Since its inception in 2008, Bitcoin has grown from an obscure digital experiment to a globally recognised asset, facilitating transactions worth billions of dollars daily. Alongside Bitcoin, thousands of other cryptocurrencies have emerged, each with varying levels of adoption and legitimacy. Their rapid rise has sparked intense debate; some see them as the foundation of a new financial era, while others dismiss them as speculative bubbles or instruments of financial instability.
Muslims, like much of the wider public, have largely approached cryptocurrencies with caution. Many scholars have hesitated to issue verdicts, often citing uncertainty regarding their nature and function. Where objections have been raised, they typically centre on concerns about Bitcoin’s substance, its classification under Sharīʿah, or its potential misuse. However, these discussions frequently rely on assumptions rather than a principled legal analysis.
This paper presents a structured Islamic assessment of Bitcoin’s permissibility. It begins by outlining the fundamental criteria for wealth, as established by the Ḥanafī jurists. These principles are then applied to Bitcoin, evaluating whether it meets the conditions required to be recognised as wealth in Islamic law. The discussion further examines Bitcoin’s classification: whether it qualifies as a currency (thaman) or remains an asset (ʿarḍ) and the legal implications of each. Finally, common objections to Bitcoin’s permissibility are addressed, including concerns over its intangibility, volatility, and potential misuse. Two appendices are included at the end of this paper: one explains how Bitcoin works, and the other provides an overview of the modern financial system it challenges.
Any errors in this work are my own, and any truth it contains is from Allah, the Most High. May He grant us clarity and understanding in new matters and guide us to what is most beneficial.
To evaluate Bitcoin’s permissibility, it is necessary to establish the principles in Islamic law that determine whether an asset is valid and permissible. Classical jurists have laid out comprehensive definitions of wealth (māl) and value (taqawwum), which serve as the foundation for analysing new and unconventional assets.
The jurists describe wealth as something recognised by society, permissible for use, and capable of being stored. In Al-Baḥr al-Rā’iq, Ibn Nujaym (d. 970) cites from Al-Kashf al-Kabīr:[1]
Ibn ʿĀbidīn (d. 1252), in Radd al-Muḥtār, expands on this understanding:
The Majallah echoes these criteria, stating in Article 126:
From these texts, three primary conditions emerge for an item to qualify as wealth in Sharīʿah:
These criteria are principled and flexible, capable of encompassing both conventional and unconventional assets that meet these definitions.
When applying these principles to Bitcoin, the following observations can be made.
First, Bitcoin is globally recognised as a store of value and a medium of exchange, with increasing adoption across various industries and financial markets. The recognition of Bitcoin, even if not universal, satisfies the condition of tamawwul as articulated by the jurists. The reference in the above texts to partial recognition is especially relevant here, as Bitcoin’s value is acknowledged by a substantial and growing number of people.
Second, Bitcoin exists digitally and can be securely stored in digital wallets. Its ability to be saved and used at a later time for transactions or investment aligns with the condition of iddikhār.
Finally, Bitcoin itself does not inherently involve prohibited elements such as interest (ribā) or gambling (maysir). Its permissibility depends on its use, similar to fiat currencies or other assets, which can be used in both permissible and impermissible ways.
These points collectively demonstrate that Bitcoin conforms to the Sharīʿah definitions of wealth and value, providing a basis for its consideration as a legitimate asset under Islamic law. While objections such as its intangibility or perceived lack of intrinsic value may arise, these will be addressed in subsequent sections.
Having established that Bitcoin qualifies as wealth in Sharīʿah, the next question concerns its categorisation. Is Bitcoin a currency (thaman) or just an asset (ʿarḍ)? To answer this, we must examine the types of wealth in Sharīʿah, the characteristics of currency (thaman), and assess whether Bitcoin contains these characteristics.
Sharīʿah divides wealth into three primary categories. Ḥaṣkafī (d. 1088) states:
Gold and silver historically served as the default currencies. Items like clothing, livestock, and trade goods fall into the category of assets (ʿurūḍ, plural of ʿarḍ). When these items were traded for a currency, such as gold or silver, the gold or silver would automatically be considered as the payment in the transaction. The third category describes items, which can function as currency (thaman) or asset (ʿurūḍ) depending on the context and other factors. The example given is of mithliyyāt, a term that describes fungible items that are uniform, interchangeable, and replaceable with each other, such as flour or sugar. The property of fungibility is a typical characteristic of currencies.
Also included in this third category are base metal coins (fulūs) that have no gold or silver content. These can function as currency if society collectively agrees to determine them as such (iṣṭilāḥ). Once afforded currency status, these coins will then be considered fungible, just like any other currency.
