Is Investing In Bitcoin Permissible or Not?

Answered by Shaykh Irshaad Sedick

Question

Is investing in bitcoin permissible or not?

Answer

The following answer was written by the late contemporary Shafi’i Mufti, Muhammad Taha Ibn Yusuf Karaan (may Allah have mercy on them):

The emergence of Bitcoin and other cryptocurrencies presents the type of problem upon which scholarly opinion is bound to differ. It is, therefore, to be expected that some scholars would declare it permissible while others regard it as impermissible.

Discussion around Bitcoin is still ongoing in many scholarly circles. In our preliminary view, Bitcoin is essentially permissible. In this view, Bitcoin is recognized as a tradeable form of property, but not yet the type of alternative currency that its creators intended it to be.

As such the aspects of zakah and riba do not yet apply to Bitcoin. The potential for it to become an alternative currency exists, provided it gains sufficient critical mass in terms of social acceptance. If it does, the rules of zakah and riba will come to apply to it.

Even without being recognized as a currency, Bitcoin may be used to settle payments to parties who accept it. Where a country’s laws specifically prohibit trading in Bitcoin, those laws will have to be respected. Like any rapidly rising form of property, investing in Bitcoin should be done with due circumspection.

Further Details:

There are two seminal questions to the issue:

1. Is Bitcoin an acceptable form of property (mal)?

2. Assuming a positive answer to no. 1, does it fall into the general category of goods (‘urud) or the more specific and restricted currency category (nuqud)?

Is Bitcoin an Acceptable Form of Property (mal)?

For something to become recognized as mal, all that is required is general social concurrence, or what the Fuqaha (Jurists) refer to as istilah. When all of society, or a reasonable sector of it, has concurred upon deeming something as property, it becomes a valid form of property with all the features attached to such characterization. In this regard, governmental recognition is immaterial.

With Bitcoin, I believe this has already happened.

Now for the second question: as a form of property, does Bitcoin qualify as money per sè? In other words, would the rules of riba and zakat apply to it?

The recognition of a form of property as a currency would appear to hinge on one of two factors potentially:

(a) sovereign issue

(b) social concurrence to accept

Bitcoin clearly, and characteristically is not issued by any central sovereign authority. But I believe that the absence of this factor alone is not sufficient to deprive it of currency status. Of the two factors that produce acceptable currency (sovereign issue and social concurrence), I believe that the latter is the one that dominates and determines. The phenomenon of public refusal to accept government-issued currency is not unknown.

So, we are left with social concurrence. As stated, I do believe that society has sufficiently concurred to recognize Bitcoin as a form of property, and I am persuaded that there is a burgeoning groundswell of public opinion that has come to accept it as currency.

The nature of such social processes, however, is that they are gradual and not precipitous. Such processes usually involve three stages:

• the stage clearly and unambiguously before critical mass;

• a “grey” stage wherein critical mass might or might not have been reached;

• the stage is unmistakably recognizable as post-critical mass.

I believe we are right now in the grey stage wherein it is very natural to have a divided opinion. At the same time, however, the buildup towards critical mass continues unabated. Unless we see government bans, Bitcoin will probably soon come into its own as a recognized form not only as property but also as an acceptable currency with all attached to that characterization.

The above leaves us with the question about its current status. In this regard, I am persuaded to apply the rule of Istishab استصحاب, which states that a situation known with certainty to exist will be presumed to continue until replaced by equal certitude.

We know for a fact that Bitcoin is property. But as to whether it has already become currency, we are not exactly sure. So, we stay for the present with what we know until certainty is replaced with equal certitude.

Mufti Taha Ibn Yusuf Karaan (may Allah have mercy on them both)

Related Answer:
Is Trading With Bitcoins Permissible?

[Shaykh] Irshaad Sedick
Checked and Approved by Shaykh Faraz Rabbani