In the name of Allah, the inspirer of truth
Bitcoin and cryptocurrencies have existed for over fourteen years. Throughout this period, both scholars and non-scholars have struggled to understand its Shar’i status, largely because its internal mechanics and workings are not easily comprehensible. This complexity has made its status particularly challenging to determine, with one scholar even characterising it as a type of “jinn.”
Whilst I personally could not identify any prohibitive aspects in cryptocurrency, I had not previously had the opportunity to conduct thorough research into the matter. I had encountered various opinions regarding its permissibility and impermissibility from different scholars and financial experts. However, over these years of development, its operational mechanisms, various applications, and economic impact – particularly regarding inflation – have become increasingly clear.
Our formal investigation began when the question of cryptocurrency was included in the agenda by the Jamiat Ulama-i-Hind’s Idara Mabahith-e-Fiqhiyya and distributed to all its members for deliberation. The Jamiat Ulama-i-Hind, established during India’s independence movement, has consistently served as a leading organisation for Islamic religious guidance and social reform. In 1980, recognising the need to address contemporary Islamic jurisprudential issues, they established the Idara Mabahith-e-Fiqhiyya under Maulana Muhammad Miyan Deobandi’s supervision. After his passing, this work continued under different forms until 1990, when at the persistent encouragement of Amir-ul-Hind Mawlānā Sayyid Asad Madani, the executive committee formally revived the Idara Mabahith-e-Fiqhiyya.
The seminar takes place in different locations around India each year, and I have been attending since 2018. Each year, questions are sent to over two hundred muftis several months before the seminar. Typically, 60 to 70% of them formulate and submit responses to the review committee. These responses are then summarised by the committee and presented at the seminar for deliberation over a two-and-a-half-day period. The final resolutions are passed after extensive debate and discussion. This gathering usually brings together these muftis and jurists, along with other distinguished scholars from Darul Ulum Deoband and other institutes.
We received the cryptocurrency question for their 19th annual seminar several months before the event, which was scheduled to be held at Darul Ulum Pokhran, Jaisalmer, Rajasthan in October 2024. We spent several weeks researching and deliberating over the issue with our ifta class students and teachers before preparing our response. We submitted our findings approximately two months before the November date.
I attended the seminar in person, and despite our preliminary conclusion of permissibility, I remained receptive to counter-arguments, willing to adjust or completely change my position if presented with compelling evidence. The seminar reviewed over a hundred submissions, with opinions almost evenly divided. However, ultimately, the general assembly concluded that there wasn’t sufficient clarity on the matter to permit its use at present.
A telling moment occurred during our departure when our local village driver, overhearing our discussion about Bitcoin, asked about its halal status and revealed that he too had invested in it. This casual exchange carried profound significance. I remarked to him that had he shared this information the day before, I could have informed the attendees about how Bitcoin had reached even rural Indian villages, demonstrating that it wasn’t something unreachable, arcane, or difficult to understand. This would have challenged the perception that cryptocurrency was overly complex or exclusively urban.
Since nothing emerged during the seminar to change my view towards impermissibility, I had our paper further edited and strengthened with additional evidence to finalise our position. Having received multiple queries about our stance, we are finally able to present this paper, which has been meticulously worked on by one of our distinguished students, Mawlana Huzayfah Mangera. The paper presents our research, arguments, and responses to common confusions and objections against cryptocurrency, alongside a crucial history of money that helps contextualise Bitcoin’s role.
We humbly seek Allah’s acceptance and guidance in this matter, as in all matters where we are consulted for our opinion. May He grant us clarity of understanding in these complex issues and enable us to provide sound guidance. We pray for His protection from misunderstandings and from treading incorrect paths in our interpretations. May He guide us always to what is right and true.
Abdur-Rahman Mangera
The Fatwa Centre
Whitethread Institute
25 May 2025 | 27 Dhū ’l-Qaʿdah
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). 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.
Huzayfah Mangera
21/05/2025 (Last updated)
Approved by:
Mufti Abdur-Rahman Mangera
Mufti Zubair Patel
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]
“Wealth is that which people incline towards and can store for times of need. Its status as wealth is established by the recognition of all or some people (tamawwul al-nās kāffah aw baʿḍuhum).” (Al-Baḥr al-Rā’iq, 5:277)
Ibn ʿĀbidīn (d. 1252), in Radd al-Muḥtār, expands on this understanding:
“Wealth (māl) is that which people incline towards and which can be stored for times of need. Its status as wealth is established either through universal recognition as wealth or partial recognition (tamawwul al-nās kāffah aw baʿḍuhum), and value (taqawwum) is affirmed by these as well as by permissibility of use in Sharīʿah. If something is permissible to use but not regarded as wealth by people, such as a single grain of wheat, it is not considered wealth. Similarly, if it is regarded as wealth but its use is prohibited, such as wine, it does not have value…” (Radd al-Muḥtār, 4:501).
The Majallah echoes these criteria, stating in Article 126:
“Wealth is what people incline towards and can store for times of need, whether movable or immovable.” (Majallat al-Aḥkām al-ʿAdliyyah, 31)
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:
“Wealth is of three types: (1) the first is always considered currency (thaman). This applies to gold and silver—whether or not the word bā’ is used with it[2] and whether or not it is exchanged with its own kind. (2) The second is always considered an asset (ʿarḍ), such as clothing and animals. (3) The third is [an hybrid category, being] currency in one sense and an asset in another, such as fungible items (mithliyyāt). If the preposition bā’ is used with it, it is treated as currency (thaman); otherwise, it is considered an asset (mabīʿ). As for fulūs (base metal coins), when they are widely used, they are treated as currency (thaman), and when they are not, they are treated as assets.” (Al-Durr al-Mukhtār, 448)
Gold and silver historically served as the default currencies. Items like clothing, livestock, and trade goods fall into the category of ʿurūḍ (assets, 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 (thaman) in the transaction. The third category describes items, which can function as thaman or 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 thaman.
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:
“As for fulūs, when they circulate (rājat), they attain the status of currency (athmān)” (Al-Ikhtiyār li-Taʿlīl al-Mukhtār, 3:14).
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 thamaniyyah was not an inherent characteristic but rather a function of iṣṭilāḥ, as described in Al-Baḥr al-Rā’iq:
“They (fulūs) do not become designated assets (taʿayyun) because they are considered currency (athmān), meaning as long as they are in circulation (tarūj). Their thamaniyyah is established through iṣṭilāḥ, and as long as this consensus remains, their currency status does not cease.”
(Al-Baḥr al-Rā’iq, 6:218)
This principle clarifies that once an item’s status as thaman is lost due to the absence of iṣṭilāḥ, it reverts to being ʿurūḍ. Historically, this was seen when certain fulūs became worthless (kāsidah), losing their acceptance and use as currency.[3]
Some modern economic commentators describe a process called “monetisation” to explain the progression of Bitcoin and other assets in becoming a widely accepted currency. This framework outlines four distinct stages:
Bitcoin is currently in the store of value stage, where it is predominantly held to preserve wealth or as a speculative investment.[4]
Bitcoin’s status as thaman depends on its widespread use and recognition (iṣṭilāḥ). While Bitcoin has gained some utility as a medium of exchange, particularly in international transfers, its adoption in day-to-day commerce remains limited. Without iṣṭilāḥ, Bitcoin cannot achieve full thamaniyyah and remains classified as ʿurūḍ.
As explained in Al-Durr al-Mukhtār, items like fulūs became currency only when they were widely used (rā’ij):
“As for fulūs, when they are widely used, they are treated as currency (thaman), and when they are not, they are treated as ʿurūḍ.”
Bitcoin’s limited circulation prevents it from achieving the status of rā’ij, which is essential for thamaniyyah. However, as adoption grows and societal consensus develops, Bitcoin has the potential to progress along the stages of monetisation and eventually achieve thamaniyyah.
For now, Bitcoin is best categorised as an asset and not a currency, reflecting its current function and utility in preserving wealth rather than serving as a widely accepted medium of exchange.
