The Usmani Crypto Fatwa Explained: Why Some Scholars Say Bitcoin Is Haram

If you have ever asked whether Bitcoin (BTC) is halal and gotten two flat, opposite answers from two people who both sounded certain, you have run into the single deepest split in modern Islamic finance. On one side sits Darul Uloom Karachi and Mufti Muhammad Taqi Usmani, arguably the most influential living Hanafi jurist in commercial fiqh and the man who chaired the AAOIFI Shariah Board. On the other sit Malaysia's Securities Commission, Bahrain-based Shariyah Review Bureau, and a cluster of younger muftis who screen tokens one at a time.

The Usmani crypto fatwa explained properly turns on a much drier question than volatility or crime or energy use, though all three come up along the way. The question is whether a Bitcoin counts as mal at all.

What Darul Uloom Karachi Actually Ruled

The position that filtered out of Darul Uloom Karachi's dar al-ifta, articulated publicly by Mufti Taqi Usmani and elaborated by Mufti Muhammad Imran Ashraf Usmani, is that Bitcoin and coins like it are impermissible to buy, sell, mine or hold as an investment. The core of the reasoning is that a cryptocurrency fails to qualify as property in the Hanafi technical sense, and everything else follows from that.

Hanafi jurists work with two overlapping terms. Mal is roughly a thing that human nature inclines toward and that can be stored for a time of need, a definition you will find in Ibn Abidin's Radd al-Muhtar. Mal mutaqawwam adds the layer of lawful, legally recognized value. Wine is arguably mal for a non-Muslim but is not mutaqawwam for a Muslim, which is why a Muslim's contract over it does not stand.

The argument runs like this. Bitcoin has no physical existence, no industrial or consumption use, no issuer standing behind it, and no reserve. Its price is entirely other people's willingness to pay. Strip out that expectation and there is nothing left, unlike gold, wheat, a share in a factory, or even fiat, which at least carries a sovereign's declaration behind it. On that reading a coin is a number with a market attached, and the market alone does not manufacture taqawwum. If there is no valid mal in the contract, the sale itself is void, which is why the fatwa reaches mining and holding and not just trading.

Two secondary grounds usually ride along. One is gharar, the excessive uncertainty attaching to something whose subject matter and value are both indeterminate. The other is qimar and maysir, the gambling character of buying purely on price expectation. Usmani has also pointed to the anonymity that makes crypto useful for haram trade. Those arguments matter, but they are supporting, and they are the reason critics say the fatwa is doing sociology rather than fiqh. The load-bearing claim is the mal claim.

Doctrine Versus Inference

The distinction between settled doctrine and juristic inference carries more weight in this question than in almost any other screening topic. Doctrine is the Quranic prohibition of riba in 2:275 through 2:279, the hadith corpus on riba al-fadl and the six commodities, and the established requirement that a sale have a determinate subject matter that the seller owns and can deliver. Nobody disputes any of that.

Everything about Bitcoin is inference. There is no revealed text about a distributed ledger. The Usmani ruling is a considered legal judgment applying a Hanafi property definition to a new object. It is ijtihad by a very senior jurist, which gives it enormous weight, and it is still ijtihad. Anyone who tells you Bitcoin is haram "because the Quran says so" has skipped several steps.

Why Other Scholars Reach the Opposite Result

The counter-case attacks the same premise: that value has to come from somewhere other than convention.

The classical hook is fulus, the copper coins that circulated in the early Islamic world with no precious metal value of their own. Jurists treated fulus as money because people treated them as money, and Ibn Taymiyyah and Ibn al-Qayyim both wrote about money's function being established by istilah, social adoption, rather than by any intrinsic quality of the substance. If a copper token becomes thaman by convention, the argument goes, so can a digital one. The Maliki tradition preserves a related report about leather being usable as currency if it came into circulation as such.

Mufti Muhammad Abu Bakar, then at Blossom Finance in Indonesia, published a widely circulated 2018 paper arguing exactly this: Bitcoin satisfies mal because urf, custom, has accepted it, and custom is a recognized source in determining whether something has value. Bahrain's Shariyah Review Bureau issued a fatwa around the same period permitting crypto investment subject to conditions. Malaysia's Securities Commission Shariah Advisory Council took a third route in 2020, declining to classify digital assets as currency and instead treating them as urud, tradeable assets, permissible to buy and sell on regulated exchanges. That framing sidesteps the currency-exchange rules and lands crypto in the same bucket as any other commodity.

Mufti Faraz Adam's work at Amanah Advisors represents the granular school: you do not rule on "crypto," you rule on a specific token by looking at what it actually is and what it entitles the holder to. A payment coin, a governance token, a security token wrapping a revenue share and a stablecoin claiming redemption against T-bills are four different legal objects.

The prohibitionist camp is not only Karachi, though. Egypt's Dar al-Ifta under Grand Mufti Shawki Allam issued a prohibition in 2018. Turkey's Diyanet took a similar line in 2017. Indonesia's MUI, at its 2021 Ijtima Ulama, ruled crypto impermissible as currency and impermissible as a commodity where it lacks an underlying asset and clear specification, while Indonesian regulators kept trading legal. So the geography is not tidy, and Malaysia and Indonesia, neighbours with similar madhhab profiles, landed in different places.

