Answered by Shaykh Yūsuf Badāt
Question:
Why is lending cryptocurrency and earning interest on them ḥarām forbidden? Is it not a commodity and not a currency?
Answer:
بِسْمِ اللهِ الرَّحْمنِ الرَّحِيْم
In the name of Allāh, Most Gracious, Most Merciful.
Jazāk Allāh Khayr/ Thank you for contacting Mathabah Institute.
Bitcoin and or cryptocurrency has been deemed as a digital asset according to many contemporary muslim jurists. Therefore, just as usury (ribā) is not permissible in other commodities as well as money (cash), usury is also impermissible in transactions involving cryptocurrency.
For clarity, one should understand that usury (ribā) can take place in one of the two ways mentioned below:
- Money in exchange of money with disparity on one side of the transaction. This usually takes place in modern day loans.
- The very same commodity being exchanged and traded with either disparity or deferral (depending on the type of transaction can be deemed usury). This is also forbidden in Islam.
“Allāh has permitted trade and has forbidden interest.” – (Qur’ān 2:275)[1]
“Dates can be exchanged for dates, wheat for wheat, barley for barley, salt for salt, like for like. Payment [must] be made on the spot. He who made an addition or demanded an additional amount [on one side of the transaction], in fact, has dealt in usury except in the case where the commodities differ [on either side of the transaction].” – (Ṣaḥīḥ Muslim 1588)[2]
Only Allāh knows best.
[1] وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا – البقرة ٢٧٥
[2] التَّمْرُ بِالتَّمْرِ وَالْحِنْطَةُ بِالْحِنْطَةِ وَالشَّعِيرُ بِالشَّعِيرِ وَالْمِلْحُ بِالْمِلْحِ مِثْلاً بِمِثْلٍ يَدًا بِيَدٍ فَمَنْ زَادَ أَوِ اسْتَزَادَ فَقَدْ أَرْبَى إِلاَّ مَا اخْتَلَفَتْ أَلْوَانُهُ – اخرجه مسلم ١٥٨٨