Assalam-u-alaikum I have a confusion please be kind to me on this topic. When we are looking for halal coins (the coins with halal use cases ) do we look into their partnerships also? I have analysed tons of coins with halal use cases but they end up having haram partnerships ( by haram I mean partnerships with either a gaming platform that has other games of gambling or by an exchange that works on interest)
Do we look into the partnerships while looking for haram or halal? My brother on this topic had an opinion he said we are actually not buying the shares of the company so we don’t have any concerns about what the company is doing we are buying its digital product and we are only concerned with that product being halal or haram. (Is he correct?)
Walaikum salam,
So, I’ll give you my opinion on this using established Islamic finance in stocks as a comparison. Maybe it will help you make your own decision or at least give you some indication to do further research.
If we look at Visa or Mastercard, both of these companies deal with credit, partner with alcohol, gambling, gaming and every other non shariah compliant sector you can imagine. And yet both companies are considered halal and shariah compliant, and also part of the S&P Shariah index which is widely used across the globe and accepted and approved as shariah compliant by Islamic scholars and finance accademics.
The reason for this is effectively because these companies provide the tech and not necessarily the credit facility. The fact that the tech is used for haram activities does not make the tech itself haram.
So the simple answer is no, partnerships do no necessarily make something haram. However, they do play a part.
In our screening of cryptos, partnerships with impermissible sectors is a factor, and we score down coins that have these partnerships. It will make a lot more sense when you see our latest reports with a shariah compliance score and not just a simple halal/haram, as details matter.
In some cases the coin may score highly because it is halal, but score low because its main use is interest based. We have to look at everything and make an overall judgement and in cases where things are unclear its probably best to avoid.
Hope that helps iA
Yes, we’ve had similar arguments on a number of other questions. If the underlying asset is halal, its partnership or even its use on some haram activities does not make the asset haram.
The partners would remain haram and the haram activities would remain haram regardless, but your investment is in the underlying asset which is halal, in this case. It gets complicated in the details though so use caution and stay with coins where there are minimal or no haram activities/ partnerships.
W-Salam Isn’t it true that the value and success of a project are closely tied to the activities and partnerships? Partnerships can make a cryptocurrency project popular or trusted, encouraging people to invest. I usually trade Layer 1/2 coins because their technology makes it easier to decide if the project is halal or haram. However, partnerships are confusing me these days. If we consider partnerships, the very first partnership of every coin becomes haram, as they partner with exchanges to list their coin. If partnerships don’t play a role, I need a reason for this. The previous comment was somewhat reasonable.
I think you’re looking for a black-and-white response, but it doesn’t work like that, which is why details matter. There are a lot of grey areas in between, and it’s our role to stay away from things that are too haram and only trade/invest in things that are a little haram or not haram at all.
It may sound odd, but consider the money in your pocket. You could have earned it with a halal job, but the currency itself was created based on interest, debt, and fractional reserve. There is a degree of haram in your wallet, and many would argue that some cryptos are more halal than the money in our bank accounts.
The criteria for stocks and shares is that up to 5% of their total income can be made from non-permissible or haram activities, for a stock to be considered halal. There are larger thresholds for debt and other areas but the principle remains.
Also, just saying an exchange is haram is a bit unreasonable in my opinion. We have written about Binance, which you may want to read up (just search binance) to see a different perspective.
The cautious approach you are taking is what we always suggest. Research and stay away from things where the uncertainty of being halal increases to a point beyond your personal halal/haram risk profile.
If you are uncomfortable with an exchange that does leverage/ margin or derivitives etc, then use one that doesn’t. If the cryptos you are looking at have too many questionable partnerships then you’re probably in the right to remain cautious.
Yeah, I got your point. Thank you for clearing out my doubts. So when the coin is halal, we look into its ecosystem like where it is being used in the partnerships. If it is the majority used to take interest or to lend stuff we ignore it but if it is specifically used to increase transaction speeds or any other things we trade it. Is this correct or I am still wrong about something?
Thanks a lot it’s the first ever answer that I got which makes sense. Just to make sure you are saying if a tech is halal and its majority partnerships are also halal it is then considered halal?
I am actually confused on the coin PHB as it has it’s partnerships with some exchanges which work on interest and along with that it’s partnered up with Tencent Gaming Industry. Will you mind to analyse PHB if it’s halal or haram because that will give me a better view of how to analyse other coins. Thanks a lot for your time