The Prophet Muhammad (peace be upon him) said:
"الذهب بالذهب، والفضة بالفضة، والتمر بالتمر، والبر بالبر، والشعير بالشعير، والملح بالملح، مثلًا بمثل، سواءً بسواء، يدًا بيد فإذا اختلفت هذه الأصناف فبيعوا كيف شئتم إذا كان يدًا بيد"
“Gold for gold, silver for silver, dates for dates, wheat for wheat, barley for barley, and salt for salt, equal for equal, hand-to-hand. But if these types differ, then sell as you wish, so long as it is hand-to-hand.”
This hadith is central in Islamic jurisprudence regarding trade and business transactions. It sets guidelines that ensure fairness, transparency, and immediacy in exchanges, particularly when trading commodities or currency-like assets. As the world moves into digital finance, with tools such as futures, options, and pre-market trading in cryptocurrency gaining traction, it is important to explore whether these practices align with the principles established by this hadith.
Understanding the Hadith in the Context of Modern Trading
The hadith emphasizes two important points regarding transactions:
Equal exchange for identical commodities: When exchanging items of the same kind, they must be of equal value and exchanged immediately (hand-to-hand).
Freedom of trade for differing commodities, provided the transaction is immediate: If the items being traded differ, such as gold for silver, or in the modern context, cryptocurrencies like Bitcoin for Ethereum, they can be traded in any agreed-upon manner, as long as the exchange happens immediately.
These principles have guided Islamic scholars in determining the permissibility of various forms of trade, including modern financial instruments. Applying this framework to cryptocurrency trading, we now analyze whether futures, options, and pre-market trading are permissible.
1. Futures Trading in Cryptocurrency
Futures trading involves an agreement to buy or sell an asset at a future date and a predetermined price. The key issue here is that the exchange of the asset does not occur immediately but is deferred until the agreed-upon date.
Based on the hadith, immediate exchange is a requirement when trading commodities or currency-like assets. The deferment in futures contracts contradicts the principle of “hand-to-hand” (immediate settlement). In traditional Islamic finance, transactions that involve delays in the exchange of goods or money are often categorized under riba (interest) or gharar (excessive uncertainty), both of which are prohibited. The uncertainty of future market conditions also introduces a significant level of speculation, which is discouraged in Islam.
Therefore, futures trading in cryptocurrency is generally considered impermissible under Islamic principles because it involves deferred delivery and speculative risk, which violate the hadith's guidelines on immediate exchange and certainty.
2. Options Trading in Cryptocurrency
Options trading gives the buyer the right, but not the obligation, to buy or sell an asset at a future date for a predetermined price. Like futures, options involve speculative contracts that may or may not result in the exchange of the asset.
The issue with options trading, from an Islamic perspective, is twofold:
Uncertainty and speculation (gharar): The buyer may or may not exercise the option, which introduces a level of uncertainty in the transaction.
Lack of immediate exchange: Like futures, options do not guarantee immediate hand-to-hand exchange, which again conflicts with the hadith’s stipulation for immediate transactions when trading commodities or currency-like assets.
Given the speculative nature and the delay in settlement, options trading in cryptocurrency is typically deemed impermissible according to Islamic principles. The uncertainty and deferment in these contracts create risks that align with prohibited forms of trade in Islamic jurisprudence.
3. Pre-Market Trading in Cryptocurrency
Pre-market trading refers to buying or selling assets before the official market opens. Unlike futures and options, pre-market trading can involve immediate exchange of assets for payment, as long as the trade is executed at the current market price and settled on the spot.
In light of the hadith, pre-market trading in cryptocurrency could be permissible under certain conditions:
Immediate exchange (hand-to-hand): The key factor is whether the cryptocurrency is exchanged immediately upon agreement. If the buyer and seller complete the transaction on the spot, then it complies with the hadith’s emphasis on immediate settlement.
Differing commodities: Since cryptocurrencies are not the same type of asset as traditional commodities like gold, silver, or wheat, the hadith permits trading them as long as the transaction is immediate and fair.
Therefore, if pre-market trading involves direct, immediate exchange of cryptocurrency, it aligns with the hadith’s principles and could be considered permissible. However, if pre-market trades involve speculative contracts or delayed settlement, they would likely fall into the same category as futures or options, making them impermissible.
In conclusion, applying the principles from the hadith of the Prophet Muhammad (peace be upon him) to modern cryptocurrency trading leads to the following conclusions:
Futures trading in cryptocurrency: Impermissible, due to the deferred delivery and speculative risk.
Options trading in cryptocurrency: Impermissible, due to uncertainty and lack of immediate settlement.
Pre-market trading in cryptocurrency: Potentially permissible, provided the transaction involves immediate exchange of assets and payment.
