Should Muslims invest in Crypto? Are they halal?

Gassner's picture

More and more Muslims consider investing in Crypto Currencies and participating in so-called Initial Coin Offerings (ICO). What is the background aside from the poster child bitcoin?

There are two main types of Crypo:

Security Token - Crypto which has some rights or assets attached. Regulators tend to require a prospectus and deem it akin to a security. It's value follows the rights and assets attached and need careful analysis. As Security Tokes are offered online, they may or may not be subjected to a regulator, and any misrepresentations could not be prosecuted. Fraud is frequent.

Utility Token - Crypto which has no rights or assets whatsoever attached to it. Regulators mostly leave it to the people taking the view that no disclosures are required if something is essential without any value. Analysis about the price can only be derived from market psychology. Fundamental values are not given. It is a kind of gift to the issuer from a regulatory point of view and thus no need to protect anybody out there. There is no material countervalue from a secular legal point of view.

Sharia point of view:

Security Token - it is like a share or sukuk and its Sharia analysis follows the same set of criteria. Who defrauds us, is not from us.

Utility Token - lots of discussion. If used in the darknet often deemed impermissible e.g. by Egyptian and Turkish authorities. The second key issue follows the idea that any sale is the exchange of two items both of value. Now what is value? Security Token has value and is so far not doubtful, what is with Utility Token, which has zero intrinsic value? Is a sale contract Islamicly acceptable? Scholars disagree on it due to the respective definition of value: one side says, if something has a market value, it has value. Others insist on intrinsic value, which is missing.

The long form of the arguments pro/contra opinions of others out there are listed here:

Islamic spirit point of view:

The best among Muslims is, who provides the most benefit. Without intrinsiv value there is no benefit. Hence, Utility Token are fundamental worthless and pointless. No hassanah attached to them. The investor's money is gone for bad, and only if another one will pay you something you get something back. This is like a snowball system, which is a point of critic of some Scholars, too.

In any trade we exchange goods for mutual benefit because one has a higher utility value for it as the other. This increases the utility value for the society altogether.

So-called Utility Token do not have intrinsic value: No benefits on their own, so at zero intrinsic value, nobody has any benefit . If profits being deemed a benefit: profits in Utility Token coming solely from other people's money, with their consent, yes, but so is gambling a zero sum game with consent, too. It does not increase the welfare of the society at all.


But bitcoin is priced so high, and it is Utility Token? Yes, bubbles persist sometimes very long. Bitcoin has a use case for the dark net, and then became a speculative bubble: But as Muslims we are on earth to be a blessing to others.
Eventually, once enough people are invested in Bitcoin on credit (which starts now), a proper meltdown of the price will make a lot of "investors=gamblers" unhappy with big losses, those with credit possibly beyond their means. Observe the information of how many bitcoin are bought with credit and you know the endgame is coming.

But you still like the easy profit? Yes, lots of people want to earn without work. Save and invest in useful projects, then Allah grants baraka. In Initial Coin Offerings, the baraka is hard to find, most (90% estimated) get punished for their fear to miss out:

Stay focused on providing a benefit to mankind and the creator will bless you! Do not fall for Islamic labels either. A halal loss is still a loss. There are opportunities within Security Token, understand those well and earnings are justified.

Here a empirical study, showing failure and success:

Here you can study Islamic labelled projects and research on your own, how well they went:

Be careful always - as theft and scams are prevalent in the market and commission based MLM type of structures will create further deception among the people. Technical jargon is a traditional smoke and mirror to disguise fraud for centuries. Understand what you invest in. Other people prey on your money and fear to miss out is bad guidance, which will be punished. ICOs are not for orphan's wealth!

Addendum on 23 April:
Read and study:
Addendum on 25 April:
Pump and Dump in Crypto Study:
Addendum 30 April: My favoured YouTube:

All the best,

Michael Gassner