Cryptocurrencies and digital assets are financial technologies that have emerged in the modern era. Digital assets refer to items that have value and can be owned, but they are virtual in nature, have no physical form, and do not exist tangibly. In other words, digital assets are digital entities owned by individuals or companies, such as digital images, videos, and songs. These data are created in the form of files stored on storage devices such as computers or cloud-based storage networks.
However, Islamic financial experts have yet to reach a consensus on the ruling regarding the use of cryptocurrencies and digital assets. This explanation focuses on the zakat ruling related to cryptocurrencies and digital assets according to Islamic law, in line with current developments.
Several fatwas have been issued by scholars, international fiqh bodies, and fatwa institutions in Malaysia regarding the zakat ruling on cryptocurrencies. Among the scholars’ views on zakat for cryptocurrencies are as follows:
Cryptocurrencies are analogized (qiyas) to nuqud (currency such as dinar and dirham), and the zakat on them is treated the same as zakat on nuqud.
Dr. Ibrahim Abdul Halim Ubadah is of the opinion that cryptocurrency is a specific type of currency and therefore considered an asset that is obligatory for zakat. The ruling on zakat for cryptocurrency is equated with the ruling on zakat for fiat currency, which is analogized (qiyas) to the ruling on zakat for gold and silver. This is because cryptocurrency possesses the characteristic of ath-thumuniyyah al-mutlaqah (serving as an absolute medium of exchange).
Cryptocurrency Is a Digital Asset and the Ruling on Its Zakat Is Analogized (Qiyas) to the Ruling on Business Zakat (‘Urud Tijarah)
This opinion is also supported by the Perlis State Fatwa Committee, which decided that the ownership of digital assets such as Bitcoin is subject to zakat if it meets the conditions of haul (one-year holding period) and nisab (minimum threshold). Zakat is imposed on digital assets because they are considered ‘Urud al-Tijarah (trading goods).
The view of the Selangor Zakat Board (LZS)
Cryptocurrency falls under the category of al-Mal because it is considered property that possesses the characteristic of al-Mutaqawwim (value according to Shariah). Therefore, zakat is obligatory on
it based on general evidences regarding the obligation of zakat on al-Mal. The zakat ruling on cryptocurrency depends on its classification, whether as Trading Goods (‘Urud Tijarah) or Currency (al-Sarf).
In addition, several references state that these digital assets can be classified as either currency or commodities. If the asset is considered a currency, zakat may be imposed based on savings zakat or income zakat. However, if it is categorized as a valuable and tradable commodity, business zakat is imposed on the digital asset. To facilitate further discussion, it is appropriate to briefly explain the general theories of business zakat
If a cryptocurrency possesses the attribute of althamaniyyah (value as a medium of exchange), then the zakat rulings for gold and silver may apply, and savings zakat will be imposed. Meanwhile, for digital assets classified as commodities, two types of zakat may be applicable, namely:
Business Zakat
If the asset is resold for profit and meets the conditions for business zakat.
Income Zakat (Based on the theory of zakat on acquired wealth – mal al-mustafad)
If a digital asset is not intended for business purposes but still generates income through investment, selling at a higher price, or other profit-generating means, it meets the conditions for zakat on mal al-mustafad (wealth that yields income). According to expert opinions, most tend to support the imposition of zakat on digital assets.
Among the reasons presented is that digital assets fulfill the characteristics of valuable property. More specifically, the basis for zakat on digital assets, according to the views of the experts interviewed, includes the following:
- Determining whether a digital asset is considered as currency or a commodity.
- Examining the status of digital assets from the perspective of althamaniyyah (value as a medium of exchange)
or al-muthman (valuable property) - Considering digital assets as trade goods.
- Distinguishing the use of digital assets for business, investment, or
savings.
Adapted from Source: https://mais.gov.my/e-edisi/zakat-wang-crypto/
