Crypto currency and Bitcoin

Crypto currency and Bitcoin


Is Crypto currency such as Bitcoin essentially prohibited because it is issued by unknown people?

Some argue that it is not tangible, being not made from anything physical, except being backed by software.  Wealth cannot be created from nothing, being prohibited in Sharī’ah.  Although paper money in origin was based upon the gold standard, even though that link is not there now, it is accepted as being legal tender, being issued and controlled by central banks therefore having the backing of states, its overall legitimately accepted widely and not contended.


Having analysed the matter, there isn’t specific textual evidences cited that would make the buying and selling of this prohibited.  The reasoning underpinning the adoption of a prohibition based upon its perceived nature contains several analytical flaws which will be commented upon in turn.  In short, the general ruling of permissibility would apply in this instance.


  1. To begin, the idea that Crypto currency is created from nothing is patently false. It is created from the solution of certain equations upon a blockchain. It is the combined action of human beings interacting with the programme.  In turn, that programme(s) have been created by human beings arising from complex mental processes and mathematical equations Crypto currency is minted in various ways, for example by proof of work, proof of stake or other types of initialisation. In the round, that cannot be termed as being ‘nothing.’  Admittedly, it is not a physical entity like gold or silver, but perhaps more in the realm of abstraction, and that is a type of existence. Not every type of existence, by necessity, needs to be independent from a certain mind.  Something exists called Bitcoin, it is an abstract entity, yet it can be perceived, calculated etc.
  2. While other Crypto currencies may be more complex, Bitcoin for example is obtained via solving certain mathematical and hash equations which involves considerable effort and electricity. We have witnessed that in certain areas, the mining of Bitcoin at times was prohibited because the electricity supply had crashed.  Thus, it is evident that it arises from human effort and activity.  The other aspect of the question, ‘produced by nobody,’ isn’t necessarily a primary concern.
  3. Wheat, according the ḥadith recorded in Ṣaḥīḥ Muslim, as well as appearing in the wider Sunan collections, is one form of exchange:

حدثنا أبو بكر بن أبي شيبة وعمرو الناقد وإسحاق بن إبراهيم واللفظ لابن أبي شيبة قال إسحاق أخبرنا وقال الآخران حدثنا وكيع حدثنا سفيان عن خالد الحذاء عن أبي قلابة عن أبي الأشعث عن عبادة بن الصامت قال قال رسول الله صلى الله عليه وسلم الذهب بالذهب والفضة بالفضة والبر بالبر والشعير بالشعير والتمر بالتمر والملح بالملح مثلا بمثل سواء بسواء يدا بيد فإذا اختلفت هذه الأصناف فبيعوا كيف شئتم إذا كان يدا بيد

Abu Bakr ibn Abi Shayba, ‘Amr al-Nāqid and Isḥāq ibn Ibrāhim narrated to us, the wording of which is that of Ibn Abi Shayba, Isḥāq said, ‘reported to us,’ and the others said, ‘Waki narrated to us Sufyān narrated to us from Khālid al- Ḥudha’ from Abi Qilābah from Abi al-Ash’ath from ‘Ubāda ibn al-Ṣāmit, he said the Allah’s Messenger (may peace be upon him) said:

Gold is to be paid for by gold, silver by silver, wheat by wheat, barley by barley, dates by dates, and salt by salt, like for like and equal for equal, payment being made hand to hand. If these classes differ, then sell as you wish if payment is made hand to hand.

  1. This can be exchanged by hand with immediacy according to the different types and those similar to them. The production of the wheat at purchase, it is not necessarily known who has produced it. It could be from Canada or another country.  Ultimately, in origin, the producer is Allah the exalted.  Human activity is really only associated with its production.

