I wanted to understand how Bitcoin resonates with the Muslim world and Sharia law, so I explored a bit and wrote this short article. lmk what you think and whether I made any mistakes in the thinking process or understanding.
---
** IS BITCOIN A SHARIA-COMPLIANT ASSET? **
The question of Bitcoin’s compliance with Islamic finance principles (Sharia) has sparked some debate among scholars, investors and bitcoin / crypto fans.
There seems to be no universal consensus, and I'm no Muslim but it seems to me from what I've read that Bitcoin’s design aligns very well with core Islamic values of transparency, fairness, and resistance to exploitation.
Below, I explore Bitcoin's Sharia compatibility through the lens of ethics, technology, and practical application.
---
1. CORE SHARIA PRINCIPLES AND BITCOIN’S ARCHITECTURE
Islamic finance prohibits *riba* (interest/usury), *gharar* (excessive uncertainty), and mandates *hifz al-mal* (preservation of wealth). Bitcoin’s protocol directly addresses these concerns.
Bitcoin’s code contains no interest mechanisms, making it inherently free from *riba*. Transactions occur peer-to-peer without intermediaries, and mining rewards compensate computational work rather than interest-based returns. This contrasts sharply with fiat systems (or with Proof-of-Stake systems) which rely on fractional reserve banking and debt-driven money creation—practices deeply entangled with *riba*.
The network’s deterministic monetary policy—capped at 21 million coins, with a transparent issuance schedule—eliminates the systemic *gharar* inherent in fiat currencies (subject to central bank manipulation) or that of gold (whose supply fluctuates with mining discoveries). Every transaction and circulating coin is publicly verifiable on the blockchain, ensuring contractual clarity and reducing ambiguity.
As for wealth preservation, Bitcoin’s scarcity and decentralization protect against inflationary devaluation. While its short-term volatility draws criticism, long-term appreciation trends (e.g., compounding growth since 2010) suggest it meets *hifz al-mal* for investors prioritizing durability over stability.
---
2. SCHOLARLY OPINIONS: DIVERGENCE AND PROGRESS
Islamic scholars remain divided on this topic, but momentum is growing in Bitcoin’s favor. In 2018, Indonesia’s National Ulema Council recognized cryptocurrency as a tradable commodity, while Dubai-based scholar Mufti Muhammad Abu Bakar declared Bitcoin permissible (*halal*) if treated as an asset rather than currency.
Others, like Islamic Finance Guru argue Bitcoin is compliant *if* users avoid interest-bearing services (e.g., crypto lending), mirroring rulings on gold, which is permissible as an asset but forbidden in *riba*-based transactions. Critics, including Saudi Arabia’s Grand Mufti, reject cryptocurrencies due to volatility and speculative trading. However, this stance conflates Bitcoin’s *design* with human misuse—a distinction emphasized by progressive scholars.
---
3. BITCOIN VS. TRADITIONAL “COMPLIANT” ALTERNATIVES
Gold-backed assets and Islamic banking products are often touted as Sharia-compliant, but Bitcoin offers distinct advantages. In contrast to gold’s storage costs and opacity in custodianship, Bitcoin’s blockchain provides a public, auditable ledger. Unlike real estate—a popular Islamic investment—Bitcoin democratizes access to scarcity without high entry barriers. Most critically, Bitcoin’s decentralization ensures no central authority can debase it, unlike fiat systems that enable *riba* through interest rate manipulation.
---
4. RISKS AND MITIGATIONS
Bitcoin’s Sharia compliance hinges on ethical usage. To avoid *riba*, investors must steer clear of interest-bearing platforms like crypto lending services. Speculative practices—day trading, derivatives, or leverage—introduce *gharar* and should be avoided in favor of long-term *HODLing*, which aligns with Islamic wealth preservation principles. Prioritizing Bitcoin’s original purpose—a censorship-resistant store of value and medium of exchange—strengthens its ethical case.
---
Conclusion: Bitcoin is not inherently *haram* (sinful, prohibited by Quran). Its architecture—scarce, transparent, and free from centralized manipulation—resonates deeply with Islamic financial ethics. While misuse (e.g., speculation, *riba* services) can render it non-compliant, the same risks apply to gold or real estate.
For Muslims exploring Bitcoin, intentionality is key: use it as a long-term store of value, avoid interest-based platforms. As Islamic finance wakes up to future technology, Bitcoin’s role as a *halal* hedge against fiat injustice will grow.