Items like fulūs (base metal coins) were not inherently valuable but functioned as currency (thaman) through societal consensus (iṣṭilāḥ). This status, however, was neither intrinsic nor permanent. As the author of the Ikhtiyār explains:
This demonstrates that fulūs were only considered currency when widely used in transactions, highlighting their reliance on societal acceptance rather than any intrinsic property. Their currency status (thamaniyyah) was not an inherent characteristic but rather a function of societal acceptance (iṣṭilāḥ), as described in Al‑Baḥr al-Rā’iq:
This principle clarifies that once an item’s status as currency is lost due to the absence of societal acceptance, it reverts to being an asset. Historically, this was seen when certain fulūs became worthless (kāsidah), losing their acceptance and use as currency.[3]
As explained earlier, Sharīʿah recognises gold and silver as currency intrinsically. At the same time, it allows other items of wealth to assume the rulings of currency once they are adopted by society as a medium of exchange. Historically, jurists illustrated this principle through the case of fulūs coins, which were treated as currency when they circulated widely, but reverted to being mere assets once their use as currency declined (kasād). Any currency not based on gold or silver, including modern fiat currencies, must be assessed according to this same framework, in order to be regarded as currency in Sharīʿah.
At first glance, Bitcoin does not appear to fit neatly into this conception of currency. Very few shops accept it as a means of payment, and those that do remain the exception rather than the norm. Most people who purchase Bitcoin do so either to hold it long term as a store of value, or on a short term basis in hopes of profiting from price fluctuations. In this sense, Bitcoin still appears to be some distance away from functioning as a widespread medium of exchange. On this basis, it could be argued that Bitcoin is not a currency, but just an item that can be purchased and sold. However, upon closer examination, it becomes more accurate to regard Bitcoin as a currency rather than an asset.
The Bitcoin protocol was designed exclusively as a payment network. Its sole function is to facilitate the transfer of value across the world in a manner that is easier than existing methods. Bitcoin has no secondary or ancillary use: it cannot be manufactured into goods, repurposed as a raw material, or utilised outside of its role in transferring value. Features that enable this, such as fungibility and the ability to transact without middlemen, are intrinsic to what Bitcoin is.
This means that if Bitcoin is not regarded as a currency, then it cannot coherently be regarded as anything else. Unlike fulūs coins, whose metal content would remain valuable even when they ceased to function as currency, Bitcoin has no alternative existence to which it can revert. Its entire reality is bound to its monetary function. To deny Bitcoin its currency status is, in effect, to deny it any meaningful function or value altogether.
As for the Sharīʿah, it recognises both objects (ʿurūḍ) and currency (thaman) through the same fundamental mechanism: societal acceptance and usage. Once an item is widely accepted and dealt with as valuable, it is recognised as wealth; once it is adopted as a means of exchange, it is recognised as currency. Accordingly, recognising Bitcoin as wealth necessarily demands its classification as currency as well. For Bitcoin, it is hard to see there being an intermediate classification where it can be regarded as an item of wealth, unless it is as also a currency.
The fact that Bitcoin is widely used as a store of value does not undermine this conclusion. On the contrary, the ability to store value is one of the fundamental functions of currency.
Assets that hold their value over time usually do so because they are scarce and difficult to acquire. People with wealth tend to seek out scarce assets such as gold and silver, knowing they will remain valuable far into the future, unlike other assets that are abundantly available. Historically, this made gold and silver among the most desirable assets to own, and people would be willing to trade their other assets in exchange for it, making it a convenient medium of exchange.[4]
However, in the modern monetary environment, the store-of-value function of currency has largely eroded. Fiat currencies are widely perceived as poor vehicles for preserving wealth, leading people to exchange them quickly for assets such as property, equities, gold, or other stores of value. This has produced a culture in which currency functions merely as a temporary conduit, while value is stored elsewhere. As a result, the roles of medium of exchange and store of value, which were historically unified, have become decoupled.
Bitcoin should be understood against this backdrop. Its use as a store of value does not detract from its function as a payment network. Rather, the more widely Bitcoin is held, the more effective it becomes as a means of payment, since an increasing number of participants are able to receive value directly on the network. Its adoption for value preservation therefore reinforces, rather than undermines, the purpose for which it was designed.
On this basis, Bitcoin’s characterisation as a currency in Sharīʿah is not negated by its role as a store of value. Given its exclusive monetary function, and the Sharʿī mechanism by which both wealth and currency are recognised, Bitcoin cannot coherently be treated as a non-monetary asset. It must therefore be regarded as a currency in Sharīʿah.
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Ammous, Saifedean. The Bitcoin Standard: The Decentralized Alternative to Central Banking. Wiley, 2018.
[1] ʿAbd al-ʿAzīz al-Bukhārī (d. 730), Kashf al-Asrār, 1:268. Some scholars refer to this book as Kashf al-Kabīr, see Qāsim ibn Qutlūbughā’ (d. 879), Tāj al-Tarājim, 1:361; and Ibn al-ʿImād al-Ḥanbalī (d. 1089), Shadharāt al-Dhahab, 10:53.
[2] In the context of a sale, the bā’ preposition in Arabic, is used to mean “in exchange for,” and enters upon the price or payment in the transaction as opposed to the item of sale. For example, “I have sold this book to you in exchange for 2 dirhams” (biʿtu hādhā ’l-kitāb minka bi dirhamayn). The text above explains that gold and silver will be considered the payment (or currency – thaman) in a transaction, even if the preposition bā’ is not used.
[3] Al-Hidāyah fī Sharḥ Bidāyat al-Mubtadī, 3:85.
[4] See Saifedean Ammous, The Bitcoin Standard, chap. 3.