Money is a critical part of everyone’s life, and for the religious it is even viewed as a matter of eternal consequence. While those on the outside may be unaware of the importance finance takes on in circles of faith, these beliefs nonetheless affect and impact the businesses and economies of market actors everywhere, regardless of worldview. This post seeks to examine the background of what is known as Sharia compliance in crypto, looking at the relationship between bitcoin use and Islamic religious law.

What Is Sharia Law?

At its most fundamental, Sharia law can be described as the law of the Islamic religion. While interpretations of what is and isn’t “Sharia-compliant” can vary, there is still a pressing need perceived by practicing Muslims to abide by Sharia, or “the way.” As such, even topics like bitcoin have been addressed and clarified in the context of the faith.

From Sharia-compliant exchanges to guidelines on ICO’s, Islam’s lively address of cryptocurrency in the context of religious morality is not surprising. It’s a testament to just how ubiquitous and important Satoshi’s creation has become. With a reported 1.8 billion followers of Islam worldwide, and the top four cryptos enjoying a combined market cap of over $200 billion in the world economy, the meeting of peer-to-peer digital assets and faith was inevitable.

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Key Issues for Compliance

Exchanges billing themselves as Sharia compliant focus on key issues such as usury (unreasonable interest rates/profiting from debt), gambling, drug use, perceived sexual immorality, scams, and economic uncertainty. One exchange, Estonia-based Beldex, notes that it “does not allow or associate itself” with the aforementioned activities. Another service, crypto brokerage Rain, boasts it is officially certified by the Bahrain Central Bank-licensed Shariyah Review Bureau.

When deciding if bitcoin use is “halal” (lawful) or “haram” (forbidden) in Islam, there’s not a clean-cut consensus. Blossom Finance founder Matthew J. Martin clarified to news.Bitcoin.com’s Jamie Redman in 2018: “Contrary to popular myth, Shariah law is not a single set of rules; it’s is a scholarly field subject to differing interpretations and opinions on various matters.” Martin’s startup seeks to help investors navigate this ambiguity, by offering investments that are “end-to-end shariah compliant using fully approved shariah structures such as profit-sharing (mudarabah).”

Where ICOs and potential scams are concerned, it’s no wonder Muslims are sometimes hard-pressed to find clarification. The idea of “garar” (uncertainty) requires that the faithful steer clear of overly uncertain investments and other financial practices which could be deemed irresponsible. Those navigating the crypto space know all too well it’s a veritable asteroid field of snake oil pitches, shitcoins, and empty promises. However, there are other principles in the religion that have some seeing bitcoin as Halal, and highly beneficial to Muslim finance.

Sharia and Bitcoin’s Common Ground: Peer-to-Peer Consensus

While Sharia is typically understood to be superseded by governmental law — thus rendering crypto activity haram where the state has deemed the same activity illegal — the nature of bitcoin yet has some interesting overlap, and creates potential gray areas, where Sharia law is concerned. For example, when there is ambiguity which cannot be settled by reference to the religion’s holy book, the Quran, social consensus is one of the tools by which Muslims can deem something acceptable.

“A large group of scholars say cryptocurrencies are permitted because of the social concurrence concept,” Dr. Ziyaad Mahomed, from the International Centre for Education in Islamic Finance, has noted, “But they also say this does not necessarily mean that cryptocurrencies can be recognised as a legitimate form of currency.” What is interesting is that although bitcoin may be viewed as an unstable, non-official currency, it is simultaneously a widely utilized consensus network, so on these grounds it may be acceptable.

Ziyaad also stated that “digital coins can represent various sustainable development projects through a cooperative scheme,” emphasizing:

From a shariah perspective, I think this is the ultimate goal — leveraging new technologies to benefit all parties in a legitimate, halal manner.

Though the debate about compliance will likely continue as long as religious sects disagree on aspects of their various doctrines, one thing is certain: billed as “Sharia compliant” or not, in a crypto space full of irresponsible parties, one should always do their homework before investing.