With approximately 1.9 billion Muslims worldwide, many are eager to participate in trading. However, numerous forms of trading are deemed impermissible (Haram) in Islam. Despite some platforms claiming to operate in line with Islamic (Sharia) principles, this is often inaccurate. Through my own research and consultations with various Islamic scholars, I have gathered key insights that I'd like to share with both traders and platforms, especially Binance.
Islamic rulings consider Forex, margin, and futures trading as Haram due to two major reasons. The first issue relates to leverage, where platforms lend traders money and charge fees, which is viewed as interest (Riba) in Islam, making it impermissible. However, profit-sharing arrangements are Halal. Binance could address this by charging fees only on successful trades, leaving failed trades free of charge. These fees could be adjusted to cover operational costs in a balanced manner, creating a fair system for both the trader and the platform.
The second issue arises from margin and futures trading, where individuals essentially trade assets they do not own, a practice prohibited in Islam. To resolve this, platforms like Binance could deposit the leveraged funds into the trader's account strictly for the purpose of executing a trade, then retrieve the funds once the trade is closed. This method would allow traders to engage in leveraged positions without violating Islamic rules, making future trading more accessible to the Muslim community.
While spot trading is Halal and widely accepted, its profitability often falls short compared to futures trading. With appropriate adjustments to leverage and margin systems, platforms could open up their services to a significantly larger audience while ensuring compliance with Islamic principles.
