Ethereum and Ether classified as halal

For devout Muslims, additional regulations apply to financial transactions. These are dictated by Sharia, Islamic law. So far there is no general judgment as to whether cryptocurrencies meet the requirements of Sharia law. In order to promote the adaptation of the Ethereum platform in the Islamic world, the Ethereum Foundation had its creation examined.

Are devout Muslims allowed to use the Ethereum platform? Islamic legal scholars from Amanie Advisors, an Islamic financial consultancy, investigated this question in cooperation with the Ethereum Foundation.

The result should be gratifying for Muslim crypto enthusiasts: the scholars classified both the Ethereum platform and the associated crypto currency ether as “Sharia-compliant”. Amanie Advisors have summarized the results of their investigation in a Shariah whitepaper, which is available here. Accordingly, it follows from the positive classification:

Being Sharia-compliant means that ether can be lawfully traded and exchanged by the Muslim community. A Muslim is permitted to buy, sell or hold Ether in order to participate in the Ethereum Blockhain and take full advantage of the technology.

The purpose of the investigation was to remove any uncertainties in order to stimulate interest in the Ethereum platform in the Islamic world. The head of the initiative is Virgil Griffith, who is responsible for special projects at Ethereum. He put Amanie Advisors in touch. The legal scholars then set out to highlight the “Sharia parameters” of Ethereum and Ether.

Ethereum is not considered a currency

In the Shariah White Paper, the authors first discuss the question of whether ether should be classified as a currency from an Islamic perspective. The scholars deny such an assessment; instead, they designate ether as a valuable commodity. Because they recognize the primary function of Ether as a utility token for the Ehtereum platform.

Ether is therefore primarily used as an incentive for miners to confirm transactions. As such, it only has value within a limited ecosystem. The use of ether as a store of value and a universally valid medium of exchange, on the other hand, is of only marginal importance from the perspective of the experts.

The scholars then check whether ether meets the requirements of the Shari’a for goods. The following principle applies here: What is not prohibited is permitted. Following this maxim, they come to the conclusion that the exchange of ether neither includes interest nor is characterized by an inevitable uncertainty. After all, trading in ether cannot be compared to gambling. Thus, from an Islamic perspective, there is no reason why ether should be considered forbidden.

The Ethereum Blockchain is also Sharia-compliant

Amanie Advisors also reviewed the rest of the components of the Ethereum ecosystem. They rated both the platform and the mining of ether as permitted. They also saw no fundamental objections with regard to smart contracts and dApps. Here, however, it is important to check the specific content of the contracts and applications on a case-by-case basis.

By the way, Ethereum is not the first crypto project to be subjected to a Sharia check. The crypto currency Stellar already received a Sharia certificate in 2018.