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Crypto Investment & Trading: Halal or Haram?

BY Team Loanstreet

Updated 25 Jan 2023




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According to the Securities Commission Malaysia (SC), a total of approximately RM21 billion (bn) of digital assets were traded across all registered Digital Asset Exchange (DAX) in 2021, compared to just RM1.4 bn in 2020.

To add, a study by Luno, Malaysia’s first and leading regulated cryptocurrency exchange, indicated that 76% of its users purchased digital assets for investment purposes.

This shows that Malaysians are increasingly getting comfortable investing in digital assets such as cryptocurrencies these recent years. That said, some of you, especially our Muslim friends, may be wondering if crypto investment or trading is Shariah compliant.

What's covered in this article?


First of all, what are the factors that make your investments (including Crypto) Shariah Compliant?




Have you heard of the Islamic Capital Market (ICM)? It functions as a parallel market to the conventional capital market in Malaysia. In the ICM, market transactions are carried out in ways that do not conflict with the conscience of Muslims and the religion of Islam.

In general, according to InvestSmart (an investment education initiative by the SC), all ICM instruments and institutions must comply with Shariah principles, namely:
Prohibition of riba (interest)
  • Application of al bai’ (trade and commerce)
  • Prohibition of gharar (ambiguity) in contractual agreements
  • Prohibition of maisir (gambling)
  • Disengagement from the production of prohibited commodities, such as liquor, pork, tobacco, etc.
Hence, if your investments have elements of riba (interest), maisir (gambling) and gharar (uncertainty), then it’s considered as NOT shariah compliant.
 

So, does crypto investment comply with Shariah principles?




We were intrigued as well. So we dug a little deeper and found that in 2018, there’s a fatwa from the Mufti of Federal Territory’s Office that said crypto investment is PROHIBITED. This is because they viewed cryptocurrencies as a payment instrument (currency) and it doesn’t meet the characteristics of currency in Islam.

However, later that year Bank Negara Malaysia (BNM) issued a statement that cryptocurrencies ARE NOT viewed as legal tender (general payment instrument) as they do not exhibit the universal characteristics of money and face some limitations like price volatility and vulnerability to cyber threats.



Fast forward to 2021, the SC’s Shariah Advisory Council (SAC) has concluded that it is PERMISSIBLE, in principle, to invest and trade cryptocurrencies on registered exchanges in Malaysia, including Luno.

The SAC viewed digital currency as ‘mal’ (assets) from 2 perspectives: 

i. Digital currency that is based on technology without any underlying
Digital currency in this form is categorised as ‘urudh’ (goods) and it is not a currency from Shariah perspective. Such digital currency is not categorised as ribawi items. Therefore, the trading of such digital currency is not subject to the principle of bai` al-sarf (currency exchange).

ii. Digital currency that is backed by ribawi items 
a. Digital currency that is backed by gold, silver and currency
If a digital currency is backed by ribawi items comprising gold, silver and currency, it is categorised as a currency from Shariah perspective. Hence, the trading of such digital currency is subject to the principle of bai` al-sarf.
 
b. Digital currency that is backed by ribawi items other than gold, silver and currency
If a digital currency is backed by ribawi items other than gold, silver and currency, it is categorised as amwal ribawiyyah (ribawi items). Therefore, the trading of such digital currency is subject to the Shariah requirements of ribawi items.

In short, the SAC concluded that investment and trading of Digital Assets that fulfill the above requirements and are traded on SC’s registered DAX are PERMISSIBLE.

That said, this resolution is NOT applicable to any Digital Assets which are outside the jurisdiction of SC.

SIDE NOTE: Investing in Shariah compliant securities is not limited to Muslims only as they’re part of the securities listed on Bursa Malaysia.
 

Now, are you ready to start your financial fitness journey through crypto? 


Perhaps you’re feeling more confident to give crypto investment a try now after knowing that investing in cryptocurrency is permissible so long as you do it on registered exchanges.

If you’re unsure about which cryptocurrency to invest in, check out this article that talks about factors you should consider before investing in a coin: Which Cryptocurrency To Buy in Malaysia?

And, if you’re still scouting around for the best-regulated exchange platforms with the most coin offering in the country, we’d like to suggest you to #MoveWithLuno. 



Not only is the platform easy to use, you can also start investing in cryptocurrencies from as low as RM1. And, since Luno is SC regulated, you can rest assured that your investment will be safe.

Plus, there’s an exclusive promo for new Luno users wanting to invest from now till the 31st of December 2022. Just use this referral code: LNSTRT30 to get RM30 worth of BTC, when you buy RM100 in BTC.

To learn more about Luno's Terms of Use and risks associated with cryptocurrencies, click here: www.luno.com.

Join the community today!

Glossary

Note: This article is for informational and educational purposes only and you should not construe any such information as investment or financial advice. Investing in cryptocurrency is high risk and may result in the loss of capital as the value can fluctuate. We recommend individuals to consult with a licensed financial planner for detailed financial advice on whether cryptocurrency is a good investment option.The SC's approval of the listing of digital assets on Luno does not amount to nor indicate that the SC has recommended or endorsed the product or service.

*The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the article.

 
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About the Author

Team Loanstreet

Run by a professional human-sized team, get resourceful tips & guides from our very own library of financial articles that can help improve your financial lifestyle & make a well-informed money decision. We strive to provide you with the best service in helping you to get the most out of that DUIT!

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