Is Bitcoin Haram?
No, Bitcoin is not ‘haram’ (forbidden). It is ‘halal’ (permissible or lawful). Therefore, Muslims can invest in Bitcoin and other major cryptocurrencies.
There is a significant divide in the interpretation of the Shariah laws by different Islamic scholars when it comes to Bitcoin and other cryptocurrencies. However, I’ll try to explain why Bitcoin and other major cryptocurrencies are legit commodities as per Shari’a.
Why is Bitcoin not “Haram”?
1. Bitcoin is accepted by People Voluntarily
Shariah law says that the main criteria of money are its acceptability by people. It can either be accepted by people voluntarily or forced upon them through laws. Some Islamic scholars point out that Bitcoins are not legal tenders and that’s why they are haram. When these scholars make that statement they tend to forget that it is not necessary for a medium of exchange to be a legal tender to be considered as money.
Bitcoin is not a legal tender. But it is widely accepted by people across the globe for payments and transactions. It is widely accepted voluntarily. This satisfies the Sharia laws and therefore be considered as money. That’s why Bitcoin is not “haram”.
2. Bitcoin has a Governing Framework having a Set of Rules
Bitcoin is not issued by any government or central authority such as a central bank of a country. In fact, no central authority is involved in monitoring it too. So, dues that make Bitcoins “haram”? No, not at all.
The advocates of Bitcoin say that Bitcoin and other cryptocurrencies satisfy the Islamic laws. They say, Bitcoin may not be governed by any central authority, it is governed by a governing framework that includes a set of rules. As these rules are adopted by users voluntarily and traded by the stakeholders through mutual acceptance, Bitcoins are “halal”, as per Shari’a laws.
In fact, the rules governing Bitcoin are also available in published format, which can be availed by anyone and everyone. In fact, any person can criticize or revise the framework anytime.
3. Bitcoin’s Rules can’t Be Manipulated
Manipulating the laws and rules governing Bitcoin mining is impossible mathematically. The same is true for transactions too. They can’t be manipulated too. Any kind of manipulation is prevented by the underlying cryptographic technology. Blockchain technology is highly secure, sometimes more than that of any centralized system employed by a central bank or government.
Let’s talk about the widely used traditional inter-bank payment system. It takes place through the SWIFT network. This widely used network is known as one of the most secure ones. However, US$1-billion was stolen from the central bank of Bangladesh’s account of the Federal Reserve Bank of New York in February 2016. Despite strong support from the government or central bank couldn’t stop this money heist.
The bitcoin blockchain is one of the strongest technologies available currently and manipulation of this network is almost impossible. The concerned blockchain is maintained by a network of people, who are called Bitcoin miners. These miners are also sometimes known as “nodes” on the network. The miners run purpose-built computers or mining rigs and compete to solve complex mathematical problems for completing a transaction.
Many people make Bitcoin transactions across the world. The daily BTC transactions were 330,000 in December 2020, which increased to around 400,000 in early January 2021. Each BTC transaction starts from a wallet, which again has a “private key”. This private key is a digital signature, providing a mathematical proof that the transaction has come from a wallet’s owner.
Many such transactions are happening across the globe. They are grouped together and put in a block by following strict cryptographic rules. Once a block gets filled up by the transactions, they are sent out to the bitcoin network. The BTC network runs on high-powered computers. It is these computers that compete with one another for solving complex mathematical puzzles to validate the transactions.
The reward for completing one block goes to the one who first solves the puzzle. Once a Bitcoin block is validated, it is added to the BTC network’s previous blocks. This creates a chain of blocks, known as a blockchain.
Bitcoin is tamperproof. Every block in the blockchain has a hard, cryptographic reference to the previous block. This is part of the mathematical problem, which miners solve to complete the block and add it to the Bitcoin network to form the chain of blocks.
When a miner is solving the mathematical problem, it involves working out a random number known as the “nonce”. It along with other data (including the size of the transaction, etc.) creates a digital fingerprint known as a hash, which is encrypted. Certain cryptographic conditions are met by each unique hash. That’s how blocks are completed and added to the blockchain.
Hypothetically saying, if a person wants to tamper a block, he/she has to tamper with the previous block. In this way, the hacker has to tamper over half a million blocks. This means that the miner has to re-mine the cryptographic puzzles of all these half a million cryptographic puzzles, which is impossible.
That’s the reason why Bitcoin is “halal” (permissible) and not “haram” (forbidden).
4. Bitcoin Preserves and Protects Wealth
One of the major concerns of Shariah law is the preservation and protection of wealth ( Maqasid al-Shariah). Some Muslim scholars believe that Bitcoin doesn’t do that. However, the decentralized nature of Bitcoin is its greatest strength. It is a great store of value and JPMorgan’s strategists believe that Bitcoin will evolve as a compelling alternative to gold. In fact, Bitcoin price has increased by over 300% in 2020 and 3,000% in the last 4-years (since 2017-beginning). In fact, the institutional investors are also investing heavily in BTC to beat inflation and global geopolitical uncertainties. This means that Bitcoin is successfully preserving and protecting the wealth of investors for the last 4-years now.
