Zakat on Bitcoin

Bitcoin as digital gold in Islamic jurisprudence

When Islamic scholars first examined Bitcoin, they needed to determine whether this novel digital asset fit within existing Zakat categories or represented something entirely unprecedented. The analysis revealed that Bitcoin functions remarkably similar to gold in traditional Islamic commercial law. Gold is zakatable because it serves as a universal store of value, maintains scarcity, and functions as a monetary asset. Bitcoin was explicitly designed with these same characteristics. The 21 million Bitcoin supply cap creates absolute scarcity like gold's natural scarcity. Bitcoin's decentralized ledger enables global value transfer like gold enabled trade across ancient civilizations. Bitcoin's divisibility into 100 million satoshis mirrors gold's divisibility into smaller units.

This functional similarity to gold led scholars to apply qiyas, analogical reasoning, extending gold's Zakat rules to Bitcoin. Just as Muslims pay Zakat on gold they own regardless of whether they plan to sell it soon or hold it for decades, Muslims pay Zakat on Bitcoin they own regardless of holding strategy. The fact that Bitcoin exists purely digitally rather than physically does not change its economic function. Bank account balances are digital representations of currency, yet clearly zakatable. Bitcoin is a digital representation of stored value, making it equally zakatable through the same reasoning. Contemporary scholars across multiple jurisdictions have reached this consensus, making Zakat on Bitcoin one of the clearest rulings in digital asset Islamic jurisprudence.

Scholarly positions on Bitcoin Zakat

The overwhelming majority of contemporary Islamic scholars who have studied Bitcoin rule it zakatable. The Islamic Fiqh Academy, AAOIFI, individual muftis across the Muslim world, and Islamic finance institutions have issued guidance establishing Bitcoin Zakat obligations. Some scholars were initially cautious due to Bitcoin's novelty, price volatility, and regulatory uncertainty in various jurisdictions. However, as Bitcoin matured and demonstrated sustained utility and acceptance, scholarly consensus solidified around its zakatable status. A tiny minority still questions whether Bitcoin is legitimate wealth given its lack of government backing, but this minority position does not exempt Muslims from Zakat obligations. The prudent approach is following the majority scholarly consensus requiring Zakat on Bitcoin.

No major contemporary scholar argues that Bitcoin is definitely not zakatable if you accept Bitcoin as legitimate property. The debate was never whether zakatable Bitcoin exists, but whether Bitcoin itself is legitimate. Once you accept Bitcoin ownership, which the vast majority of scholars do, Zakat on Bitcoin follows automatically from established principles. For Muslims holding Bitcoin, the practical conclusion is clear: calculate and pay Zakat on Bitcoin along with other wealth annually. For broader cryptocurrency Zakat context beyond just Bitcoin, see our comprehensive Cryptocurrency Zakat guide.

The snapshot moment approach for Bitcoin price

Bitcoin's price volatility creates unique challenges for Zakat on Bitcoin that do not exist with traditional assets. Bitcoin can swing 5%, 10%, or even 20% in a single day. During your Zakat date, Bitcoin price might start at $65,000, spike to $68,000 mid-day, then drop to $64,000 by evening. Which price should you use? Islamic scholars provide clear guidance: choose one specific moment on your Zakat date, check Bitcoin price at that exact moment, and use that price for Zakat calculation regardless of fluctuations before or after.

The practical implementation is straightforward. On your Zakat date, decide on a specific time. Many Muslims choose after Fajr prayer, midday, or evening. At your chosen moment, check Bitcoin price on a major exchange where you could actually sell Bitcoin if needed, or use price aggregators like CoinMarketCap or CoinGecko that average prices across exchanges. Note the exact price. If Bitcoin is $67,234.18 at that moment, use $67,234.18 multiplied by your total BTC holdings. Two hours later Bitcoin might be $65,890 or $68,420, but this is completely irrelevant. You took one snapshot, which is Islamically sufficient for volatile assets where perfect precision is impossible. This approach provides certainty and prevents endless recalculation as prices fluctuate.

Which Bitcoin price sources to use

Bitcoin trades on hundreds of exchanges globally with slightly different prices due to regional demand, liquidity, and exchange specific factors. Coinbase might show $67,100 while Binance shows $67,250 and Kraken shows $67,180 at the same moment. For Zakat on Bitcoin, use the price from an exchange where you could realistically sell your Bitcoin. If you hold Bitcoin on Coinbase, using Coinbase price is perfectly appropriate. If you hold Bitcoin in a hardware wallet and would sell on Kraken, use Kraken price. Alternatively, use price aggregators like CoinMarketCap that calculate weighted average prices across multiple major exchanges. The small differences between reputable sources are negligible for Zakat purposes.

