I am not a Mufti, but we as Muslims must all be aware of Allah’s limits in our daily financial dealings, as we will be asked about every dinar we earn or spend. Therefore, it is necessary to learn and inquire about what forbidden transactions should be avoided. Even non-Muslims, out of concern for their money, should stay away from risky practices such as leveraged trading, as failure in this type of trading can lead to complete loss of money and many these days have lost all their money due to leverage.
I ask God to make this article a part of my good deeds, as I have written it out of a desire to educate people about the necessity of preserving God’s limits in their financial dealings, and to strive to ensure that their money is from lawful and good sources.
As the cryptocurrency market booms, Muslims are increasingly interested in learning how to invest in it in a way that complies with Islamic law. Since trading involves different transactions, it is important to understand the difference between what is permissible and what is forbidden to avoid falling into prohibitions.
First: Halal transactions in digital currency trading
1. Spot Trading:
Cryptocurrencies are bought and sold directly without delay.
Ownership is instant, making the transaction Sharia compliant.
2. Mining:
Mining is considered a legitimate process because it requires real effort to produce cryptocurrencies.
There is no prohibited element such as usury or uncertainty.
3. Long-term investment (Holding):
Buy cryptocurrencies and hold them for a long time without frequent trading.
This type of investment is based on ownership and does not involve suspicious transactions.
4. Using digital currencies as a means of payment:
If the currencies are used to pay for permissible services or products, then dealing with them is permissible.
5. Trading according to Sharia analysis:
Analyze any digital currency and ensure that it is free of usurious transactions or prohibited activities.
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Second: Transactions that should be avoided in digital currency trading
1. Margin Trading:
It depends on borrowing with interest, which makes it a type of forbidden usury.
2. Trading in futures and derivatives:
Short selling involves selling something you do not own, which is against Sharia.
It is characterized by uncertainty and high risk that harms legitimate financial transactions.
3. Interest-based Earnings:
Some platforms offer services such as lending with interest or Earn, which is forbidden because it is considered usury.
4. Currencies associated with prohibited activities:
Such as currencies used to finance gambling or illicit trade.
5. Gambling-like Trading:
Any type of trading that relies on luck rather than analysis or study is considered gambling.
6. Scams:
Investing in suspicious cryptocurrencies or projects that lack transparency is not permissible.
Tips for complying with Sharia law while trading
1. Legal research: Before trading in any currency, check the nature of the project, its activities, and its sources of funding.
2. Avoid prohibited contracts: Use only spot contracts.
3. Avoid borrowing with interest: Do not use leverage or any service that requires paying interest.
4. Continuous learning: Consult scholars specializing in Islamic economics to understand the provisions of Sharia.
5. Avoid suspicion: If you doubt the legitimacy of a particular transaction, it is best to avoid it.
Adhering to Islamic law in cryptocurrency trading is not difficult if the trader is keen to learn and understand the nature of the market. Halal trading increases the blessing of profit and makes investment a means of growing money in a legitimate way that pleases Allah Almighty.
And God knows best.