Despite Bitcoin meeting the Sharīʿah definitions of wealth, several objections are often raised regarding its permissibility. This section addresses these objections, demonstrating that they do not undermine Bitcoin’s status as a valid and permissible asset under Islamic law.
One frequent objection is that Bitcoin is intangible, existing only as a digital construct within a decentralised network. Critics argue that tangibility is essential for an asset to qualify as wealth (māl) in Sharīʿah.
However, this argument does not hold upon closer scrutiny. Modern economies have accepted and normalised the sale of intangible assets such as software, domain names, e-books, and fiat currencies in their digital forms. Digital transactions of fiat currency, for example, consist of changes in electronic ledgers and are not tied to tangible cash. Yet, these transactions are widely regarded as valid, and contemporary scholars have generally not raised significant objections to their permissibility.
Moreover, classical jurists did not stipulate tangibility as a prerequisite for wealth. Their definitions, as cited earlier, focus on recognition (tamawwul) and storability (iddikhār). These criteria emphasise the functional and societal recognition of an asset rather than its physicality.
Overall, intangibility alone cannot disqualify Bitcoin from being permissible in Sharīʿah.
One common objection is that Bitcoin lacks intrinsic value. But what does intrinsic value mean, and is it even a requirement for permissibility in Sharīʿah? Classical jurists did not use intrinsic value as a criterion for wealth. Instead, they focused on conditions such as recognition as wealth by society (tamawwul) and the ability to be stored for future use (iddikhār). This raises the question: is not having intrinsic value a valid criticism of Bitcoin?
Critics often suggest that assets like gold and silver have intrinsic value. However, in reality, things only have value because people collectively agree to assign value to them.
Similarly, fiat currencies, despite lacking physical backing by gold or other hard assets, hold value because of trust and mutual agreement among people. Historically, fiat currencies were tokenised representations of gold and silver. Over time, this backing was abandoned, leaving fiat currencies without hard reserves. Critics of fiat currencies often highlight how this shift contributed to financial instability and crises.[5] However, fiat currencies remain widely accepted as wealth. This acceptance reinforces the notion that value is fundamentally a matter of societal consensus (ʿurf), not intrinsic characteristics.
In fact, the issue of intrinsic value is arguably a more significant critique of fiat currencies than of Bitcoin. Fiat currencies, which were once tokens for gold and silver, have since lost their backing and thus their intrinsic value, yet they continue to function as wealth. This demonstrates that intrinsic value is not a strict requirement for an asset to be recognised as wealth, even within Sharīʿah. Instead, societal recognition (ʿurf) plays the decisive role.
The critique of Bitcoin’s lack of intrinsic value often stems from its meteoric rise in valuation over the past 15 years, which some claim was driven primarily by speculation. Critics argue that its price increases are unstable and lack grounding in tangible assets. However, this view does not align with Sharīʿah definitions of wealth, which are centred on storability and custom, rather than intrinsic value.
Unlike fiat currencies, Bitcoin was never designed to be a token of another asset. Its value stems from its utility as a decentralised medium of exchange, its scarcity (limited to 21 million units), and its growing recognition as a store of value. This independence from hard backing makes Bitcoin more resilient to criticisms traditionally levelled against fiat currencies.
Some critics may attempt to analogise Bitcoin to intangible rights or usufructs, which Ḥanafī jurists typically restricted from independent sale unless attached to an underlying asset, i.e., Bitcoin should also be backed. However, Bitcoin fundamentally differs from these rights. While intangible rights fail to meet the Sharīʿah definition of wealth due to their lack of storability, Bitcoin fulfils these criteria. Furthermore, intangible rights were sometimes treated as wealth by the jurists due to custom (ʿurf). As Muftī Taqī Usmani explains:
“The views of the scholars differed regarding watering rights (ḥaqq al-shirb). Some prohibited it on the grounds that it is an intangible right, while others permitted it based on custom (ʿurf). This indicates that custom has a role in including certain rights and usufructs within the category of wealth [even if it does not meet all the criteria of wealth in the strictest sense]. Ibn ʿĀbidīn says (Radd al-Muḥtār, 4:501): “Wealth is established through the recognition of all or some people and value (taqawwum) is established by this recognition as well as by the permissibility of its use in Sharīʿah.” (Fiqh al‑Buyūʿ, 269)
The recognition of certain intangible rights as wealth by the jurists, despite their failure to fully meet the classical definition of wealth, was justified purely on the basis of custom (ʿurf). In contrast, Bitcoin not only enjoys clear and undeniable ʿurf but also fully satisfies the criteria of wealth in Sharīʿah—being recognised as wealth (tamawwul), storable (iddikhār), and permissible for use (taqawwum). Given that the jurists demonstrated leniency in categorising certain rights as wealth solely due to ʿurf, there is an even stronger case for recognising Bitcoin as wealth under Sharīʿah, especially as it comprehensively fulfils the classical definition. Any doubts about its status as wealth, therefore, are unwarranted.
Ultimately, Bitcoin’s value is not tied to tangibility or backing by another asset. Its acceptance, utility, and recognition as wealth align with Sharīʿah principles, which prioritises custom over intrinsic worth. Thus, the objection that Bitcoin lacks intrinsic value appears misplaced when evaluated against Sharīʿah principles.
A common criticism of Bitcoin is that it is not issued or regulated by any government, unlike fiat currencies. Critics argue that this lack of state endorsement undermines its legitimacy and stability as a currency. While government recognition can contribute to societal acceptance (ʿurf) of a currency, it is not a requirement in Sharīʿah for something to be considered valid wealth or a medium of exchange.
The jurists define wealth (māl) based on its recognition as wealth by society (tamawwul) and its ability to be stored for future use (iddikhār). None of these criteria require an asset to be issued or regulated by a government. Historically, during the time of the Prophet g, the Arabian Peninsula did not mint its own currency. Instead, the Arabs used gold dinars and silver dirhams minted by the Byzantine and Sassanian empires.[6] These coins were accepted and circulated widely among the Arabs due to the material worth of their gold and silver content, not out of allegiance to or recognition of the issuing rulers. In fact, they were traded based on their weight rather than any standardised nominal value assigned to the coins.[7]
The legitimacy of a currency in Sharīʿah has always been determined by its utility and acceptance within society, not by its source of issuance. Even after the first Islamic coins were minted during the Umayyad Caliphate under ʿAbd al-Malik ibn Marwān (d. 86),[8] the fundamental principle of acceptance through usage (ʿurf) remained central to defining currency.
Critics often argue that government endorsement ensures stability and legitimacy for currencies. While government involvement can facilitate trust in a currency, historical examples illustrate that government backing alone is not sufficient. Currencies experiencing hyperinflation, such as the Zimbabwean dollar or the Venezuelan bolívar, lost societal trust and ceased to function as mediums of exchange despite continued government support.[9] This demonstrates that societal recognition, not state regulation, is the decisive factor in establishing the legitimacy of an asset.
Governments also have vested interests in maintaining monopolies over money supplies, as they derive significant revenue through practices such as seigniorage—the profit from issuing fiat money—and by borrowing from central banks, which create money from nothing.[10] This financial dependency may explain why governments are often critical of Bitcoin, which challenges their control over currency issuance. Despite this, Bitcoin has gained significant societal recognition independently of state endorsement, illustrating that government backing is not a prerequisite for legitimacy.
Furthermore, many governments have implicitly recognised Bitcoin’s value. For instance, Bitcoin is taxed by numerous countries, which demonstrates that governments consider it a valuable asset. Some nations, such as El Salvador, have gone further by recognising Bitcoin as legal tender.[11] Bitcoin’s legitimacy is also reflected in its adoption by financial institutions, the approval of Spot Bitcoin ETFs,[12] and its use as a reserve asset by certain countries, including the US.[13] These developments indicate that Bitcoin is increasingly being accepted within global financial systems.
Even in remote villages in India, people are investing in Bitcoin, reflecting its growing appeal across diverse demographics and regions. Bitcoin’s market capitalisation has surpassed the GDP of several sovereign nations,[14] further demonstrating its global significance. This level of societal recognition and adoption exceeds that of many fiat currencies, even without official government backing.
