How Scholars Disagree on Crypto: The Prohibitionist vs Permissive Divide

Ask two qualified muftis whether you can own Bitcoin and you can get two confident, opposite answers with real evidence behind each. That is unusual. On riba, on pork, on gambling, the Islamic legal tradition is settled to the point of boredom. On digital assets it splits cleanly, and understanding how scholars disagree on crypto (the prohibitionist camp versus the permissive one) is more useful to you than picking a side and hoping you guessed right.

The split is not about whether Muslims should get rich. Both camps are arguing about a technical question in classical property law, and once you see the question, the disagreement stops looking arbitrary.

The Question Underneath Everything: Is a Token Mal?

Before any screen runs, before anyone talks about staking yields or DeFi lending, Islamic law asks whether the thing in front of you is mal, which is roughly "property that the Shariah recognizes as having value and permits you to own and exchange."

This matters because the fiqh of sale (bay') only works on mal. If a token fails the mal test, you cannot buy it, sell it, gift it, or use it as dowry, and the whole conversation ends there. Nothing about the blockchain's technical merit rescues it.

Classical jurists set two conditions in most formulations. The thing has to be capable of being possessed or controlled (ihraz), and it has to have a recognized benefit (manfa'a mubaha) that people customarily value. The schools split on the first condition in a way that turns out to matter enormously for a digital bearer asset.

Where the Madhhabs Actually Diverge

Hanafi jurists historically defined mal narrowly, requiring something with a corporeal existence ('ayn) that can be stored. Pure usufruct, in the classical Hanafi formulation, does not count as mal in itself. That position comes straight out of the classical texts and has nothing to do with anyone's discomfort with technology.

The Maliki, Shafi'i and Hanbali schools took a broader line, treating recognized benefits and rights as mal even without a physical substrate. Under that reading, an entry on a distributed ledger that confers exclusive, transferable control over a scarce network position is far easier to classify as property.

So a portion of the crypto disagreement is downstream of a madhhab difference that predates the internet by about a thousand years. When a Deobandi mufti trained in Hanafi usul says Bitcoin is not mal, he is applying a definition his school already held. When a Malaysian or Bahraini scholar working in a Shafi'i or mixed environment says it clearly is, the same is true in reverse.

And Then There Is Thamaniyyah

A second, separate question is whether a token can function as thaman, money. Here the tradition gives the permissive camp a strong precedent: fulus, the copper coins used for small transactions. Fulus had negligible commodity value. Their purchasing power came from people agreeing to accept them.

Ibn Taymiyyah and Ibn al-Qayyim both discussed money as something established by convention and social acceptance rather than by any intrinsic property of the metal, and Imam Malik is reported in the Maliki corpus to have disliked people adopting leather tokens as currency precisely because he assumed such adoption would give them monetary status with all the sarf rules attached. The classical position is that custom ('urf) makes money, which gives the permissive camp its strongest card and forces the prohibitionists to answer it.

The Prohibitionist Case: Karachi, Usmani, and the Sovereign

Mufti Muhammad Taqi Usmani, who chairs the AAOIFI Shariah Board and is about as senior as contemporary Islamic finance authority gets, has publicly argued against Bitcoin. Darul Uloom Karachi, along with a number of Deobandi darul iftas in Pakistan, India and South Africa, has issued rulings prohibiting cryptocurrency trading.

The reasoning runs roughly like this:

No corporeal existence. Under the Hanafi mal definition, a purely digital record fails the 'ayn requirement. It is a number, not a thing.

No sovereign issuance. In this reading, thamaniyyah in the fulus precedent was tied to a ruler issuing and standing behind the coin. A currency with no issuer has no anchor, and calling it money is a category error.

Dominant speculative use. If the overwhelming reason people hold an asset is price appreciation with no underlying productive activity, the transaction starts to resemble maysir (gambling) more than bay'. Extreme volatility layers gharar on top.

Illicit-use exposure. Early Bitcoin's association with darknet markets and ransomware gets cited as evidence that the network's primary utility was itself impermissible.

Turkey's Diyanet issued a widely reported ruling against Bitcoin in 2017, and Egypt's Dar al-Ifta under Grand Mufti Shawki Allam followed with a prohibition, both leaning heavily on the speculation and illicit-use arguments rather than the mal argument.

Here is the part people miss. The Quranic and hadith texts these scholars cite (the prohibition of gharar sales, the prohibition of maysir in 5:90, the sarf rules requiring hand-to-hand exchange of monetary items) are doctrine, fixed and uncontested. The claim that Bitcoin specifically instantiates gharar or maysir is inference, a reasoned judgment applying settled texts to a new fact pattern. Reasonable jurists can accept the doctrine completely and reject the inference. That distinction is the whole ballgame.

The Permissive Case: Malaysia's SAC, 'Urf, and Asset Classification

Malaysia's Securities Commission Shariah Advisory Council took the opposite route. Its resolutions on digital assets concluded that digital currencies and digital tokens traded on registered exchanges can be treated as recognized assets, on the basis that market participants customarily value and transact in them. Malaysia's regulator then built an actual licensing regime around that, which is why the country has registered digital asset exchanges operating within a Shariah framework while Pakistan's scholars were writing prohibitions.

The SAC's move is a straightforward application of 'urf to the mal question. Value is established by what people recognize as valuable. That is the same logic that made fulus money.

