Islamic Finance Principles Assessment
Riba — Does Felix feUSD involve interest?
Felix feUSD is built around a native interest mechanism: borrowers choose and pay an ongoing rate to mint feUSD, and that interest is the primary income stream distributed to Stability Pool depositors. This is not an incidental or third-party interest exposure but the protocol's core design. For Muslim investors, this places feUSD's underlying lending mechanics in direct tension with the prohibition of riba, regardless of the protocol's otherwise legitimate utility.
Assessment: Riba Dominant
Score: 28.5/100
Our methodology examines 10 criteria to evaluate how well Felix feUSD avoids interest-based mechanisms.
Felix's annualized revenue (reported near $984,516 on roughly $13.06M in fees) is sourced from CDP borrow interest, redemption fees, liquidation profit, curated-vault yields, and a Treasury-bill-backed "USDhl" product. The borrow-interest and T-bill components are explicitly interest-based income streams, while redemption and liquidation fees are closer to permissible fee-for-service or penalty structures. Because interest income is a named, material, and structural part of protocol revenue rather than a peripheral leakage, feUSD's treasury economics carry direct riba exposure that cannot be dismissed as incidental.
The Stability Pool functions as Felix's reward mechanism: depositors lock feUSD to absorb liquidations and, in return, receive a variable share of borrower interest payments, upfront fees, and liquidation gains. The variability tied to utilization and market conditions gives it some resemblance to profit-sharing rather than a fixed guaranteed coupon. However, because the dominant input to that variable yield is borrower-paid interest itself, the reward is riba-derived at its source, even though its distribution is not fixed — a distinction that matters for magnitude of concern but does not eliminate it.
Gharar — How much uncertainty does Felix feUSD involve?
Felix carries a moderate degree of uncertainty: the protocol's mechanics, collateral ratios, and redemption logic are clearly documented, but the people behind it are not. Multiple named audits reduce technical uncertainty, while unresolved high-severity findings and anonymous leadership keep informational risk elevated. On balance, uncertainty here is manageable but non-trivial.
Assessment: Moderate Gharar (Material Uncertainty)
Score: 54.3/100
Our methodology examines 15 criteria including team transparency, audit quality, and governance.
No verifiable, credentialed team is disclosed for Felix Protocol in available sources; searches for "Felix" founders surfaced unrelated individuals rather than confirmed project principals. This is a genuine transparency gap for a protocol holding meaningful TVL and issuing a dollar-pegged stablecoin. Mitigating this, the codebase is open-source on GitHub and extensive GitBook documentation covers mechanics, fees, and liquidation logic in detail. Still, anonymous ownership of a lending protocol with borrower obligations and depositor funds at stake is a real gharar factor that transparency in code alone does not fully resolve.
Felix has been reviewed by multiple named firms: Dedaub (August 2024, November 2024, and a Felix-specific audit on December 18, 2024, which flagged high-severity gaps relative to upstream fixes), ChainSecurity (December 2024), Certora formal verification (December 2024), Coinspect covering core and governance (December 2024), and Three Sigma (July 2025, medium-severity price-feed issues). This is a well-documented audit trail by reputable names, which meaningfully reduces gharar. The concern is not absence of audits but that some flagged high-severity issues were acknowledged rather than demonstrably fully resolved, leaving a residual, disclosed risk for users to weigh.
Maysir — Does Felix feUSD involve gambling or speculation?
Felix feUSD itself is not a gambling instrument — it is a collateralized stablecoin used for borrowing, saving, and payments. Speculative behavior arises mainly from how some users apply it in leveraged strategies, which is a usage pattern rather than a core design feature. The protocol's own function is productive credit provision, not chance-based wagering.
Assessment: Moderate Maysir (High Risk)
Score: 53.6/100
Our methodology examines 11 criteria to determine whether Felix feUSD is a gambling instrument or a genuine economic tool.
Felix's core function — minting feUSD against over-collateralized blue-chip crypto (HYPE, UBTC, wstHYPE, kHYPE) at roughly 40% LTV — serves genuine borrowing, liquidity, and payment needs, with feUSD redeemable for $1 of underlying collateral. This asset-backed, redemption-anchored design gives feUSD tangible economic utility distinct from a purely speculative token, and its Stability Pool provides a real liquidation-absorption service to the protocol rather than a betting mechanism. Productive credit intermediation of this kind is fundamentally different from maysir, even though its interest basis is a separate riba concern.
Against this utility, the ecosystem actively promotes leveraged "carry trade," "margin trade," and "looping" strategies built on feUSD, which encourage speculative, high-risk positioning by sophisticated and retail users alike. This is a real feature of how the protocol is marketed, not merely unrelated third-party misuse, and it does increase speculative exposure for users who engage with it. Still, per the principle of judging a protocol by its own primary design, feUSD's base function as an over-collateralized, redeemable stablecoin is not itself gambling — the maysir concern is secondary and usage-dependent rather than intrinsic to the coin's core purpose.
The Full 27-Point Screening
1. Legitimacy (4 criteria)
| Criterion | Score | Analysis |
|---|
| Team Transparency | 25/100 (low evidence) | Sources contain no verifiable identification of the actual Felix Protocol founding team; only unrelated individuals named Felix appeared, so the team remains effectively anonymous from what is available. |
| Fraud & Scam Risk | 60/100 | No fraud, hack, or regulatory action tied to Felix specifically was found, and audits show issues being addressed, but this is inferred from absence of negative reports rather than a direct clean-record statement. |
| Use Case Legitimacy | 80/100 | The protocol has a clearly documented, functioning lending/stablecoin use case with real TVL, revenue, and multiple described products. |
| Ethical Practices | 30/100 | The protocol's own core design is an interest-bearing CDP lending system, with borrower-paid interest central to its mechanics rather than incidental third-party misuse. |
Summary: Felix appears to be a genuine, actively-used DeFi lending protocol rather than a meme coin, but the sources do not identify any accountable founding team.