Ultimately, Bitcoin’s legitimacy stems from its utility, scarcity, and societal acceptance. While government endorsement can help foster acceptance, it is not a condition for an asset’s validity in Sharīʿah. Bitcoin’s decentralised nature and its widespread adoption affirm its status as legitimate wealth under Islamic law, irrespective of its relationship with governments.
Another objection raised against Bitcoin is that its price volatility constitutes excessive uncertainty (gharar), which is prohibited in Sharīʿah. Gharar refers to ambiguity or uncertainty in the subject matter or terms of a transaction, leading to potential injustice or exploitation. Examples cited by jurists include selling fish still in a pond or milk in a cow’s udder, where the existence or deliverability of the asset is uncertain. As described in Maydani’s (d. 1298) Lubāb:
“It is impermissible to sell fish in water before it is caught because it constitutes selling what one does not possess… Similarly, selling milk still in the udder is impermissible due to gharar, as it could simply be swelling [of the udders].” (Al‑Lubāb fī Sharḥ al-Kitāb, 2:25)
Bitcoin, however, is not like such examples. Its existence, ownership, and transferability are guaranteed in every transaction, ensuring there is no ambiguity in deliverability or terms. Transactions involving Bitcoin are clear, immediate, and final, distinguishing them from the classical forms of gharar prohibited by Islamic law.
Volatility itself is not a new concept in Islamic jurisprudence. Historically, jurists addressed scenarios where fulūs (base metal coins) lost their value or became devalued (kasād).[15] This demonstrates that fulūs experienced volatility and yet were still treated as valid wealth when circulating. Their rulings evolved with changes in societal recognition, illustrating that volatility alone does not render an asset impermissible.
Volatility is evident in assets such as silver, which has fluctuated considerably over the years. Similarly, currencies like the Turkish lira and Venezuelan bolívar have undergone extreme depreciation and instability, yet their trade has not been cautioned by scholars. These examples show that volatility itself is not a factor for prohibition.
Sharīʿah also recognises the principle that risk and reward are intrinsic to trade, as characterised by the following juridical maxim:
Liability corresponds to benefit (i.e. harm is balanced by advantage – Radd al-Muḥtār, 4:373).
Bitcoin’s volatility is a natural part of its adoption as a relatively new asset class and its limited market size. As its adoption and market capitalisation grow, its volatility has decreased, suggesting that this issue is transitional rather than inherent. While volatility may warrant caution as an investment, it does not affect Bitcoin’s permissibility under Sharīʿah. By contextualising Bitcoin’s volatility within the broader framework of permissible trade and historical precedents, it becomes clear that this objection does not render Bitcoin impermissible. On the contrary, its transparency, clear ownership, and recognition as wealth affirm its compliance with Sharīʿah principles.
Some opponents argue that Bitcoin is used for illicit activities, such as money laundering, tax evasion, and purchasing illegal goods. While it is true that Bitcoin has been misused in criminal enterprises, this does not inherently render it impermissible. Any tool or asset—whether cash, gold, or bank accounts—can be misused. Sharīʿah does not judge the permissibility of an asset based on the actions of some of its users but on the intrinsic characteristics of the asset itself. Bitcoin is a neutral technology, and its ethical use depends on the intentions and actions of its users.
Moreover, the notion that Bitcoin is predominantly used for illegal purposes is increasingly baseless. Studies show that only a tiny fraction of cryptocurrency transactions are linked to criminal activity,[16] with cash remaining the preferred medium for illicit enterprises due to its anonymity. Unlike cash, Bitcoin transactions are recorded on a transparent, decentralised ledger (the blockchain), allowing anyone to trace and verify activity. This transparency makes Bitcoin an impractical choice for criminals, as transactions remain permanently recorded and traceable, allowing authorities to monitor illicit activity more effectively than with cash.[17]
In conclusion, while Bitcoin has been misused in isolated instances, its transparent and decentralised nature discourages criminal activity and provides a high level of accountability. Its permissibility in Sharīʿah remains rooted in its intrinsic characteristics and legitimate uses, rather than the misdeeds of a minority of its users.
Having established that Bitcoin meets the Sharīʿah conditions for wealth (māl) and value (taqawwum), the next question concerns other cryptocurrencies—often referred to as “altcoins.” While Bitcoin pioneered the concept of decentralised digital money, thousands of alternative cryptocurrencies have since been created, each claiming to offer unique advantages. However, these altcoins vary significantly in their structure, purpose, and legitimacy, raising the question of their Sharīʿah compliance.
While most cryptocurrencies can be stored (iddikhār), their permissibility still depends on whether they are recognised by society as wealth (tamawwul) and permissible for use in Sharīʿah (taqawwum). Therefore, altcoins that are very low in value or have very little liquidity would not be considered to have sufficient societal recognition, making their classification as māl doubtful, while others may intrinsically contain prohibited elements, such as interest, rendering them impermissible. However, most established altcoins that are widely traded and possess sufficient liquidity would generally be recognised as māl under Islamic law, provided they do not contain any prohibited elements.
Over the last century, governments have held a monopoly over currency issuance, ensuring state control over monetary policy. However, modern digital payment systems, despite their convenience, are often inefficient, costly, and rely on centralised trust. Bitcoin introduced a trust-less system of value transfer based on blockchain technology, securing transactions through cryptographic verification rather than reliance on financial intermediaries. Its decentralised nature means no single entity can control or shut it down, making it fundamentally different from traditional fiat currencies and even other cryptocurrencies. This structure also allows Bitcoin to be quicker, cheaper, and more secure than the current methods.
While many altcoins claim to improve upon Bitcoin’s model, none have achieved its level of decentralisation or resilience. Bitcoin’s success is rooted in its security, scarcity, and broad adoption—qualities that most alternative cryptocurrencies struggle to replicate.[18]
Since Bitcoin’s release, developers have copied or modified its code to create thousands of alternative cryptocurrencies. Some were created to experiment with new features, while others were launched to serve specific use cases. However, the majority lack the decentralisation and security that give Bitcoin its competitive edge. Despite this, some altcoins have gained a degree of acceptance and function as a store of value or as payment networks, albeit with varying levels of stability.
Unlike Bitcoin, which has no identifiable founder or controlling authority, most altcoins are managed by a foundation, company, or individual. This introduces centralisation, meaning the currency’s future depends on the integrity and decisions of its creators. Additionally, new cryptocurrencies can be launched with little effort, leading to the proliferation of thousands of digital assets—many of which exist primarily as speculative vehicles rather than genuine alternatives to Bitcoin.
One major issue with many altcoins is the potential for unjust enrichment. Creating a cryptocurrency can be extremely profitable for its founders, as they can generate new digital tokens and sell them to the public, effectively creating free money for themselves. This has led to a flood of new cryptocurrencies, each marketed as the next big innovation, despite most failing to deliver any real value.
The altcoin space has also become notorious for price manipulation schemes, particularly in smaller, low-cap cryptocurrencies. A common strategy, often referred to as a “pump and dump,” involves early investors or insiders accumulating large quantities of a cryptocurrency, artificially inflating its price through coordinated hype, and then selling at a profit once new investors have driven up the price.[19] This sudden sell-off results in a sharp crash, leaving latecomers with significant losses. As those engaged in such schemes have openly admitted:
“We have to make [other buyers] lose money in order to make a profit.”[20]
The ḥadīth prohibits the practice of talaqqī ‘l-jalab[21] (intercepting traders before they reach the market to manipulate prices), which can be understood as a prohibition of market manipulation that exploits buyers. Such deceptive practices are deeply unethical and contradict Islamic principles. Moreover, even investors who do not directly engage in manipulation may still benefit at the expense of others, raising serious ethical concerns. This is mainly confined to cases where it is evident that profits are made at the expense of others’ losses—such as when markets are manipulated—rather than profits made through organic market movement.
A significant portion of cryptocurrency trading is driven by speculation. Many investors seek to profit from short-term price swings, hoping to buy low and sell high without any interest in the underlying technology or utility of the asset.