Sheikh Nizam Yaquby, a Bahraini scholar who sits on Shariah boards across the global Islamic finance industry, has been publicly open to digital assets, and Bahrain's Sharia Review Bureau has issued compliance certifications for specific blockchain projects, including a well-publicized review of the Stellar protocol in 2018. Mufti Muhammad Abu Bakar's 2018 working paper for Blossom Finance made the fulus-and-'urf argument explicitly and concluded that Bitcoin qualifies as mal and can serve as currency where a community accepts it.

The permissive camp answers the prohibitionist objections directly:

On corporeality: the Maliki, Shafi'i and Hanbali definitions of mal never required it, and even within Hanafi practice, rights like haqq al-ta'lif and trade goodwill have been treated as valuable in modern fatwas.

On sovereign backing: post-1971 fiat has no commodity backing and derives value from acceptance plus legal tender status. If backing is what makes money valid, the argument proves too much.

On speculation: speculation describes how people use a thing. You can gamble with gold, and nobody concludes from that that gold is haram.

The Middle Position, Which Is Where Most Practitioners Actually Live

A third group, including Mufti Faraz Adam and much of the working Shariah advisory industry, refuses to rule on "crypto" as a category at all, because the category is incoherent. A privacy coin, a stablecoin backed by interest-bearing Treasuries, a governance token for a lending protocol that charges interest, a tokenized gold claim, and a dog-themed meme coin have almost nothing in common except the ledger.

This camp screens by token function:

• Payment and settlement tokens with genuine network use are assessed on the mal and thamaniyyah questions above.
• Utility tokens are assessed against what the underlying platform does. If the platform is an interest-bearing lending market, the token inherits the problem regardless of how elegant the code is.
• Security and asset-backed tokens are screened like the underlying asset. A tokenized bond is still a bond.
• Yield mechanics get their own analysis. The Sharia Review Bureau's staking work distinguishes rewards paid for genuine validation service, which can be structured as ju'ala or wakala with a fee, from guaranteed returns on a locked principal, which look like a loan with a stipulated increase and fall under riba al-nasiah.
• Pure speculation vehicles with no function beyond price fail on maysir grounds even for the permissive camp.

One absence shapes all of this. AAOIFI has nothing for digital assets with the settled authority of Shariah Standard No. 21 and the familiar 30 percent debt, 30 percent interest-bearing securities and 5 percent impure income thresholds you use on equities. Equity screening has a rulebook. Crypto has competing opinions.

Where the Other Faith Screens Land

Christian and Jewish screening frameworks mostly do not have this fight, because their objections operate at different layers.

BRI-style Christian screening runs on the six categories (abortion, alcohol, gambling, pornography, tobacco, anti-family entertainment) plus corporate conduct. A blockchain protocol usually touches none of those directly, so a token passes or fails based on what its ecosystem funds. Gambling dApps are the obvious flashpoint. The USCCB socially responsible investment guidelines behave similarly, with the additional concern that unregulated speculation conflicts with the stewardship and human-dignity emphasis in Catholic social teaching.

Jewish halakhic screening raises a genuinely interesting parallel. Whether crypto counts as currency or as a commodity affects ribbis analysis, because lending a commodity and getting more back later runs into se'ah b'se'ah problems that lending money does not treat identically. Bais HaVaad and similar authorities apply the standard two-tier framework (biblical ribbis ketzutzah and rabbinic avak ribbis), and crypto lending platforms would typically need a heter iska structure to be usable.

LDS guidance is the least ambiguous. Dallin H. Oaks warned in 1971 about the difference between investing and speculating, and Church leadership has repeated cautions about get-rich-quick schemes since. There is no doctrinal ban on owning a token, and there is a clear and consistent institutional discomfort with the speculative behavior most retail crypto activity involves.

What You Should Actually Do

Pick your authority first, then apply it consistently. If you follow a Deobandi darul ifta, you already have your answer, and shopping around for a Malaysian resolution to overrule it is talfiq for convenience rather than genuine scholarly reasoning.

If your reference point is Malaysia's SAC or a Gulf-certified framework, the permission is conditional and the conditions do the real work. Screen the token's function, not its logo. Check whether the protocol's revenue comes from interest. Check whether any yield you are offered is a service fee or a guaranteed return on principal. Avoid margin, perpetual futures and leveraged products entirely, since those carry riba and gharar problems that no camp disputes.

Size the position like the volatility is real, because it is. Even scholars who permit ownership treat concentrated speculative exposure as a separate problem from permissibility.

How FaithScreener Handles the Split

We do not pretend the disagreement is resolved. FaithScreener's crypto screening covers 3,300+ tokens and classifies each by function first: payment, utility, governance, asset-backed, or speculative. The underlying protocol's revenue model is analyzed for riba exposure, and staking mechanics are flagged by structure rather than lumped together.

Because the schools genuinely differ, our framework selection lets you screen against the stricter reading or the permissive one, and you can see which assumption produced the verdict. The methodology documentation spells out the thresholds and the classification logic so you can hand it to your own scholar instead of asking you to trust a rating.

The Bottom Line

The prohibitionist and permissive camps are arguing about whether a distributed ledger entry satisfies the classical definition of mal, and their disagreement traces to a real Hanafi versus Maliki-Shafi'i-Hanbali split over whether property requires physical existence. Usmani and Darul Uloom Karachi say no. Malaysia's SAC, working from 'urf and the fulus precedent, says yes. Both cite doctrine correctly and differ on the inference. The thing to remember is that "is crypto halal" is the wrong unit of analysis, since a tokenized gold claim and a leveraged perpetual on a meme coin do not share a ruling, and the token's function is what your screen should actually be reading.

This is educational research rather than a religious ruling or personalized investment advice, so confirm your own position with a qualified scholar or advisor before acting on it.