Are Cryptocurrencies haram?

Are Cryptocurrencies haram?

Recently Indonesia’s Council of Religious Leaders, “The Majlis Ulema Council”, deemed cryptocurrency as both a currency and a tradable asset as haram, i.e. prohibited in Islam.

Naturally as someone who reached a different conclusion, I wanted to understand what the reasoning of this council’s decision was.

I went to the website of The Majlis Ulema Council to find the justifications they gave. I will respond to their arguments in this article. I should mention here that the site of the Majlis doesn’t have an English version. So I used Google Translate to convert it to English and consequently what I relay to you will not be exact quotes from the Council rather the English translation of what they said. 

First, since the Ulema Council issued their ruling on “Cryptocurrency”, we should be clear on our understanding of what the word “cryptocurrency” actually means.

I found a definition for Cryptocurrency on Investopedia that I think is pretty comprehensive:

A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.


So the primary elements of cryptocurrencies are: 

  • Cryptography: which is basically coded communication designed to prevent fraud.
  • Decentralized bookkeeping (a.k.a. blockchains): which increases immunity to manipulation since there is no central authority that can be corrupted.

Now let’s look at the reasons cited by Indonesia’s Ulema council to see if they can help us make sense of their judgement.

Cryptocurrency as a Legal Currency

1. The use of cryptocurrency as a legal currency is haram, because it contains gharar, dharar and is contrary to Law number 7 of 2011 and Bank Indonesia Regulation number 17 of 2015.

The Majlis Ulema Council of Indonesia (


As it relates to the use of something as a legal currency, there are no restrictions whatsoever in Islam on what you are and aren’t allowed to use.

A currency is something used as a medium of exchange.

If you decide to use camels as currency, that’s your prerogative.

Seashells and Ketchup packets as currency? if that floats your boat, have at it.bThey probably aren’t the most efficient currencies that can be used, but if the buyer and seller agree to use them that’s really all that matters.

I don’t get where this impetus for trying to control what people agree amongst themselves to use as currency is coming from?

Certainly not anything I could find in the Quran or authenticated Hadith.

As for Gharar which is an Arabic word that is associated with uncertainty and has been described as “the sale of what is not yet present,”. It is true that the prophet peace be upon him prohibited sales that involve Gharar. 

One example of this would be: buying a calf in its mother womb.

In this case, the calf is not yet present, so you don’t know what you are going to receive. Will the calf be born dead? Will the mother give birth to triplets? Will the baby carry a disease? 

How does “the use of cryptocurrency as a legal currency” relate to Gharar??

When you transact in cryptocurrency do you not know what you are buying and how many of it you will receive?

Of course, you do. 

You know exactly how many coins you will either part with or receive and what type of coin you will be either paying or receiving.

Where is the gharar here?

Where people get gharar wrong is that they think it relates to the benefit you get out of something. That is, if you purchase something without knowing the ultimate benefit you’re going to get out of it then this is haram.

This is of course not true.

The benefit from virtually everything purchased is not known beforehand.

You can buy a tire and drive over a nail pulling out of the shop.

You can buy a delicious ice cream on a hot summer day and drop it before you even get to taste it.

So yes, while it’s true that in some instances the benefit of a cryptocurrency may be unknown beforehand, it is certainly not unique in this regard.

The type and amount of currency you purchase is known and as it relates to the issue of Gharar that’s really all that matters.

The second thing they mention is “dharar”, which is another Arabic word that simply means harm.

While I’m not sure what particular harm they are referring to, suffice it to say that yes, I can accept that some cryptocurrencies have perhaps caused some amount of harm to some people. However, this is not a reason to deem the entire technology haram to use.

The internet has caused a lot of dharar. Does that mean the internet is haram?

The existence of some dharar is not enough to deem something haram. You must weigh the dharar against the manfa’a, the harm against the benefit to come out with a proper conclusion.

If the benefit from cryptocurrencies far outweighs their harm than it is quite wrong to say that cryptocurrencies are haram and I see no evidence in the Majlis’s opinion that this cost/benefit analysis was ever made.

This is perhaps most strongly evidenced by the fact that they deemed cryptocurrencies haram as currency even though there are more than 10,000 different cryptocurrencies with each different cryptocurrency having a different cost/benefit analysis associated with it.

Finally, the opinion argues that using cryptocurrency as a currency is contrary to Law number 7 of 2011 and Bank Indonesia Regulation number 17 of 2015.

Well, law number 7 of 2011 is not a source of legislation in Islam. This law may be a reason for people in Indonesia to deem it illegal but it’s not a reason for Muslims outside of Indonesia to deem it haram.

Cryptocurrency as a Tradable Asset

2. Cryptocurrencies as digital commodities/assets are not legally traded because they contain gharar, dharar, qimar and do not meet the syar’i sil’ah requirements, namely: have a physical form, have value, are known for certain amounts, are property rights and can be submitted to buyer.

The Majlis Ulema Council of Indonesia


Again here we’ll consider this statement point by point…

As it relates to gambling, I suppose the accusation originates from the fact that cryptocurrencies are very volatile and therefore risky to invest in. 

This may be something counterintuitive to some, but as I’ve explained on this blog before: gambling (more specifically al-maisir) has precious little to do with risk. 

An activity can have very little risk and be considered a form of haram gambling i.e. al-maisir. For example, betting Burkina Faso will not win the next Olympic Gold medal in ice Hockey.

On the other hand, an activity can have very high levels of risk and not be considered al-maisir. For example, opening a restaurant.

Al-maisir has to do with zero sum games wherein players agree to forfeit something of material worth based on the outcome of the game.

When you purchase a volatile asset, this is not zero sum since not just money, but an asset is exchanging hands.

The asset in the purchasers’ hands is valued more than the price they paid for it while the opposite is true for the seller. This is why a sale was possible.

At the time of a trade, both sides are parting with what they value less in exchange for what they value more. Whether or not the buyer or the seller were correct in their assessment of relative value at the time of trade has nothing to do with the permissibility of the exchange itself or its association with gambling.

As for an asset having to have physical form for trade in it to be permissible, I’m not sure where exactly this is coming from.

Is the Majlis implying it’s haram to buy or sell software??

Similarly, arguing that “…cryptocurrencies don’t have value” is the equivalent of saying software doesn’t have value. After all, that’s what cryptocurrencies essentially are. All modern economies today are built on software. You are able to read this article because of software. 

As for the argument that cryptocurrencies are not “…known for certain amounts” well, I log into my crypto portfolio every day and can see exactly how much of each crypto I own and how much they are worth. Again, not entirely sure what they are talking about here.

As for the argument that cryptocurrencies are not “…property rights and can be submitted to buyer” this is simply not true. With cryptocurrencies, perhaps for the first time in human history, people can store wealth in a way that the state cannot seize. No other property right is this robust.

Also, cryptocurrencies can be submitted to the buyer who can then store them on or offline. 

Conditions for Cryptocurrencies to be considered Tradable Assets

3. Cryptocurrency as a commodity/asset that qualifies as sil’ah and has an underlying and has clear benefits that are legally valid to be traded.

The Majlis Ulema Council of Indonesia


Who said an asset must have an underlying in order to be traded? What Quranic verse or Authenticated Hadith is this coming from?

Further, who determines what has clear benefits and what doesn’t?

Certainly I think some cryptocurrencies are valueless and I would go so far as to say contribute a net negative value but I think others are quite constructive and positive.

To say that all cryptocurrencies don’t have benefit or real world utility is, in the author’s opinion, an unfounded overgeneralization.

In conclusion I find the recent opinion of the National Ulema Council of Indonesia prohibiting cryptocurrencies to be lacking in merit and rigor.

I encourage the Majlis to review its position in a timely manner.

May Allah forgive me if I have erred in my opinion. 

I encourage the reader to consult multiple sources before reaching a conclusion. 

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