While speculation itself is not prohibited, certain speculative instruments operate in a manner that closely resembles gambling, though they are not strictly equivalent to it. In gambling, one places a wager with the hope of winning a prize, knowing that the outcome is uncertain and that losses are a real possibility. Similarly, in speculative trading, investors take financial risks in the hope of price appreciation, fully aware that they may incur significant losses. Though risk is a fundamental aspect of trade and, on its own, does not determine whether a transaction is permissible or not, many altcoins are primarily designed for speculation, with no real utility or substantive value proposition. Their price movements are often dictated by market hype and manipulation rather than genuine economic function, leading them to mimic gambling-like dynamics rather than serving as productive investments.
The spirit of Sharīʿah discourages wealth generation that does not contribute to productive economic activity. One possible wisdom behind the Sharīʿah prohibition of ribā (interest) could be because money is treated as a mere asset and used to generate more money without any underlying productive effort.[22] Similarly, trading in purely speculative assets—whose only purpose is to enable short-term price gains—contributes nothing to the real economy and merely redistributes wealth in an exploitative manner. This differs from long-term investment in assets that serve as a store of value, such as gold or property, which function as legitimate hedges against inflation.
Thus, while speculative altcoins do not constitute gambling in the strict Sharīʿah sense (as the asset purchased is clearly defined), they nevertheless promote a mindset of wealth-seeking through artificial price movements rather than productive means. This makes them ethically questionable and best avoided.
Stablecoins are a category of cryptocurrencies designed to maintain a fixed value by being pegged to an asset, such as the US dollar or gold.[23] They are typically backed by reserves held by an issuing entity, which guarantees that each unit of the stablecoin can be redeemed for the corresponding asset.
A stablecoins that is fully backed by tangible assets can be considered equivalent to the asset they represent. For example, a US dollar-backed stablecoin can be treated as digital cash, while a gold-backed stablecoin can be regarded as ownership of a gold deposit. However, if the stablecoin lacks proper reserves or involves prohibited financial practices (such as fractional reserve backing), its legitimacy becomes questionable.
While Bitcoin meets the Sharīʿah criteria for wealth and value, most altcoins do not share its decentralised, trust-less, and censorship-resistant qualities. Many exist primarily for speculative purposes, are subject to price manipulation, or function as profit-generating schemes for their creators rather than as genuine stores of value.
For this reason, a cautious approach is necessary when considering altcoins. While some may serve legitimate purposes and meet the Sharīʿah conditions for wealth, many others should be avoided due to their speculative nature, centralisation, and susceptibility to unethical practices. Generally, meme coins or smaller altcoins with no clear utility, excessive volatility, or strong elements of speculation should be treated with scepticism. Stablecoins, if properly backed, may be a permissible means of storing value.
Ultimately, Muslims should exercise due diligence and avoid cryptocurrencies that resemble get-rich-quick schemes or exploit market participants. Unlike Bitcoin, which has proven its resilience and legitimacy over time, most altcoins remain unproven, and their permissibility depends on a careful evaluation of their structure, purpose, and ethical implications.
The objective of this piece has been to examine Bitcoin through the principles of Ḥanafī fiqh, assessing its status as wealth (māl) and determining whether it meets the criteria for permissibility. By applying the definitions articulated by the jurists, it has been established that Bitcoin possesses the essential characteristics of wealth: it is recognised and valued by people (tamawwul), can be stored and utilised (iddikhār), and is not inherently prohibited (taqawwum). Consequently, Bitcoin is permissible by default, and the common objections raised against it—such as its intangibility, volatility, or lack of state backing—do not affect its fundamental status in Sharīʿah.
This ruling, in principle, extends to other cryptocurrencies. However, caution is necessary, as many alternative digital assets lack substantive value, are created purely for speculation, or function as exploitative financial schemes. While the foundational ruling of permissibility applies, each cryptocurrency must be assessed on its own merits to determine whether it aligns with the ethical and legal principles of Sharīʿah.
It is important to emphasise that this paper is a legal and ethical appraisal, not an endorsement of Bitcoin or any other cryptocurrency as an investment. No claims are made regarding its future value or financial viability. The purpose of this discussion has been to clarify its standing in Islamic law, and any engagement with Bitcoin or similar assets should be approached with due diligence and a full awareness of the associated risks.
The origins of cryptocurrencies go back to the emergence of Bitcoin in 2008, introduced online[24] by an anonymous individual who called himself Satoshi Nakamoto. In the initial whitepaper, the author described the need for an online payment system that operated without relying on any financial institution to act as an intermediary.[25] The proposed solution was Bitcoin, a peer-to-peer payment network, secured by cryptography, obviating the need to depend on a bank or other intermediary to secure the transaction. Users of Bitcoin would benefit from final, irreversible transactions, similar to handing over cash in person.
Existing digital methods for transferring money over the internet already required the sender and receiver to rely on financial institutions to mediate the transaction. For example, in bank or wire transfers, the bank acts as the mediator, while PayPal serves this role in its transactions. While these systems are generally reliable and handle thousands of transactions every second, they necessitate placing trust in a third party. Nakamoto pointed out that existing payment methods lack finality, as intermediaries can reverse transactions, increasing the risk of fraud.[26] This dynamic compels buyers and sellers to trust that the other party will not make fraudulent claims to the mediator, resulting in merchants often requiring additional customer information, such as the sender’s full name and billing addresses, that would not be necessary in cash transactions. Moreover, mediation incurs costs, usually paid by the buyer or seller. Thus, payment systems reliant on trusted third parties involve inconveniences and additional expenses for users, unlike cash-based transactions.
To understand why Bitcoin’s peer-to-peer system is significant, it is useful to examine how traditional bank transfers work and why they involve delays and inefficiencies.[27] In a typical bank transfer, the bank first collects outgoing payment requests from its customers, some of which are sent to other banks. To manage these transactions efficiently, banks process them in batches, settling the total amounts with other banks at predetermined times—often at the end of the day—depending on the payment system in use.[28] Although banks usually make funds available to recipients of the transfer immediately, they do so assuming that official settlement will take place later. For larger transfers or those flagged as suspicious, banks may delay the release of funds to protect themselves from the risks of fraud. Settlement between banks is generally supervised by the country’s central bank, which oversees financial regulation and tries to ensures stability in the banking system.
International transfers are even more complex and time-consuming than domestic ones. Banks must coordinate across borders, often relying on intermediary banks when they lack a direct relationship with the receiving bank. This adds extra steps, requiring clearing houses and central banks to process transactions. Currency exchange introduces further delays due to fluctuating rates. Strict compliance checks for fraud and money laundering mean banks may hold funds until settlement is complete. Time zone differences, bank processing times, and technical issues add to the delays, making international transfers slow and costly—an issue that cryptocurrencies like Bitcoin aim to solve.
For a digital payment system to truly replace traditional banking, it needed to operate without trusted intermediaries. However, without oversight, the system would be vulnerable to fraud by malicious users. The key challenge was to create a system that could maintain security and reliability while ensuring independence.
To illustrate this challenge, consider the following example. Zayd has created a digital asset, such as an application or software, and Amr wishes to purchase full rights to it. However, Amr has no way of verifying whether Zayd has kept a copy for himself or already sold it to someone else. This is because when Zayd sends the software, he is merely sending a copy—while the original remains on his device. Even if Amr insists that Zayd deletes the original, there is no way to confirm that he hasn’t saved a backup elsewhere or transferred it to others beforehand. What Amr needs is proof that ownership of the asset has transferred to him and is no longer linked to Zayd.
This was a fundamental problem in all digital transfers—and especially for digital money. In a system without trusted intermediaries, this flaw becomes critical. A user could potentially duplicate a digital coin and spend it more than once. This issue became known as the double spend problem.[29]
In 2009, Satoshi Nakamoto launched the Bitcoin network, presenting a novel solution to this problem by using a decentralised, timestamped ledger—known as the blockchain—to prevent double spending without the need for a trusted intermediary.[30] The effectiveness of his solution is evident in the continued growth and reliability of the Bitcoin network since its launch.
