trading? ›
Zoya - #1 Halal Investing App | Shariah Compliant Stocks & ETFs.
Is cryptocurrency halal hanafi? ›
The result shows that cryptocurrency is hugely volatile and has limits to being called 'money,' as it is limited and used for speculation, which is prohibited in Islam. The research implies that Muslims would be reluctant to use cryptocurrency as money, as a currency of transaction.
Is binance halal or haram? ›
"Crypto in general is halah to buy, sell or keep as an asset, but for binance (or any other exchange) only spot trading is halal, so margin trading, futures, staking, defi staking, earn services, loans, dual investments, borrowing ALL are Haram, and binance in particular even for normal staking gives you the rewards + ...
Is USDT halal or haram in Islam? ›
As with any investment, whether USDT investment is halal or not depends on the specific circ*mstances of the investment and the underlying assets or activities involved. In general, there are some key principles in Islamic finance that must be followed to ensure an investment is considered halal.
