Assalamu ‘Alaikum,

Today we’re going to cover the top 5 cryptocurrencies by market cap and give you my comfort level with investing in them from a halal perspective.

Just to level set, in general, I find Cryptocurrencies to be halal.

I made a video on why I think this is if you’re interested, the link to that video is in the description.

While generally halal, I also think that a cryptocurrency can be haram if it is primarily used for a haram purpose. So I will be checking the utilities of the cryptos in our list to determine my comfort level investing in them from a halal perspective.

On this topic, When giving my halal ratings for cryptos and assets in general I don’t like to use the terms “Halal” and “Haram” in light of the weight these words carry. 

Instead, I use the terms: Comfortable, and Uncomfortable to represent my ratings and as a reminder to the listener that this is ultimately my judgment on the matter which could be wrong so be sure to do your own due diligence.

So with that level set out of the way, all what is left to say is if you’re new here my name is Rakaan Kayali founder of practical Islamic finance where we help people globally build wealth in a halal way. To follow my crypto and stock portfolios and access exclusive content, consider becoming a member link to do so in the description and now without further adieu, let’s get started.

The largest cryptocurrency by market cap you may have heard of is called bitcoin. Symbol BTC

Bitcoin is used as a store of value that is designed to resist corruption or inflation. 

It was initially designed as a peer-to-peer online currency, and although sometimes used to facilitate trade, Bitcoin’s most common use case is simply the preservation of wealth and transfer of said wealth from one party to another without the need for an intermediary.

And I find nothing inherently objectionable in Bitcoin’s utility.

Some people have argued that it is primarily used for illegal activities but there is no evidence of this, in fact, recent studies point to cryptocurrencies, in general, being used for illegal activity less than traditional currencies are.

And moreover, I find the protection from inflation that Bitcoin provides a force for good as it can help savers preserve the value of their savings in a way that was previously unavailable to them.

Therefore I am comfortable investing Bitcoin from a Halal perspective.

The second-largest cryptocurrency in terms of market cap is Ethereum which has the symbol ETH

Ethereum is a decentralized network that features its own cryptocurrency,   Ether. 

Ethereum works as a platform for numerous other cryptocurrencies, as well as for the execution of smart contracts and decentralized applications.

Ethereum’s utility is analogous to the utility of Apple’s operating system (iOS) which is used to build many traditional digital applications with the obvious difference being that Ethereum is more decentralized than Apple’s operating system is.

Similar to the apps built on the iOS platform, some Decentralized Applications can be used for haram activities.

However, just as I suspect most people would not consider the iOS platform to be inherently haram considering the thousands of applications it hosts which are beneficial. 

Using the same reasoning, I think the utility of Ethereum, as a platform used to host decentralized applications, isn’t inherently haram either despite my not agreeing with the utility of some of these applications that are built on Ethereum’s network.

Therefore my rating for Ethereum is comfortable to invest in from a Halal perspective.

The third-largest cryptocurrency by market cap is Tether with the symbol USDT

USDT is a stable coin (short for stable-value cryptocurrency) that mirrors the price of the U.S. dollar.

The intended uses of Tether are for purchasing other cryptocurrencies, money transfers, and saving.

So I see nothing inherently haram in the specific utility of Tether, although I don’t necessarily trust its ability to maintain a peg to the dollar indefinitely.

The company that issues Tether, Tether Limited, doesn't have the best reputation.

For example, They previously claimed that every Tether coin was backed by $1. 

 That was later revealed to be a lie. 

 In March 2021, Tether Limited released information on its reserves, which showed that only 2.9% of Tether is backed by cash at the time.

So while I’m comfortable with the purpose of Tether from a halal perspective although I’m not sure how much I trust the parent company of the coin.

I would not use Tether for anything other than a quick trade or transfer.

The fourth-largest cryptocurrency by market cap is Binance Coin with the symbol BNB

Binance Coin serves as the main currency to transact with on Binance exchange.

Binance is the biggest cryptocurrency exchange globally based on daily trading volume.

Given that demand for Binance coin is a function of demand for the services provided by the Binance exchange and considering some of the most popular services on the Binance exchange are leveraged trading and derivatives trading, which I’m uncomfortable with from a halal perspective,  it is likely that any price increase in Binance coin is driven by demand for these services that I’m uncomfortable with.

So consequently, I am uncomfortable profiting from any appreciation in the price of Binance Coin.

The fifth-largest cryptocurrency by market cap is USD Coin known by its ticker symbol USDC.USD is a stable value cryptocurrency (stablecoin) that is pegged to the U.S. dollar on a 1:1 basis.

Every unit of this cryptocurrency in circulation is backed by $1 that is held in reserve.The Centre consortium, which is behind this asset, says USDC is issued by regulated financial institutions.

The intended uses of USDC are for purchasing other cryptocurrencies, money transfers, and saving.
Unlike its rival Tether which has found itself embroiled in repeated investigations USDC has never been accused of any wrongdoing.

In terms of utility, I am comfortable with USDC’s intended utility.

So I am comfortable investing in USDC from a halal perspective.

Now If you want to follow my crypto and stock portfolios, access privilege content, and a whole host of other perks, consider becoming a PIF member, link to do so is in the description.

Until next time, make sure to take care of yourself.

Assalam ‘Alaikum and peace be upon you all.