Every time bitcoins are sent from one person to another, the transaction is recorded on the blockchain—a decentralised public database. The Bitcoin blockchain contains a complete history of all transactions ever made, and this data can be used to determine the balance of any Bitcoin address.
The blockchain is publicly accessible and transparent. Anyone can view the transaction history and the current balance of each address, though the real-world identities behind the addresses are not necessarily known.[31]
Rather than being stored in one central location, the blockchain is maintained by users across the network running Bitcoin software. Each user holds a copy of the blockchain and helps verify transactions by comparing their copy with others. This decentralised model makes the network highly secure and resistant to tampering or hacking—as will be discussed further below.
Bitcoins are held at Bitcoin addresses, which function similarly to account numbers. Each address is a unique string of letters and numbers. To send bitcoins, a user must use a corresponding private key—a secret code akin to a password. Without this private key, bitcoins cannot be spent. If someone else obtains a user’s private key, they can access and transfer those bitcoins. If the key is lost, the bitcoins stored at the associated address are permanently inaccessible, as recovery is virtually impossible.
Each private key has a matching public key, which allows others to verify that a transaction was authorised by the rightful owner. For example, if someone tried to fraudulently transfer bitcoins from Zayd’s address, the network would attempt to validate the transaction using Zayd’s public key. If it was not signed with Zayd’s private key, it would be rejected.
Because every user running Bitcoin software stores a full copy of the blockchain and verifies transactions independently, the network becomes more secure as more users join. A hacker would have to alter the majority of individual copies simultaneously to alter the ledger—a near-impossible task. To date, the Bitcoin blockchain has never been successfully hacked, and is regarded as one of the most secure networks in the world.[32]
Having explained how the blockchain records transactions and secures the network, we can now turn to the process by which new transactions are added to the blockchain—known as mining.
Mining is a central part of how Bitcoin operates. When a user sends bitcoins, they sign the transaction with their private key and broadcast it to the network. These transactions are then gathered by miners into a collection called a block, which they attempt to add to the blockchain. However, before a block can be added, miners must compete to solve a complex mathematical puzzle.
This puzzle requires immense computational power and electricity, as it involves repeatedly guessing a number that, when combined with the block’s data and passed through a special mathematical function, produces a valid result. The first miner to find a valid solution earns the right to add the block to the blockchain. In return, they receive a block reward consisting of newly issued bitcoins and the transaction fees included with the payments in that block.
This process is intentionally designed to be difficult to perform but easy to verify. In other words, posting transactions to the blockchain requires significant computational effort, while verifying their validity is simple for users. This ensures that fraudulent activity is both hard to carry out and easy to detect, helping prevent manipulation while keeping the system decentralised.
It also serves as a mechanism for regulating the release of new bitcoins, since block rewards—currently the only way new bitcoins enter circulation—are only issued when a block is successfully mined, a task that requires substantial effort. This stands in contrast to inflationary currency systems, where central authorities can increase the money supply at will.
Importantly, mining does not generate bitcoins out of nothing. Rather, it unlocks a portion of the fixed supply of 21 million bitcoins that will ever exist. These coins are released according to a predetermined schedule, with a small amount made available each time a miner successfully posts a block—hence the term mining.
Bitcoin’s mining process relies on a mathematical tool called a cryptographic hash function, specifically the SHA-256 algorithm. This function takes any input—such as a block of transaction data—and produces a unique 256-character output called a hash. Even the slightest change to the input—such as a single character—results in a completely different hash, making it impossible to guess the correct input from the output.
When miners prepare a new block, they must include an additional number—called a nonce—alongside the transaction data. This combined package is then passed through the SHA-256 algorithm to produce a hash. For the block to be accepted, this hash must meet specific criteria set by the network. There is no way to predict which input will yield a valid hash, so miners must continually guess different nonces until one of them produces an acceptable result. This process can take billions or even trillions of attempts.
To perform this task efficiently, miners use specialised hardware chips capable of running the SHA-256 function trillions of times per second, which consume significant amounts of electricity.
If more miners join the network, solutions are found more quickly, since more guesses are being made. To prevent blocks from being mined too rapidly, the Bitcoin network automatically adjusts the difficulty of the puzzle—increasing it when blocks are found too quickly and decreasing it when blocks take too long to mine. This dynamic adjustment ensures that a new block is added to the blockchain, on average, every ten minutes.
Once a miner successfully solves the puzzle, they broadcast the block to the network. Other users running the Bitcoin software can instantly verify whether the solution is valid, and if it is, they add the block to their copy of the blockchain. This mechanism ensures that every transaction is verified by the network as a whole.
This system is called proof of work—because the miner must prove they have done the computational work before their block is accepted. While the process is energy-intensive and seemingly arbitrary, it is essential to the security of Bitcoin. A malicious user would need to expend enormous resources competing with honest miners, only to have their block rejected if it does not meet the required conditions. This makes tampering with the blockchain economically and technically unfeasible.[33]
Bitcoin introduced the concept of a decentralised public database—the blockchain—which has since been adopted by thousands of other cryptocurrencies. While many of these projects build on the same basic idea, they often function quite differently in practice. Bitcoin is deliberately simple and inflexible, making it difficult to change. To introduce new features or design changes, developers have typically copied or “forked” its code to create entirely new cryptocurrencies.
These alternatives are usually created and maintained by identifiable teams or companies that oversee development and promote adoption. Unlike Bitcoin—which has no central authority and operates according to fixed rules—these newer cryptocurrencies may be centrally managed, with more flexible policies around supply limits, consensus mechanisms (such as using proof of stake[34] instead of proof of work), and even transaction validation. As a result, while they share Bitcoin’s foundational technology, their underlying systems, governance structures, and degrees of decentralisation can differ significantly. [35]
To understand the significance of Bitcoin, it is necessary to first understand the system it is challenging. This appendix provides an overview of how modern money works, why the current financial system is fundamentally flawed, and how Bitcoin offers a real, practical alternative. For Muslims, the greatest concern with the system is its reliance on interest, which is categorically prohibited in Islamic law. Beyond that, it also raises serious questions about justice, stability, and long-term economic wellbeing—and Bitcoin offers a possible way out.
Before examining Bitcoin as a monetary alternative, we must first understand the nature and function of money itself. In any society, individuals cannot produce everything they need on their own. They must therefore trade surplus goods—such as eggs—for what they lack, such as a loaf of bread. This system is known as bartering. However, bartering only works efficiently when both parties want what the other has. If the bread seller doesn’t want eggs, the buyer must first trade his eggs for something the baker does want—for instance, apples. He can then offer those apples in exchange for the bread he originally wanted. In this scenario, apples have temporarily functioned as a medium of exchange, even though no official currency exists.
As bartering is not practical long term, it becomes convenient for everyone to standardise on a single asset to function as a medium of exchange. This then becomes the local currency (or money). Historically, various items were used by different societies as money, such as cows, seashells, cheese, and rocks.[36]
However, some assets function better as money than others. Usually, the best currency is the one which is most convenient to transact in. For example, it must be easy to carry and move around, so that people can easily pay with it when shopping. Likewise, it must be easily divisible so that people will be able to exchange it for both low and high value items. Finally, it must be able to hold its value across time. For example, adopting houses as a currency would be impractical as they are difficult to transport and are not easily divisible to pay for small value items. However, they are very good at holding their value across time. On the other hand, apples or bananas are comparatively easier to transport, but do not hold their value across time as they will eventually become consumed or rot.
Thus, money arises naturally in every society as a tool to solve the limitations of barter—but not all forms of money are equally good or fair.
Most importantly, a good form of money must be difficult to produce more of. When new money is produced, this benefits the producer and causes the overall value of the money to reduce, which harms everyone else who owns that money.
This is based on the economic principle of demand and supply. When more of a product is made, more of it is available to purchase in the market. However, the number of people looking to purchase the product at the current price does not necessarily increase. The producer has to lower the price if he wants to sell the excess product. Therefore, increasing the supply of something usually causes the price to fall. The opposite is also true: when a product becomes scarce, its price usually rises because there is a shortage of the product in the market and buyers are usually willing to pay more to obtain it.