In fact, Wall Street analysts believe that the Bitcoin price will increase by around 10-times in 2021 and the near future. An asset management firm, Guggenheim Investments, expects the price to reach around US$400,000 by 2021-end.
Ali Mizani (Founder of FiCAS AG) and renowned crypto statistician, Willy Woo, have both predicted a BTC price jump to the US$200,000-US$300,000 range by the end of 2021. Ali Mizani had correctly predicted the BTC’s bull runs in 2016, 2018, and 2020 correctly. So, his comments are especially very important.
Strategists at the leading investment bank, JPMorgan, have said that they believe the leading cryptocurrency will reach US$146,000 in future years. On January 5, 2021, a Bloomberg report has cited a note from the strategists of JPMorgan (led by Nikolaos Panigirtzoglou) where it said that in the near future the total private sector investment in Bitcoin will equal the value that is currently invested in gold (through coins, bars, and exchange-traded funds).
The prospects of making money by trading Bitcoin will only improve in 2021 and beyond because of the rising interest of the big and institutional investors investing in Bitcoin to beat inflation, interest rates falling to almost zero levels, and increasing geopolitical uncertainties.
Almost the entire Wall Street unanimously believes that there will be a bull run in 2021 and years to come. Reports say that the pension funds and life insurance companies are going to invest around US$600-billion (equivalent to the current total global crypto market capitalization) in Bitcoin and other cryptocurrencies in the coming years, especially in 2021.
Hence, it can be said that by investing in Bitcoin, you can protect and preserve wealth in the coming years.
Now, let’s check whether backing by governments and central banks were capable of preserving and protecting wealth in the past. No, not always. The government and central bank backing couldn’t preserve wealth in 1923 (Weimar Germany), 1944 (Greece), 1946 (Hungary), 1994 (Yugoslavia), 1999 (Indonesia), and 2008 (Zimbabwe). The high rate of inflation eroded wealth in all these historical cases.
A similar hyper-inflationary situation took place in Venezuela in recent times. The rate of inflation increased to around 500%, eroding the value of paper money. At one point in time, Venezuelan people had to carry a barrel full of paper currency to buy a loaf of bread.
As Bitcoin is not issued, regulated, or monitored by any central authority, it is not affected by inflation and other factors. 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.
Therefore, Bitcoin is successful in preserving and protecting wealth. That’s why it is not haram but halal.
These are the 4 main reasons why Bitcoin can’t be considered as haram.
Debunking other Reasons given by the Islamic Scholars to consider Bitcoin as “Haram”
Reason #1 in Favor of calling Bitcoin “Haram”: Bitcoin is Highly Volatile and Not Stable
The naysayers say that Bitcoin’s exchange rate against the US Dollar (BTC/USD) is highly volatile and at the same time unstable. If high volatility is considered as the reason to call Bitcoin “haram” then should we also call all kinds of speculative tradings “haram” too? However, speculative trading of fiat currencies, precious metals such as gold and silver, stocks, and other financial assets are not considered haram. Then why only Bitcoin be considered as haram?
It is true that Bitcoin’s price is more volatile than other traditional financial assets. That’s why crypto traders and investors are always advised to get professional help or guidance before investing.
You can’t call Bitcoins impermissible only because they are speculative in nature. If gold, silver, USD, and Euros are considered halal (permissible) for trading, then BTC, ETH, and other altcoins should also be considered halal (permissible).
Reason #2 in Favor of calling Bitcoin “Haram”: Bitcoin is used for Money Laundering and Illegal/Illicit Purposes
Some Islamic scholars are of the opinion that Bitcoin is “haram” because it is used in money laundering and other illegal purposes. But the reasoning of calling it haram is inherently flawed. How can an external factor be considered as a criterion to call Bitcoin unlawful? Even if some people use this lawful cryptocurrency for illegal purposes, does that make Bitcoin unlawful?
Let’s explain this aspect with the support of a Hadith. In one of the hadiths, Prophet Muhammad (peace be upon him) forbade the selling of grapes to a wine merchant. This is because wine is considered haram or impermissible. However, he didn’t forbid either the production or trading of grapes for lawful purposes.
Fiat currencies (such as the US Dollar) are time and again used for illegal commerce, fraud, and money laundering. Does that mean the fiat currency (say, US Dollar) be regarded as unlawful? No. Then why this selective criticism of Bitcoin?
Can Muslims Trade or Invest Bitcoins?
Yes, all Muslims can trade and invest in Bitcoins as they are Sharia-compliant. Bitcoins are not “haram” but “halal”.
How should you invest in Bitcoin?
You can either open an account in leading cryptocurrency exchanges and trade Bitcoin or use automated crypto trading bots to make the trade on your behalf. One of the leading crypto trading bots is NapBots.com.
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.
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.
If you still need assistance, you can refer to the following guides: