Halal Ratings for the top 5 cryptocurrencies

Halal Ratings for the top 5 cryptocurrencies

In this article, we’re going to cover the top 5 cryptocurrencies by market cap and give you my comfort level with investing in them from a halal perspective.

In general, I find Cryptocurrencies to be halal.

While generally halal, I also think that a cryptocurrency can be haram if it is primarily used for a haram purpose. So I will be checking these cryptos’ utilities to determine my comfort level investing in them.

On this topic, when giving my halal ratings for cryptos and assets in general I don’t like to use the terms “Halal” and “Haram” in light of the tremendous weight these words carry. 

Instead, I use the terms: Comfortable, and Uncomfortable to represent my ratings.

What are my ratings for the top 5 largest cryptocurrencies?

1. Bitcoin (BTC)

Utility: 

Bitcoin is used as a store of value that is designed to resist corruption and inflation. 

It was initially designed as a peer-to-peer online currency, and although sometimes used to facilitate trade, Bitcoin’s most common use case is simply the preservation of wealth and transfer of said wealth from one party to another without the need for an intermediary.

Commentary: 

I find nothing inherently objectionable in Bitcoin’s utility.

Some people have argued that it is primarily used for illegal activities but in fact, recent studies [1] point to cryptocurrencies, in general, being used for illegal activity less than traditional currencies are.

Is Bitcoin Halal?

I find the protection from inflation that Bitcoin provides a force for good as it can help savers preserve the value of their savings in a way that was previously unavailable.

Therefore, I’m comfortable investing in Bitcoin from a Halal perspective.

2.Ethereum (ETH)

Utility: 

Ethereum is a decentralized network that features its cryptocurrency, Ether. 

Ethereum works as a platform for numerous other cryptocurrencies, as well as for the execution of decentralized smart contracts and decentralized applications.

Commentary:

Ethereum’s utility is analogous to the utility of Apple’s operating system (iOS) which is used to build many traditional digital applications with the obvious difference being that Ethereum is more decentralized than Apple’s operating system.

Similar to the apps built on the iOS platform, some Decentralized Applications can be used for haram activities.

However, we do not consider the iOS platform itself to be inherently haram considering the thousands of applications it hosts which are beneficial. 

Using the same reasoning, I think the utility of Ethereum, as a platform used to host decentralized applications, isn’t inherently haram either despite my not agreeing with the utility of some of these applications

Is Ethereum Halal?

Therefore I am Comfortable investing in Ethereum from a Halal perspective.

3. Tether (USDT)

Utility:

USDT is a stable coin (short for stable-value cryptocurrency) that mirrors the price of the U.S. dollar.

The intended uses of Tether are for purchasing other cryptocurrencies, money transfers, and saving.

Commentary:

There is nothing inherently haram in the specific utility of Tether, although I don’t necessarily trust its ability to maintain a peg to the dollar indefinitely.

The company that issues Tether, Tether Limited, doesn’t have the best reputation.

They previously claimed that every Tether coin was backed by $1. 

That was later revealed to be a lie. 

In March 2021, Tether Limited released information on its reserves, which showed that only 2.9% of Tether is backed by cash.

Is Tether Halal?

I’m comfortable with the purpose of Tether from a halal perspective although I’m not sure how much I trust the parent company of the coin.

I would not use Tether for anything other than a quick trade or transfer.

4. Binance Coin (BNB)

Utility:

Binance Coin serves as the main currency to transact with on Binance.

Binance is the biggest cryptocurrency exchange globally based on daily trading volume.

Commentary:

Given that demand for Binance coin is a function of demand for the services provided by the Binance exchange and considering some of the most popular services on the Binance exchange are leveraged trading and derivatives trading, which I’m uncomfortable with from a halal perspective,  it is likely that any price increase in Binance coin is driven by demand for these services that I’m uncomfortable with.

Is Binance Coin Halal?

Consequently, from a halal perspective, I am uncomfortable profiting from any appreciation in the price of Binance Coin.

5. USDC

Utility:

USD Coin (known by its ticker USDC) is a stable value cryptocurrency (stablecoin) that is pegged to the U.S. dollar on a 1:1 basis

Every unit of this cryptocurrency in circulation is backed by $1 that is held in reserve.

The Centre consortium, which is behind this asset, says USDC is issued by regulated financial institutions.

The intended uses of USDC are for purchasing other cryptocurrencies, money transfers, and savings.

Commentary:

Unlike its rival Tether (USDT), which has found itself embroiled in repeated investigations, USDC has never been accused of any wrongdoing.

I find nothing inherently haram with USDC’s intended utility.

Is USDC Halal?

I am comfortable investing in USDC from a halal perspective.

If you’d like to follow my crypto portfolio to see which cryptos I invest in and when consider becoming a PIF member here.

Sources: 

[1] https://blog.coinbase.com/fact-check-crypto-is-increasingly-being-used-for-criminal-activity-and-is-a-haven-for-illicit-856a71dfb399

Disclaimer: Anything you read in this article is an opinion. It is not to be considered personalized financial advice. Make sure you do your due diligence before making any investment decisions.

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