This same principle also applies to money. If a society adopts a form of money that is easy to produce, the producers of that money can create as much of it as they like for themselves to spend. As this additional money enters the market, it creates a surplus of purchasing power. Sellers begin to notice that people are more willing—and able—to pay for goods. This is especially true for scarce necessities or luxury items that most people would ordinarily not afford. As demand rises for these items, sellers raise their prices. The result is that prices increase more broadly across the economy, and the value of money declines. This phenomenon is known as inflation.
There are many examples in history where a society that used easy-to-produce money saw the value of their money collapse. In Africa, for example, certain communities used glass beads as currency, which were scarce locally. When Europeans discovered this, they began mass-producing imitation beads and shipping them to Africa, using them to buy goods, resources, and even slaves. By the time the local population realised their currency had been debased, much of their wealth and freedom had already been taken.[37]
A similar event occurred on Yap Island, where large limestone discs were used as money. An Irish sailor discovered he could quarry the same type of stone from nearby islands and shipped it back in large quantities, exchanging it for local goods. In both cases, the sudden increase in money supply—from an outside source—destroyed the value of the local currency.[38]
Even in modern times, we see similar patterns. In Venezuela, for example, the government printed money in vast amounts to finance its spending. As more money flooded the market, the value of the currency collapsed, leading to hyperinflation and economic ruin.[39]
It becomes clear from these examples that when money is easy to produce, there is nothing to stop people from producing more of it. This means that it is unlikely to hold its value well over time, and therefore it will not make a good currency.
Gold and silver have served as popular forms of money throughout history due to their unique properties. They are rare, difficult to produce in large quantities, and durable over time. Gold in particular is chemically stable—it does not rust or degrade—and most of the gold ever mined still exists today. Additionally, the rate of new gold production is consistently low—typically ranging between 1–2% of total stockpiles each year.[40] This means inflation in the supply of gold is naturally constrained, unlike modern fiat currencies. Silver shares many of these characteristics, though to a lesser degree, as it is more abundant and has historically held its value slightly less well than gold. Due to these qualities, gold and silver are commonly regarded as the best forms of money.
However, even with these hard monies, rulers found ways to manipulate the currency to their advantage. By controlling the minting process, they could debase the currency—for example, by re-minting coins with reduced gold or silver content while keeping their face value the same. Over time, this practice led to inflation, rising prices, and widespread poverty. In many cases, such as during the Roman empire, repeated debasement contributed to economic instability and was a factor in their eventual collapse.[41]
In fact, this practice of currency debasement continued throughout history and into the modern era, merely evolving into more sophisticated forms.
“Each country fixed the price of gold in their local currency. In the UK, the price of one troy ounce of gold was £4.25. In the US it was fixed at $20.67. This implied a fixed exchange rate between pound sterling and the dollar ($4.87 per £1), and all the other countries on the gold standard. To enhance the credibility of the arrangements, authorities guaranteed that paper money was fully convertible into gold. Anyone could request to convert their pounds into the equivalent value of gold.”[42]
In the 19th century, most countries adopted what became known as the gold standard: a system in which each unit of national currency represented a specific weight of gold. Banknotes could be exchanged for the gold they stood for, and international exchange rates were fixed based on the relative gold content of different national currencies.
The adoption of the gold standard was not accidental. Countries chose to peg their currencies to gold because of its stability and to facilitate trade with other gold-standard countries. Though most countries adopted the gold standard, some economies—such as China and India—operated on a silver standard instead. However, their currencies lost value significantly against gold-standard currencies, as the value of silver declined relative to gold.
In theory, the gold (or silver) standard made inflation impossible. Since each note could be redeemed for a fixed amount of gold or silver, banks and governments were restrained from issuing more notes than the amount of metal they had in reserve. People could always demand physical gold in exchange, which forced institutions to remain accountable.
In practice, however, banks did often issue more notes than they had gold, gambling that not all depositors would want to redeem them at the same time. This risky practice left them vulnerable to what became known as a bank run—when too many people attempted to withdraw gold at once and the bank did not have enough gold to facilitate withdrawal. In such cases, the banks collapsed and depositors lost all of their savings. Governments also took advantage of the system by printing excessive amounts of paper currency to spend during crises such as war, despite not having the gold reserves to back them. When people lost confidence in the currency, they would demand their gold back in exchange—gold which, in many cases, had never existed.
As people increasingly relied on paper notes rather than physical gold coins in daily transactions, gold was gradually consolidated in banks. This centralisation made it easier for governments to effectively take control of their citizens’ gold. By regulating the banking sector and establishing central banks, they were then able to control the money supply, creating new money as they pleased, without having to worry about the gold it (supposedly) represented. What began as a decentralised, trust-based monetary system gradually transformed into a centralised, politically influenced fiat system—one no longer anchored to gold at all.
The final break from gold came in the 20th century. During World War I, governments suspended the ability to redeem currency for gold, allowing them to create money to fund military spending without restraint.[43] After the war, the value of their currencies relative to gold had dropped significantly.[44] Countries did attempt to return to the gold standard, but after several failed efforts, the link between money and gold was gradually abandoned. By 1971, currency was no longer backed by anything tangible.[45] Since then, governments and banks have been free to expand the money supply at will—resulting in a system defined by chronic inflation and long-term erosion of purchasing power. Today, no country in the world maintains a currency backed by gold or any other hard asset—all operate entirely on unbacked fiat money.[46]
As we have seen earlier, one of the most dangerous tendencies throughout monetary history has been the temptation to create more money than real wealth can support. In the modern financial system, this process has become systemic.
Money today is created simply through the issuance of loans. This lending occurs at every level: central banks loan money to governments and large corporations, commercial banks loan to individuals, and rich countries loan to poorer ones. In every case, the money does not already exist; it is created at the moment the loan is issued. Once the loan is repaid, the principal is destroyed, but the lender keeps the interest as pure profit.
Because banks profit from interest, they are incentivised to issue as many loans as possible, even if doing so inflates the money supply far beyond what the economy can absorb. This is the continuation of the same old temptation: to produce ‘free money’ for the lender, at the expense of everyone else who holds money and sees its value erode.
Inflation is the hidden consequence of the constant creation of new money. As surplus money enters the market, the supply of currency rises, diluting its value and pushing prices upward. Inflation is, simply put, the steady decrease in the purchasing power of money.
For example, £100 in 2014 could buy what requires around £130 today—meaning that, in a single decade, money has lost nearly a quarter of its value.[47] This silent erosion punishes those who save and rewards those who spend quickly or go into debt.
Inflation pressures people to consume now rather than later. It also encourages borrowing, since a loan taken out today will be repaid in devalued money tomorrow. In this way, the modern fiat system penalises patience, thrift, and responsibility—the virtues that once formed the bedrock of personal and societal stability.
As inflation discourages saving and long-term thinking, it reshapes society itself. High time preference—the prioritisation of immediate gratification over future benefit—becomes the cultural norm. People are incentivised to spend recklessly, to take out loans they cannot afford, and to value the present moment over future security. As a result, chronic wastage of food, water, and other essential resources becomes widespread, even as hunger and poverty persist across the world. Agricultural practices, driven by the pursuit of rapid yields, often sacrifice long-term soil health, leading to widespread degradation and desertification. Meanwhile, industries often make products that are designed to become obsolete quickly, adding to overflowing landfills and speeding up environmental damage. When the very structure of money rewards short-termism, it should not surprise us that entire societies adopt unsustainable habits.
Because inflation encourages borrowing, and borrowing is easier for the wealthy than the poor, the financial system creates deep and systemic inequality.
Wealthy individuals and corporations can access cheap loans at low interest rates. They use this borrowed money to invest in appreciating assets such as property, stocks, and businesses—growing their wealth even further. Meanwhile, ordinary people often borrow at higher interest rates simply to meet basic needs, such as housing, education, or healthcare.[48]
For the wealthy, debt is a tool to multiply riches. For the poor, debt becomes a trap that is difficult to escape. The result is an ever-widening gap: the rich are rewarded, and the poor are punished—not by accident, but as a structural feature of the modern financial system.
