The Cryptocurrency market has taken the investment world by storm in the past years. The king crypto-coin - Bitcoin - has risen from $1k in November, 2017 to $10k in May 2019, to close to $80k now, with a bunch of ups and downs. Other Cryptocurrencies, such as Ethereum and Ripple, have become popular following a surge in people purchasing Bitcoin. Recently, NFTs or non-fungible tokens have become popular, such as a personal favourite TopShot NBA basketball cards (feel free to gift me any Los Angeles Clippers on my account)
One of the brothers requested me to write an article explaining the Islamic position regarding the purchasing and selling of cryptocurrency. The potential problems for transactions with cryptocurrencies would be: a) is cryptocurrency considered to be of value; b) is cryptocurrency a known-commodity; c) is investing in cryptocurrency considered gambling. Investing in cryptocurrency would be problematic if any of these potential problems are confirmed. This article will address each of these potential concerns one-by-one.
Is cryptocurrency considered to be of value?
One of the conditions for the permissibility of a transaction is that both items (that which is being bought and that which is being used as payment) must be considered to hold value and be considered property. The potential critique would state that cryptocurrency, such as Bitcoin or a TopShot card does not hold value and is not considered property.
When examining the books of jurisprudence, such as Tadhkirah by ‘Allamah, Makasib by Shaykh Ansari, and commentaries of Makasib by Ayatollahs Na’ini and Irwani, and Kitab al-Bay’ by Imam Khomeini, the following qualities are given for an item to be considered valuable; to be considered property:
Be rationally profitable
Be desirable for people
Have a relative shortness of availability (excluding the likes of sunshine, air, and a cup of sea water at sea)
Able to be owned (excluding stars and planets in the sky, at least at the present time)
The principal usage of the item not being prohibited (excluding alcohol or gambling instruments)
Considering these conditions, Bitcoin and other cryptocurrencies, are rationally profitable (as they hold a monetary value), desirable (many people invest in cryptocurrencies), have a relative shortness of availability, are able to be owned, and the principle usage of them is not prohibited. Hence, this would not be a reason to prohibit investing in cryptocurrencies.
Is cryptocurrency considered a known-commodity?
Another condition for the permissibility of purchasing and selling goods is that both the item being bought and the item or money used to purchase the item are known. The potential critique would state that one does not have detailed information about cryptocurrency, such as Bitcoin or a TopShot card, and therefore the item falls into the category of being unknown.
But, this seems as if it is a weak critique because the common person who buys and sells goods does not have detailed knowledge about the items he purchases. For instance, one does not know the minute details of the shirt that one purchased, such as the exact make up of material and where the material was sourced or the method of stitching, and so on. Furthermore, one does not know the minute details of money, such as what is backing the money, how many bills are in circulation, and so on. Therefore, what is meant is having general knowledge about the item, which in the case of cryptocurrency one can obtain general knowledge through minimal research.
Is investing in considered gambling?
One might assume that investing in cryptocurrency, such as Bitcoin or TopShot cards, is a form of gambling. If it is considered gambling it would be impermissible.
The problem with this opinion is that what one is doing is purchasing an item. Yes, the item is digital, but one becomes the owner of the cryptocurrency, such as the Bitcoin or TopShot card. It is true, the price of the item will fluctuate, it might increase in value and it might decrease in value. Is that not what investment is though? When one purchases a house are they gambling? The value of the house might increase or decrease. When one purchases stocks on the stock market is it considered gambling? The marja’ have not considered purchasing stocks as gambling, but the stock might increase or decrease in value. Hence, the mere fact that the value fluctuates, does not constitute purchasing that item as gambling.
A further possible critique states that it is impermissible for non-governments to create currency and cryptocurrency falls under this. There is an answer for this critique, but it would be outside the scope of this article. If you want to learn more about this mention it in the comment section below and I’ll write an article about this topic as well.
Sayyid Khamenei stated one can invest in cryptocurrency as long as they follow the law of the country. I did not find a ruling by Sayyid Sistani.
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