Assalamu ‘Alaikum,

I recently reviewed the top 10 cryptocurrencies by Market Cap and revealed my comfort level investing in them from a halal perspective.

I’ve decided to review the next 5 cryptocurrencies by market cap.

I’ll give you my comfort level investing in Polkadot DOT, DogecoinDOGE, Binance USD BUSD, TerraUSD UST and Shiba Inu SHIB.

You can see a full up-to-date list of cryptocurrencies which I’ve reviewed on Practical Islamic Finance.com for free, link in the description.

It’s important to verify the information presented here, on that list as well because my stance on a particular coin may change.

While generally halal, I think a cryptocurrency can be haram if it is primarily used for haram purposes. 

So I will be checking the utilities of these cryptocurrencies 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 words “Halal” and “Haram” in light of the tremendous responsibility entailed when using these words. 

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

I should also mention that just because I’m Comfortable investing in from a halal perspective doesn’t mean I think it’s a good investment from a financial perspective.

For that list consider become a PIF member where you can follow my crypto and stock portfolios move for move in addition to accessing exclusive content and a list of other perks. Link to do so is in the description, now without further adieu, let’s get started:

The first cryptocurrency on our list is Polkadot with the symbol DOT.

So you may have heard of Layer 1 blockchain solutions like Ethereum, Avalanche, and Solana which are platforms upon which decentralized applications can be built.

The issue with these blockchains is that they tend to optimize for some use cases at the expense of others. As a result different applications will prefer different blockchains to serve as their platform.

The problem arises when different applications built on different layer 1 solutions want to communicate with one another.

For instance, what if a decentralized application on Ethereum wants to communicate with one on Solana? 

What’s the solution?

Enter Polkadot.

Polkadot allows projects to build blockchains specific to that projects’ needs and then communicate with other applications built on other custom blockchains.

That’s why Polkadot is considered a layer 0 solution because it underlies layer 1 solutions and connects them with one another. 

Polkadot’s native DOT token serves three purposes which are staking, governance, and voting on which projects are supported.

Some may be wondering if the voting process involves an interest bearing loan (riba). This is referred to as parachain bonding. I personally don’t see this as Riba since there is no true loan to start with.

A true loan involves a lender and a borrower who can spend the borrowed money. In the case of voting in Polkadot, when you use your dot tokens to vote, no one can spend your tokens. They are simply locked in the protocol for a period of time. So because there is an absence of a loan, Riba is not a suspect. It’s not gambling either since it is not zero sum game, at the end of the lock up period you will get your tokens back which may be worth more or less than what they were when you locked them up so there is an element of risk here.

Therefore I find nothing inherently objectionable in Polkadot’s utility or the utility of its token (DOT).

Therefore, I’m comfortable investing in Polkadot from a Halal perspective.

The second cryptocurrency on our list is Dogecoin with symbol DOGE.

Dogecoin is perhaps the simplest token to understand. It has no inherent functionality other than it has a price on the open market and it can be traded.

For example, and this is 100% true, I recently paid a developer in Indonesia using Dogecoin. 

Transfer fees from my Dogecoin wallet to his were minimal and the transfer itself happened instantly.

While many people tend to frown on Dogecoin as a serious investment because it started out as a joke, the origin of this coin is hardly a determinant for what it ends up becoming. 

Many things start as a joke and end up winning.

From a Halal perspective, I will agree that the vast majority of Dogecoin’s value comes from people speculating about the future and hoping it becomes something with more substance.

However, speculating about the future, contrary to popular belief, is in no way haram. Speculating is a necessary component of economic activity.

Valuing a company for instance is simply the exercise of discounting future cash flows to the present day. The word “future” in future cash flows should tell you that there is a good deal of speculation in this activity as well.

What is haram is gambling, which happens in zero sum games where there is no good or service.

In the case of dogecoin, speculation or not, there is a good involved and they are the actual Dogecoin tokens.

So Is Dogecoin Halal?

I find nothing inherently objectionable about Dogecoin or its utility.

The third coin on our list is Binance USD with symbol BUSD.

Binance USD is a 1 to 1 US Dollar-backed stable coin issued by Binance.

This token can always be purchased and redeemed at the rate of 1 BUSD for 1 US dollar.

Stablecoins like BUSD are useful in exchanges, transfers and savings. 

I find nothing inherently haram about BUSD.

I am comfortable investing in BUSD from a halal perspective.

The fourth coin on our list is TerraUSD with symbol UST.

TerraUSD (UST) is the algorithmic stablecoin of the Terra blockchain.

“Algorithmic stablecoins” are called this because instead of being backed 1:1 by some other asset, they rely on an algorithm to keep their price stable.

The algorithm increases supply of this stable coin when demand is high and decreases it when demand is low.

  Algorithmic stablecoins should only be trusted to the extent you trust the algorithms behind them.

For me, I don’t really trust any of these algorithms.

Therefore, I would never keep any type of savings in an algorithmic stablecoin.

When the algorithm breaks for whatever reason, you don’t want your savings to be around with your savings to to witness it. 

Is TerraUSD Halal?

That said, I can’t really point to anything that would make Terra USD inherently haram.

I know that demand for this stablecoin is primarily driven by people who are depositing it in Anchor protocol and earning interest. However, this stablecoin doesn’t increase in price so you’re not profiting from that and more importantly the drivers of demand for this coin will likely change. The potential uses of stablecoins are basically as numerous as those for traditional coins. 

As the coin matures, you’ll likely see increased diversity in the use cases of this coin, that is, if it manages to survive.

So in summary I’m comfortable investing in Terra USD from a Halal perspective but I would not trust this stablecoin for anything other than a quick exchange or transfer.

The fifth coin on our list is Shiba Inu.

Shiba Inu is similar to Dogecoin with the addition of smart contract compatibility. 

Although a bridge for Dogecoin to smart contracts is being worked on.

I will grant that the practical use cases of Shiba Inu are few and far between and that its billions of dollars worth of market cap is basically driven by pure speculation and not much more.

However, as we said in our review of Dogecoin, speculation is not haram in Islam. It is indeed a necessary component of all investment activity.

What is prohibited in Islam is gambling. Wherein there is trade, rather, there is only a zero sum game.

If you buy shiba inu you are trading something in exchange for shiba inu tokens.

Accordingly, I find nothing inherently haram about Shiba Inu.

Is Shiba Inu Halal?

So I’m comfortable investing in Shiba Inu from a halal perspective.

This is not to say I think it’s a good investment or one you should make. This applies to all the cryptocurrencies I’ve reviewed.

I’m simply saying from a Halal perspective I don’t see any violations.

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.