The same dynamics that trap individuals in debt play out on the global stage. Wealthy countries and international institutions lend to poorer nations, often under conditions that are almost impossible to fulfil. In exchange for continued access to loans, debtor nations are required to restructure their economies according to the demands of the lenders: privatising industries, opening markets to foreign corporations, and shifting exports toward cash crops or raw materials that benefit foreign interests, often at the expense of local needs and self-sufficiency.[49]
These policies often strip poorer countries of their economic independence and natural resources, keeping them in a state of permanent dependency. Their economies are reshaped not for the benefit of their own citizens, but for the enrichment of foreign powers.
Modern financial colonialism is, in many ways, more insidious than the old models of empire: it enslaves nations not by force of arms, but by chains of debt.
While the modern financial system is built on endless expansion and centralised control, Bitcoin offers a fundamentally different model. It has a fixed supply that cannot be inflated, no central authority that can manipulate it, and rules that cannot be changed without broad community consensus. Bitcoin is secured not by trust in governments or banks, but by mathematics and open participation. Changes to its core design are resisted by its users, who collectively preserve its original form. In this way, Bitcoin’s resilience bears some resemblance—in a limited and worldly sense—to how the Qur’ānic muṣḥaf has been preserved through memorisation and collective safeguarding. While the Qur’ān’s preservation is divinely guaranteed and far beyond comparison, the mechanism—a community vigilantly protecting it from alteration—echoes the way Bitcoin’s users preserve its integrity against tampering. Bitcoin is decentralised, censorship-resistant, and resilient: no single entity controls it, and no government can shut it down. In a world where money is routinely abused, Bitcoin presents a compelling alternative—one that offers the possibility of a more just, transparent, and incorruptible monetary system.
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[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] For a detailed explanation on monetisation, see chap. 3 of Boyapati, The Bullish Case for Bitcoin.
[5] For a detailed critique of fiat currencies and their historical development, see the Appendix of this paper. For further reading, consult chap. 1–3 of Saifedean Ammous, The Fiat Standard.
[6] For an introduction to the history on Islamic coinage, see Coins of Two Realms. AramcoWorld, June 15, 2015. https://www.aramcoworld.com/articles/2015/coins-of-two-realms. Also see Bates, Islamic Coins.
[7] Coins of Two Realms. AramcoWorld.
[8] Bates, Islamic Coins.
[9] For Zimbabwe, see Steve H. Hanke and Alex Kwok, “On the Measurement of Zimbabwe’s Hyperinflation,” Cato Journal 29, no. 2 (2009): 353–64. https://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2009/5/cj29n2-8.pdf. For Venezuela, see Venezuela’s Central Bank Releases Data Showing Dire Economy. Wall Street Journal, May 28, 2019. https://www.wsj.com/articles/venezuelas-central-bank-releases-data-showing-dire-economy-11559098083.
[10] See Seigniorage and How Governments Profit from Issuing Money. European Central Bank, April 7, 2023. https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me/html/seigniorage.en.html. See Money Creation in the Modern Economy. Bank of England Quarterly Bulletin, March 14, 2014. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.
[11] El Salvador Makes Bitcoin Legal Tender. BBC News, June 9, 2021. https://www.bbc.co.uk/news/world-latin-america-57398274.
[12] U.S. SEC Approves First Bitcoin ETF. Reuters, January 10, 2024. https://www.reuters.com/technology/bitcoin-etf-hopefuls-still-expect-sec-approval-despite-social-media-hack-2024-01-10/.
[13] The U.S. Government Is One Step Closer to Holding 1 Million Bitcoins. Forbes, November 11, 2024.
[14] The current market cap of Bitcoin is ≈ $2T, see “Bitcoin Market Capitalization”. CoinMarketCap, accessed January 31, 2025. https://coinmarketcap.com/currencies/bitcoin/. GDP Data from the World Bank website suggests that there are only 11 countries with GDP similar or higher than this figure. See “GDP (Current US$)”, 2020. World Bank Data, accessed January 31, 2025.
https://data.worldbank.org/indicator/NY.GDP.MKTP.CD.
[15] Al-Hidāyah fī Sharḥ Bidāyat al-Mubtadī, 3:85.
[16] A report by a blockchain analytics firm found that illicit activity accounted for only 0.34% of all cryptocurrency transaction volume in 2023, highlighting that criminal use of cryptocurrency is minimal compared to its overall usage. This point is also affirmed by a report published by Europol = = on cryptocurrency–related crime. See The 2024 Crypto Crime Report. Chainalysis, January 18, 2024. https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/. See Cryptocurrencies: Tracing the Evolution of Criminal Finances. Europol Spotlight Report Series, updated January 26, 2022. https://www.europol.europa.eu/cms/sites/default/files/documents/Europol%20Spotlight%20-%20Cryptocurrencies%20-%20Tracing%20the%20evolution%20of%20criminal%20finances.pdf.
[17] Blockchain analytics has proven highly effective in tracing cryptocurrency movements, even when users attempt to obscure their transactions. For examples, see Chainalysis in Action: US Government Agencies Seize More Than $1 Billion in Cryptocurrency. Chainalysis, November 5, 2020. https://www.chainalysis.com/blog/silk-road-doj-seizure-november-2020/. See The $477 Million FTX Hack: A New Blockchain Trail. Elliptic, October 12, 2023. https://www.elliptic.co/blog/the-477-million-ftx-hack-following-the-blockchain-trail.
[18] The appendices to this paper explore the question of “What Purpose Do Cryptocurrencies Fulfil?” in greater depth. The first appendix, “What Are Cryptocurrencies?” discusses the shortcomings of modern digital payment systems and how Bitcoin’s structure differs. The second appendix, “Understanding the Financial System Bitcoin Seeks to Replace” offers a broader explanation of economic principles and the problems within the current monetary system. For further analysis, see: Saifedean Ammous, The Bitcoin Standard.
[19] Pump-and-Dump: Definition, How the Scheme is Illegal, and Types, Investopedia, updated January 13, 2022. https://www.investopedia.com/terms/p/pumpanddump.asp
[20] Eighteen Individuals and Entities Charged in International Operation Targeting Widespread Crypto Fraud Schemes. U.S. Department of Justice, October 9, 2023. https://www.justice.gov/usao-ma/pr/eighteen-individuals-and-entities-charged-international-operation-targeting-widespread.
[21] Muslim, 1519.
[22] For a detailed explanation of this concept, see chap. 3 of Mufti Taqi Usmani, The Financial Crisis – From an Islamic Perspective.
[23] Stablecoins: Definition, How They Work, and Types, Investopedia, updated June 13, 2024. https://www.investopedia.com/terms/s/stablecoin.asp
[24] Bitcoin P2P e-cash paper. Cryptography Mailing List, October 31, 2008. https://www.metzdowd.com/pipermail/cryptography/2008-October/014810.html
[25] Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System, 2008. https://bitcoin.org/en/bitcoin-paper
[26] Satoshi Nakamoto, Bitcoin.
[27] The following explanation of Bitcoin’s inner workings is based on the author’s understanding drawn from a range of sources. While care has been taken to ensure accuracy, readers are encouraged to notify the authors of any factual errors so corrections may be made.
[28] A payment system refers to the protocol used to process and settle financial transactions. In the UK, payment systems include Faster Payments (FPS), BACS, and CHAPS. These differ mainly in settlement speed. Faster Payments allow instant transfers, while BACS may take up to three days. See Payment information: BACS, CHAPS and Faster Payments. Barclays UK, accessed May 5, 2025. https://www.barclays.co.uk/help/payments/payment-information/bacs-chaps-faster-payments/.
