Crypto is like revolutionary digital money; it lets you buy goods and can even be traded to make a profit. It has a fascinating concept known as “staking” which is like putting your crypto in a digital wallet for a while, and in return, you get some rewards. But here’s the big question: is staking crypto haram or halal?
What is Crypto Staking?
Cryptocurrency, often simply referred to as ‘crypto,’ has gained prominence as a notable payment method for both businesses and individuals. It not only serves as a payment system; it also presents investment opportunities. One of its unique investment options is staking. Staking entails depositing crypto into a digital wallet and locking it for a specified duration. In exchange, you receive rewards based on your staked amount and the duration of the lockup, with the reward typically being additional cryptocurrency tokens.
Staking rewards are tokens of appreciation or incentives for the participants who help secure the blockchain network by validating transactions. The reward amount depends on factors like the cryptocurrency’s protocol, the staked amount, and the staking duration. It can also include transaction fees. Staking rewards may vary and change due to network conditions and updates, so due diligence is important.
Is Staking Crypto Haram?
Staking crypto is not automatically considered haram (forbidden) as long as the cryptocurrency adheres to Islamic financial principles, which prohibit riba (interest), maysir (gambling), and gharar (uncertainty).
Staking crypto may be quite similar to the concept of riba (interest), based on the idea that staking may involve earning rewards or returns on the cryptocurrency you hold, which could be perceived as similar to earning interest in traditional financial systems.
However, staking cryptocurrency differs from borrowing or lending money to generate interest. It’s a method to enhance the security of specific blockchain networks, and as a token of appreciation, you receive rewards in return. When you decide to stake, your crypto assets are securely locked in a digital vault, making them less accessible; therefore, your funds remain in your possession, untouched by others, and aren’t utilized by anyone else.
While some may see staking crypto as a form of gambling or uncertainty due to its perceived risk, it’s important to note that when more people participate in staking, it enhances blockchain network security and fosters the growth of new cryptocurrency projects. In essence, staking is not inherently uncertain.
According to this verdict, cryptocurrencies are not considered haram. Nevertheless, Muslims should be cautious when staking crypto. They need to make sure the crypto project follows Islamic rules before they invest their coins. However, there is a diversity of opinions among scholars regarding whether staking crypto is deemed haram.
Dr. Mahadi Hasan is of the opinion that staking crypto is not inherently haram if the crypto being staked is halal. He said,
‘It (staking crypto) involves earning rewards for supporting the network. However, it is important to ensure that the crypto being staked is halal and to comply with Islamic principles around avoiding interest-based transactions.’
Sayyed Mohammad Al-Musawi believes crypto is halal. He said:
‘Dealing in cryptocurrency is permissible like any other trading, provided that it does not contradict the law of the land and does not harm others.’
Mufti Shawki Allam, Grand Mufti of Egypt, is of the opinion that cryptocurrencies lack legitimate government approval, which can encourage smuggling and money laundering, similar to gambling. He said:
‘Here is my fatwa on cryptocurrency, as today’s widely asked questions are: is crypto halal or is crypto haram; or is crypto trading halal or haram? In my opinion, trading in cryptocurrency is haram. This is because it is not approved by legitimate bodies, such as Treasury Departments of States, as an acceptable interaction of exchange. Such currencies lead to ease in contraband trade and money laundering, and they amount to gambling’
Shaykh Assim al-Hakeem, a Saudi Arabian scholar, said:
“In my opinion, is cryptocurrency halal or haram? I would say that crypto remains anonymous when you deal with it. Cryptocurrencies facilitate money laundering, drug money, and haram (forbidden) money. Hand-to-hand exchange of currencies is permissible in Islam; however, in virtual currencies, you don’t have this.”
In summary, the judgment regarding staking cryptocurrency in Islamic finance isn’t the same for everyone. It’s an ongoing topic, especially in the fast-changing world of cryptocurrencies. So, it’s crucial for individuals to be well-informed about whether their chosen cryptocurrency follows Islamic financial rules and to seek guidance from knowledgeable scholars in this area.
Halal Cryptos
Some cryptocurrencies may include non-compliant elements like interest (riba) or potentially haram products like pork or alcohol in the future. To guide you towards crypto investments that follow Islamic principles, we will introduce a few that are considered halal by an online platform dedicated to crypto investments for Muslims, Cryptoummah.
Alchemy Pay (ACH)
Alchemy Pay (ACH) is a cryptocurrency payment platform that connects digital and traditional money. It allows easy payments using both types of currencies. ACH’s token, released in 2019, is available to users for various services. It operates through a network of merchant nodes, ensuring smooth transactions.
From an Islamic perspective, ACH is considered Halal as it aligns with Islamic values, much like traditional payment systems like Visa and Mastercard, which are deemed Halal by experts. There are no financial concerns, as ACH isn’t backed by equity. The ACH token is utility and rewards-based, used for payments and access, and is considered Halal.
Bitcoin Cash (BCH)
Bitcoin Cash (BCH) is a digital currency that emerged from a 2017 split with Bitcoin. It is intended for quick and low-cost transactions. It is considered Halal (Islamically permissible) because it does not entail interest, gambling, or significant uncertainty. BCH adheres to the proof of work approach, which is consistent with Islamic beliefs. Staking BCH is also halal because the reward mechanism excludes these illegal components.
Cardano (ADA)
Cardano (ADA) is a cryptocurrency created with the purpose of establishing a more balanced and sustainable ecosystem than its counterparts. It serves various functions, including payments, mobile money transfers, and promoting financial inclusion.
Cardano (ADA) is considered halal for several reasons. It uses an eco-friendly system called proof of stake (POS), is open-source, and aligns with Islamic principles by focusing on community involvement.
Despite some concerns, Cardano’s unique features and strong team make it an attractive choice for Muslim investors. Its price has shown steady growth over time, making it a suitable long-term investment.
Conclusion
In conclusion, staking crypto offers a distinctive chance for investment and contributes to blockchain security. To answer the question, ‘is staking crypto halal?’ – Yes, it’s generally considered permissible in Islam. However, it’s crucial for Muslims to exercise caution by ensuring that the chosen crypto project complies with Islamic principles before engaging in staking activities.
Some are of the believe that staking crypto is similar to earning interest, but it’s not. When you hold cryptocurrency and participate in staking, you receive rewards that help secure the blockchain, and your funds remain secure. While some may compare it to gambling due to its risks, as more people participate, the network becomes more secure, and new cryptocurrency projects flourish. Therefore, it’s not inherently uncertain.
However, this subject remains a matter of ongoing debate among Islamic scholars, as they hold varying opinions on this matter. Some scholars, like Dr. Mahadi Hasan and Sayyed Mohammad Al-Musawi see the potential for halal staking, while others, like Mufti Shawki Allam and Shaykh Assim al-Hakeem express concerns about the legitimacy and potential harm associated with cryptocurrencies.
Among halal cryptocurrencies, Alchemy Pay (ACH), Bitcoin Cash (BCH), and Cardano (ADA) are among the good crypto projects that Muslim investors can work with. These options help you navigate the dynamic crypto world while staying true to your beliefs.
Ultimately, individuals seeking to participate in any crypto project should be well-informed about their chosen cryptocurrency’s compliance with Islamic financial rules. Seeking guidance from knowledgeable scholars is essential to making informed decisions.
