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, certain 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.[1]
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.[2] This sudden sell-off results in a sharp crash, leaving latecomers with significant losses. As those engaged in such schemes have openly admitted:
The ḥadīth prohibits the practice of talaqqī ’l-jalab[4] (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.[5] 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.[6] 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 many meet the Sharīʿah conditions for wealth, and some may serve legitimate purposes, numerous 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.
Ammous, Saifedean. The Bitcoin Standard: The Decentralized Alternative to Central Banking. Wiley, 2018.
Usmani, Mufti Muhammad Taqi. The Financial Crisis – From an Islamic Perspective. Turath Publishing, 2014. Originally released as a paper titled Post-Crisis Reforms – Some Points to Ponder; presented by the author at the meeting of the World Economic Forum (2010) in Davos-Klosters, Switzerland.
[1] The appendices to this paper explore the question of what purpose 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.
[2] Pump-and-Dump: Definition, How the Scheme is Illegal, and Types, Investopedia, updated January 13, 2022. investopedia.com
[3] Eighteen Individuals and Entities Charged in International Operation Targeting Widespread Crypto Fraud Schemes. U.S. Department of Justice, October 9, 2023. justice.gov.
[4] Muslim, 1519.
[5] For a detailed explanation of this concept, see chap. 3 of Mufti Taqi Usmani, The Financial Crisis—From an Islamic Perspective.
[6] Stablecoins: Definition, How They Work, and Types, Investopedia, updated June 13, 2024. investopedia.com.