Differing types of existence

  1. The question really seems to stem from quite a narrow-minded materialistic approach towards understanding the term ‘existence.’ Someone could say, these hash equations that are derived in certain mathematics based upon particular axioms, if we assume that the general axioms of set theory, such as the theory of Bernays, that it essentially represents some form of absolute mathematics derived from the necessities of reason, we could say that these equations and their solutions actually exists in the knowledge of Allah even before the creation.
  2. They could have a more legitimate type of existence than say for example gold, which is the contingency of a possible universe which was not created yet, but only created by the will of Allah. So, if you go to the depth of existence, Bitcoin could have more of a genuine existence, as the solution to hash equations, having an existence in purview of knowledge of Allah the exalted. Gold is only contingent to this universe.  In another universe, there may be no gold or something else.
  3. Hence, dwelling upon the point of existence doesn’t essentially bring the matter forward to determining a legal judgement upon it. We have to depart from only having a materialistic approach.  This matter has its reality and it can be perceived by the mind and it has existence in the mind.  Although some things which may exist in the mind don’t necessarily always have a representative existence materially, nonetheless they exist in that format.  We have irrefutable evidences that the universe is not necessarily existing and it has optional variation, as set out in considerable detail in our book of Tawḥeed, the second volume (forthcoming).
  4. The universe has been created by a free agent, a being capable of the ultimate independent will; a necessarily existing being whose knowledge covers all possibilities and all contingencies, including the mathematical and logical absolutes, by necessity. All of these mathematical possibilities exist within the knowledge of Allah from eternity, they are not escapable from him.  Hence, they are not ‘nothing.’  But something that you cannot touch with your hand, doesn’t mean that this couldn’t be a currency.


  1. In terms of value, for such things this is to be based upon human agreement. Look for example at the earlier hadith mentioned, which outlined the various types.  If they are the same type then they have exactly the same amount, or in the case of entities that are abstract, they are counted, like one Bitcoin for one Bitcoin.  If they different, you can exchange, as the hadith directed us to, ‘as you wish.’  What is that wish, where does it derive from?  It is from the perceived value, or the benefit perceived.  There will be sufficient people interacting within the market with offer and counter offer to balance things out overall.  But this wouldn’t negate the fundamental nature of a market to balance human wishes and needs in a reasonable way on average.

Concluding points

  1. Overall, the claim that ‘it is nothing,’ is not correct. The assertion that the people are unknown, has no substantive weight nor does it make sense.  Regarding the matter of falsification, evidently that would be prohibited, but then that is also prohibited in other domains too, such as debasing a physical coin-minted currency, as has happened on many occasions in human history, including at some junctures in Islamic history.
  2. If two parties were to agree to utilise the dollar as a mode of exchange between them for a transaction, that is not invalidated by previous falsification and cheating which occurred by politicians and central government towards the currency. Any cheating doesn’t invalidate it as a currency or mode of exchange.  The one cheating is to be held liable with compensation being asked, but that is of a secondary consideration.  For example, Nixon (US President, 1969 / 1974) divorcing the dollar from the gold standard making it a standalone currency.  The idea that it was ‘backed’ by essentially nothing, led to considerable decline, particularly in relation to gold as the markets recognised that it wasn’t backed.  By tricks arising from usury, active decline, stimulus and other mechanism, the US has sucked a vast amount of wealth from the world.  Hence the various aspects mentioned in the question hasn’t really been analysed deeply or properly.
  3. The nature of Crypto currencies and Bitcoin is that it is decentralised, overall giving the public actually far greater power than being totally in the hand of global central banks. The proof of work relating to Bitcoin, in relation to the consumption of electricity used, is indeed considerable.  Last year consumption was more than an entire countryCambridge University has done considerable work to monitor the mining and electricity consumption used for that. So, the mining work for that effort is not nothing, it is considerable.  In that respect, it is no different for the effort utilised to mine gold.  They are different types of existence.
  4. Placing Crypto within the network to stabilise and do various activities is fine, to verify transactions and receive proceeds or fees, is akin to participation and that is also fine. Some have argued that Crypto for the first time in history, allows financial power to be decentralised and not held solely by the central banks.  Purchasing power from Crypto currencies are coming forth and its impact will be great, particularly if it threatens the usurious power of the big central banks.

By Professor Muhammad ibn Abdullah al-Mas’ari