As digital assets become increasingly mainstream, many Muslims are asking an important question: Can cryptocurrency be aligned with Islamic principles? The concept of Shariah-compliant crypto addresses this concern by ensuring that participation in the crypto market does not contradict Islamic financial ethics.

Shariah-Compliant Crypto Explained

Definition

Shariah-compliant crypto refers to digital assets that operate within the boundaries of Islamic law. To be considered permissible, a cryptocurrency must:

• Avoid riba and interest-based mechanisms
• Minimise excessive uncertainty and speculative behaviour
• Exclude involvement in haram activities or industries

Additionally, the asset must fulfil the criteria of māl—meaning it has recognised value, provides real benefit, and involves clear ownership. When these conditions are met, a digital asset may be considered valid from a Shariah perspective.

The Importance of Shariah Compliance

Shariah compliance is fundamental in Islamic finance because it ensures that all financial activities avoid harm, injustice, and prohibited practices. In the context of cryptocurrency, this means investments must not involve riba (usury), excessive uncertainty (gharar), or elements linked to haram industries such as gambling, alcohol, or unethical speculation.

All activities must be carefully checked and structured to follow Islamic rules.

There are specific criteria that must be met for a token to be classified as Shariah-compliant. The following are traits to specific whether a token is eligible to be shariah-compliant token.

Shariah-Compliant Tokens

• Clear real-world utility with practical use cases
• Value driven by genuine demand, not social media hype
• Lower speculative risk, supporting ethical investing
• Carefully screened to meet Shariah principles

Non-Shariah Complaint Tokens

• No practical use or real-world purpose
• Value depends on hype and social trends
• Highly speculative with extreme volatility
• Not reviewed or approved for Shariah compliance

Shariah Compliance in Crypto Over the Years

Shariah perspectives on cryptocurrency have evolved significantly over the years, particularly in Malaysia:

• 2018: The Islamic Understanding Institute of Malaysia (IKIM) held one of the earliest consultations on cryptocurrency, initiating discussions on its Shariah status.
• 2020: Malaysia’s Shariah Advisory Council (SAC) officially recognised cryptocurrencies as māl (assets) and ruled that trading on licensed platforms is permissible.
• 2021–2022: State religious authorities in Perak and Selangor allowed crypto trading through licensed exchanges, provided Shariah guidelines are followed.
• 2024: The Federal Territories Islamic Religious Council (PPZ-MAIWP) permitted Zakat payments using cryptocurrencies, marking a major milestone in Islamic digital finance.
• 2025–Present: The SAC continues to refine Shariah guidance on digital assets beyond 2025, focusing on token classifications and transaction mechanisms.

Risks of Investing in Non- Shariah Compliant Token

1. Lack of Genuine Utility (No Manfa’ah)

In Shariah, an asset must have real benefit (manfa’ah) to be valid for trade. Assets created only for speculation and hype are not recognized as lawful property (Al-Shāṭibī, Al-Muwāfaqāt).

2. Potential for Financial Harm (Darar)

Islam prohibits transactions that expose people to excessive financial harm. The Prophet ﷺ said: “There should be no harm nor reciprocating harm” (Ibn Mājah, 2340).

3. Encouragement of Gambling-Like Behavior (Maysir)

Profits that depend mainly on chance and speculation resemble gambling, which is forbidden in Islam. Allah says: “Gambling is an abomination so avoid them so you may be successful” (Qur’an 5:90).

4. Exposure to Fraud & Scams

Shariah requires honesty and transparency in trade, and fraud invalidates transactions. The Prophet ﷺ said: “Whoever deceives us is not one of us” (Ṣaḥīḥ Muslim, 101).

Closing Perspective

Shariah-compliant crypto demonstrates that technological advancement and Islamic principles can coexist. With proper regulation, transparent structures, and ongoing Shariah oversight, cryptocurrency can serve as a responsible and ethical investment avenue for Muslims navigating the digital economy.

As guidance continues to evolve, understanding Shariah compliance remains the most important trick for Muslims seeking to invest confidently and conscientiously in crypto.