The Stablecoin Question Is a Different Question

People routinely quote the Bitcoin ruling at someone holding Tether (USDT) or USDC, and that is a category error in both directions.

A dollar-referenced stablecoin is a claim on somebody, which puts it in a completely different fiqh box from a coin with no issuer. It survives or fails on the shape of that claim. Three issues come up.

First, if USDT is a debt owed by the issuer, then swapping it for actual dollars is arguably sarf, currency exchange, which classical rules require to be settled hand to hand with no delay and at par. Trading it at 0.998 or 1.003 becomes a problem under that framing. If instead you treat the token as its own asset that merely tracks the dollar, the sarf rules do not bite and small deviations are just price.

Second, retail holders generally cannot redeem at all. Direct redemption at Tether runs through verified institutional accounts with minimums. A right that only large counterparties can exercise weakens the "it is a receipt" reading.

Third, the reserve backing large stablecoins sits mostly in Treasury bills and repo, which is interest-bearing by construction. The holder receives none of that yield, so no riba reaches your pocket directly. What you have instead is participation in a structure whose economics are interest, which sits closer to the tolerance question that AAOIFI's screening thresholds handle for equities than to a direct prohibition.

None of that is settled. Treat any blanket claim that stablecoins are automatically fine, or automatically worse than Bitcoin, with suspicion.

Why These Rulings Are Explicitly Provisional

Read the prohibitionist fatwas carefully and most of them condition themselves on the facts as they stand. That is normal fiqh practice: a ruling built on a description of an object moves when the description moves.

Several of the stated grounds are already shifting. "No sovereign recognition" looked solid until El Salvador made BTC legal tender in 2021, then walked it back to voluntary status in early 2025 under an IMF programme. Pakistan itself, whose State Bank recommended a ban and whose Federal Shariat Court has pushed hard on riba elimination, later reversed course toward building a regulatory authority for virtual assets. Custody, insurance, audited reserves and licensed exchanges have all matured. If the objection was indeterminacy and lack of legal recognition, some of that objection has eroded.

The mal objection has not eroded, because it never depended on regulation. That is the piece to watch. Anyone claiming the Karachi position has been overtaken by events should be asked which specific premise they think has failed.

What To Actually Do With This

Some practical structure, whichever camp you find persuasive.

Pick a school and be consistent. If you follow the Deobandi Hanafi mainstream and your local mufti sits in that tradition, the honest answer is that your school's most senior authority says no, and shopping around until you find a permissive fatwa is preference wearing the costume of research. Conversely, if your reference authority is Malaysia's SAC or a mufti applying the token-by-token approach, follow that consistently rather than case by case.

Separate the coin from the yield. Even scholars who permit holding a token often prohibit the way you earn on it. Lending your coins at a fixed percentage is a straightforward riba al-nasiah problem regardless of what you think about the underlying asset. Staking is more nuanced, and the taxonomy Shariyah Review Bureau and others use distinguishes validator work compensated as a service fee from pooled arrangements that look like a guaranteed return on a deposit.

Watch what a token entitles you to. A governance token in a lending protocol whose entire revenue is interest spread carries the interest problem into your wallet no matter how the token itself is classified. Our crypto screening coverage runs each asset against that: what the protocol earns from, what the holder is entitled to, and how the consensus mechanism pays participants.

Size it like speculation, because it is. Even permissive rulings treat crypto as high-uncertainty. Position sizing is a discipline question rather than a fiqh one, but the two interact: a holding large enough to make you desperate is a holding that will push you toward leverage and lending products that are clearly prohibited.

A Short Cross-Faith Note

Other traditions arrive at crypto through different doors. Jewish halakhic authorities including Bais HaVaad have generally treated crypto as a commodity rather than currency, which paradoxically makes crypto lending more of a ribbis concern rather than less, since lending a commodity and taking back more implicates the two-tier prohibition and typically calls for a heter iska. Christian BRI screening and the USCCB guidelines target company conduct across categories like abortion, pornography and weapons, and a bare protocol usually trips none of them, so the scrutiny lands on the exchange or issuer instead. The LDS lens has the sharpest fit: Dallin H. Oaks warned in 1971 against speculation dressed as investment, and that framing applies to leveraged crypto trading almost verbatim. You can compare how each of these handles digital assets in our framework breakdowns and see the specific tests in the screening methodology.

The Bottom Line

The Usmani crypto fatwa rests on one technical claim: Bitcoin is not mal mutaqawwam, so contracts over it do not stand. That claim is a reasoned juristic inference from a senior Hanafi authority rather than a revealed text, and the scholars who disagree, in Malaysia, Bahrain and among the token-by-token muftis, disagree specifically about whether social convention is enough to create value in fiqh. Everything else in the debate, volatility and crime and energy, is secondary. If you remember one thing, make it that the ruling turns on the definition of property and that stablecoins, staking rewards and DeFi governance tokens are separate questions that the Bitcoin ruling does not automatically answer.

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