[29] Double-Spending. Investopedia, updated May 15, 2024. https://www.investopedia.com/terms/d/doublespending.asp. There were many attempts to solve the double-spend problem before Bitcoin. Bitcoin was developed building on these earlier efforts. See Arvind Narayanan and Jeremy Clark, Bitcoin’s Academic Pedigree: The concept of cryptocurrencies is built from forgotten ideas in research literature. Communications of the ACM, December 2017. https://doi.org/10.1145/3134434.313655.
[30] Bitcoin v0.1 released. Cryptography Mailing List, January 8, 2009. https://www.metzdowd.com/pipermail/cryptography/2009-January/014994.html. See also: The Satoshi Nakamoto Institute archive of his writings: https://satoshi.nakamotoinstitute.org/
[31] The entire blockchain can be downloaded and verified on your personal device using Bitcoin Core software. See https://bitcoin.org/en/full-node#setup-a-full-node. Alternatively, you can use an online block explorer to view all current and past transactions on the blockchain, for example, see https://mempool.space/. https://bitcoinbriefly.com/how-to-use-mempool-space-block-explorer/ is a guide on how to use.
[32] Can Bitcoin Be Hacked? River, accessed August 4, 2024. https://river.com/learn/can-bitcoin-be-hacked/. Although the Bitcoin network itself has never been hacked, users can lose funds if their private keys are compromised.
[33] For a clear and accessible explanation of how Bitcoin works, see the animated video by 3Blue1Brown. But how does bitcoin actually work? YouTube, 7 July 2017. https://youtu.be/bBC-nXj3Ng4. For more detailed technical reading, see Andreas M. Antonopoulos, Mastering Bitcoin; and Arvind Narayanan et al., Bitcoin and Cryptocurrency Technologies.
[34] In proof of stake systems, validators are selected based on how much cryptocurrency they hold and lock in as “stake,” rather than performing energy-intensive calculations. This contrasts with Bitcoin’s proof of work system, where miners expend computational power to validate transactions. For a defence of Bitcoin’s energy use and its trade-offs, see Lyn Alden, Bitcoin’s Energy Usage Isn’t a Problem, updated January 2023. https://www.lynalden.com/bitcoin-energy/.
[35] The Bitcoin network has no central authority. After its anonymous founder stepped away, it continued to grow organically without the influence of any individual or group. This decentralisation makes Bitcoin highly resistant to change. During the “blocksize wars,” major corporations, miners, and influencers attempted to impose changes to the protocol, but ultimately failed. See Jonathan Bier, The Blocksize War: The Battle for Control over Bitcoin’s Protocol Rules (BitMEX Research, 2021). A summary of these events is also available in: The Blocksize Wars Revisited. Coindesk, May 17, 2023. https://www.coindesk.com/consensus-magazine/2023/05/17/the-blocksize-wars-revisited-how-bitcoins-civil-war-still-resonates-today/. Around the same time, Ethereum underwent a controversial rollback to return stolen funds after the DAO hack—highlighting its centralised decision-making. See How the DAO Hack Changed Ethereum. Coindesk, May 9, 2023. https://www.coindesk.com/consensus-magazine/2023/05/09/coindesk-turns-10-how-the-dao-hack-changed-ethereum-and-crypto/.
[36] How Has Money Changed Over Time? Bank of England, accessed 20 July 2024. https://www.bankofengland.co.uk/explainers/how-has-money-changed-over-time
[37] Lankton, James W. “Akori Beads and the African Trade.” Beads: Journal of the Society of Bead Researchers 22 (2010): 52-70. https://surface.syr.edu/beads/vol22/iss1/8. Also see The Many Lives of Akori Beads. Perspectives on History, American Historical Association, December 23, 2023. https://www.historians.org/perspectives-article/accori-beads-december-2023. For an interpretive account of its economic consequences, see Akori Beads, Hyperinflation and the Ancient African Economy. Afrikapital, July 22, 2020. https://www.afrikapital.org/p/akori-beads-hyper-inflation-and-ancient.
[38] David O’Keefe: The King of Hard Currency. Smithsonian Magazine, July 28, 2011. https://www.smithsonianmag.com/history/david-okeefe-the-king-of-hard-currency-37051930/.
[39] Venezuela’s Central Bank Releases Data Showing Dire Economy. Wall Street Journal, May 28, 2019. https://www.wsj.com/articles/venezuelas-central-bank-releases-data-showing-dire-economy-11559098083.
[40] This figure is cited in The Bitcoin Standard, based on long-term U.S. Geological Survey data. See Saifedean Ammous, The Bitcoin Standard, chap. 3, fig. 1. For recent annual figures, see Gold Demand Trends: Full Year 2023 – Supply. World Gold Council, Jan 31, 2024. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-full-year-2023/supply; and Full Year 2024 – Supply, Feb 5, 2025. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-full-year-2024/supply.
[41] Metallic Money: Roman Debasement and Collapse. Encyclopaedia Britannica, accessed May 06, 2025. https://www.britannica.com/money/money/Metallic-money#ref362590.
[42] Small Change: Currency and the Gold Standard. Olympic Britain, House of Commons Library, July 10 2012. https://www.parliament.uk/business/publications/research/olympic-britain/the-economy/small-change/.
[43] Small Change: Currency and the Gold Standard. Olympic Britain.
[44] For a historical analysis of exchange rate declines during and after World War I, see George J. Hall, “Exchange Rates and Casualties During the First World War,” Journal of Monetary Economics 51, no. 8 (2004): 1711–42. https://doi.org/10.1016/j.jmoneco.2004.02.001. In some countries, this devaluation eventually led to full monetary collapse, such as in Weimar Germany and Austria. See Hyperinflation in the Weimar Republic. Encyclopaedia Britannica, accessed May 06, 2025. https://www.britannica.com/event/hyperinflation-in-the-Weimar-Republic; and Christian Beer, Ernest Gnan, and Maria Teresa Valderrama, “A (Not So Brief) History of Inflation in Austria,” Monetary Policy & the Economy 3 (2016): 6–32. Oesterreichische Nationalbank. https://www.oenb.at/dam/jcr:71fd40dc-79b6-4947-9782-474fa1a805f1/05_beer-gnan-valderrama_tcm16-261980.pdf.
[45] These attempts were ultimately bound to fail, as governments were unwilling to stop inflating the money supply. The United Kingdom abandoned the gold standard in 1931, when rising redemption demands forced the government to suspend convertibility. See Going off Gold. The National Archives, Sept 20, 1931. https://www.nationalarchives.gov.uk/education/resources/thirties-britain/going-gold/. The United States followed in 1933, suspending gold convertibility for its citizens and confiscating privately held gold. See Gold Reserve Act of 1934. Federal Reserve History, Nov 22, 2013. https://www.federalreservehistory.org/essays/gold-reserve-act. Though the US attempted to maintain a devalued gold peg at $35 per ounce, this system was ultimately abandoned in 1971, when the Nixon administration ended dollar convertibility to gold. See Nixon Ends Convertibility of US Dollars to Gold. Federal Reserve History, Nov 22, 2013. https://www.federalreservehistory.org/essays/gold-convertibility-ends.
[46] It is a common misconception that modern currencies are still backed by gold. In fact, no country currently operates on a gold standard, though some central banks do hold gold as a reserve asset. See “Who Still Has the Gold Standard?” Investopedia, updated October 14, 2024. https://www.investopedia.com/ask/answers/09/gold-standard.asp.
[47] Based on the Bank of England’s official inflation calculator. See “Inflation Calculator.” Bank of England, accessed August 4, 2024. https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator.
[48] For examples of preferential loan terms offered to the wealthy, see How the Super-Rich Buy Their Homes. Financial Times, Nov 5 2021. https://www.ft.com/content/ebf761ea-fcc8-4fd4-a636-87561398da3e.
[49] The Effects of IMF Loan Conditions on Poverty in the Developing World. Journal of International Relations and Development 25 (2022): 806–833. https://doi.org/10.1057/s41268-022-00263-1. Also see Structural Adjustment: How the IMF and World Bank Repress Poor Countries and Funnel Their Resources to Rich Ones. Bitcoin Magazine, Nov 30, 2022. https://bitcoinmagazine.com/culture/imf-world-bank-repress-poor-countries.