2. Project Operations (9 criteria)
| Criterion | Score | Analysis |
|---|
| Core Protocol Business | 20/100 | The base protocol's core business is a money market charging and distributing borrower interest, placing it in an interest-based lending sector. |
| Transaction Fees | 30/100 | Fees include upfront borrow fees, a dynamic redemption fee, and ongoing borrower interest streamed to Stability Pool depositors, which functions as an interest-like extraction rather than a simple flat fee. |
| Treasury Assets | 20/100 | One disclosed protocol revenue line is yield from a short-term U.S. Treasury-backed dollar instrument, indicating interest-bearing treasury exposure. |
| Revenue Model | 20/100 | Disclosed revenue is largely composed of borrower interest shares and yield-bearing products rather than pure service fees. |
| Transparency | 80/100 | Contracts are open-sourced on GitHub and the protocol has extensive public documentation plus multiple published third-party audits. |
| Governance | 35/100 | Felix-specific governance structure and decentralization are not clearly detailed beyond a reference to an inherited Liquity governance audit. |
| Launch Fairness | 65/100 | feUSD supply appears minted on-demand via user collateralization rather than pre-allocated, suggesting no conventional pre-mine, though no explicit launch-fairness statement exists in the sources. |
| Token Distribution | 65/100 | Distribution occurs organically through borrowing rather than a static token allocation, but sources give no explicit breakdown to confirm broad distribution. |
| Speculation/Utility Ratio | 40/100 | Documented use cases show heavy leverage/speculative activity (carry trades, looping, margin trading) alongside genuine borrowing utility. |
Summary: Felix is an open-source Liquity V2 fork on Hyperliquid that mints the feUSD stablecoin through over-collateralized borrowing with user-set interest rates, though its governance structure and token launch details are largely undisclosed in these sources.
3. Financial Health (4 criteria)
| Criterion | Score | Analysis |
|---|
| Protocol Revenue | 15/100 | Protocol revenue is explicitly described as including a share of borrower interest and Treasury-yield income. |
| Financial Status | 60/100 | Measurable fees, revenue, and a stable near-$1 peg are documented, though this remains a relatively young, moderate-scale protocol. |
| Interest Assessment | 10/100 | The base protocol is explicitly an interest-based lending/CDP system where borrowers set and pay interest to depositors. |
| Audit Quality | 75/100 | Multiple named, dated audits (Dedaub, ChainSecurity, Certora, Coinspect, Three Sigma) are documented with some findings disclosed and partially addressed. |
Summary: The protocol generates measurable, mostly interest-derived revenue and has been reviewed by several named audit firms, but its core money-market design bakes in borrower interest at the protocol level.
4. Token Economics (5 criteria)
| Criterion | Score | Analysis |
|---|
| Token Purpose | 75/100 | feUSD is explicitly described as a utility stablecoin for borrowing and liquidity within the ecosystem, not a meme token. |
| Governance Rights | N/A | Sources describe no governance rights attached to feUSD holders, which is a neutral absence for a stablecoin instrument rather than a governance token. |
| Rewards Distribution | 35/100 | Rewards vary with utilization and liquidation activity but are fundamentally sourced from borrower-paid interest, blurring the line between variable and interest-based. |
| Speculation Controls | 30/100 | Risk controls like over-collateralization and liquidation thresholds exist, but the ecosystem actively markets leveraged looping and carry-trade strategies that encourage speculation. |
| Asset Backing | 75/100 | feUSD is over-collateralized by blue-chip crypto assets and redeemable for $1 of underlying collateral. |
Summary: feUSD functions as a genuinely utility-oriented, collateral-backed stablecoin rather than a speculative meme token, though the ecosystem actively promotes leveraged and speculative usage.
5. Staking Mechanism (5 criteria)
| Criterion | Score | Analysis |
|---|
| Mechanism Type | 75/100 | The Stability Pool deposit mechanism is non-custodial, on-chain, and withdrawable at any time without a lock-up penalty. |
| Islamic Contract Classification | 20/100 | The reward source blends borrower interest (an interest-like/riba component) with liquidation profit-sharing, leaving its Islamic contract classification contested. |
| Rewards Structure | 40/100 | Rewards fluctuate with utilization and liquidation events but derive substantially from borrower-set interest payments rather than purely activity-based profit. |
| Documentation | 75/100 | GitBook documentation clearly explains Stability Pool mechanics, fees, and risks. |
| Shariah Alignment | 25/100 | Reliance on borrower interest as a core reward source leaves an unresolved Shariah question despite otherwise transparent, non-custodial design. |
Summary: Felix's Stability Pool acts as a non-custodial, flexible staking-like mechanism, but its rewards are substantially sourced from borrower interest, leaving its Islamic classification unresolved.
Overall Assessment: Felix feUSD is a technically transparent and audited but interest-driven CDP lending protocol whose core reliance on borrower interest as both revenue and reward source raises a significant unresolved Shariah concern, even though the coin itself is not a meme or fraud-indicative project.
Written by ThanvirFounder, Ex Director S&P Global Energy
Reviewed by Imam Omar SiddiqiShariah Scholar