Avoid obscure exchanges showing significantly different prices from market consensus, especially if they have low liquidity. If mainstream exchanges show Bitcoin around $67,000 but some small exchange shows $72,000 with virtually no trading volume, the $72,000 price is unrealistic for Zakat valuation because you could not actually sell at that price. Islamic law requires honest realistic assessment of wealth. Use prices that genuinely reflect what you would receive if converting your Bitcoin to currency. For most Bitcoin holders, major exchanges or CoinMarketCap provide reliable prices for Zakat on Bitcoin calculations.

Converting Bitcoin value to your local currency

Bitcoin price is typically quoted in US dollars, but Muslims worldwide calculate Zakat in local currencies and compare to nisab in local currency. After determining your Bitcoin value in USD, convert to your currency using exchange rates at your Zakat moment. If your Bitcoin is worth $167,118 and you are in the UK where exchange rate is 1 USD equals 0.79 GBP, your Bitcoin value for Zakat is approximately £132,023. If you are in Malaysia where 1 USD equals 4.7 MYR, your Bitcoin value is approximately 785,454 MYR. Perform this currency conversion once at your snapshot moment using realistic exchange rates you could actually obtain. For country specific Zakat guidance, see our UK Zakat Calculator or USA Zakat Calculator.

Bitcoin on centralized exchanges is fully zakatable

Most Bitcoin holders keep at least some BTC on centralized exchanges for trading convenience or because they are not yet comfortable with self custody. Common platforms include Coinbase, Binance, Kraken, Gemini, Bitstamp, and regional exchanges. From an Islamic Zakat perspective, Bitcoin on exchanges is unquestionably your wealth requiring Zakat. The fact that Coinbase technically holds custody of your Bitcoin does not change your ownership. You control that Bitcoin, can withdraw it to a wallet anytime, sell it, or transfer it. This control establishes ownership sufficient for Zakat obligation.

On your Zakat date, log into every exchange where you hold Bitcoin. Note your exact BTC balance on each platform. If you have 0.5 BTC on Coinbase, 0.3 BTC on Binance, and 0.2 BTC on Kraken, your total Bitcoin for Zakat purposes is 1.0 BTC. Aggregate all exchange holdings into one total BTC amount, then value it at current price. Do not exclude Bitcoin on exchanges thinking it is somehow different from Bitcoin you control yourself. Exchange custody Bitcoin is your wealth requiring Zakat on Bitcoin calculation.

Bitcoin in hardware wallets: Ledger, Trezor, Coldcard

Security conscious Bitcoin holders store substantial amounts in hardware wallets. Ledger Nano S, Ledger Nano X, Trezor Model T, Trezor One, Coldcard, and similar devices provide offline storage where you control private keys. This is the purest form of Bitcoin ownership in the technical sense because you maintain direct cryptographic control without any intermediary. From a Zakat perspective, self custody Bitcoin in hardware wallets is absolutely and unquestionably zakatable. This is your Bitcoin under your sole control, making Zakat obligation crystal clear.

On your Zakat date, connect your hardware wallet to check your Bitcoin balance. Note the exact BTC amount. If you have multiple hardware wallets, check each one and aggregate the totals. Many Bitcoin holders split holdings across devices for redundancy. Your 1.5 BTC on one Ledger plus 2.0 BTC on another Ledger plus 0.8 BTC on a Trezor equals 4.3 BTC total for Zakat calculation. The security benefits of hardware wallet storage do not create any Zakat exemption. Enhanced security actually strengthens your ownership claim, reinforcing rather than reducing Zakat obligation.

Bitcoin in software wallets and mobile apps

Software wallets on computers and phones provide another self custody option for Bitcoin. Popular wallets include Electrum desktop wallet, Bitcoin Core full node, BlueWallet, Blockstream Green, Wasabi Wallet, and many others. These wallets store your private keys locally on your device, giving you full control over your Bitcoin. All Bitcoin in software wallets is zakatable wealth requiring inclusion in your annual Zakat on Bitcoin calculation. Check each software wallet on your Zakat date, note Bitcoin balances, and aggregate into your total BTC holdings.

Lightning Network Bitcoin and layer 2 holdings

Bitcoin on Lightning Network exists in payment channels enabling fast, cheap transactions. Lightning Bitcoin is still Bitcoin you own and control, making it zakatable. If you have Bitcoin locked in Lightning channels through wallets like Phoenix, Breez, or Zeus, include those amounts in your total Bitcoin holdings for Zakat calculation. Check your Lightning wallet balances on your Zakat date. The fact that Bitcoin is in Lightning channels rather than on chain does not change ownership or Zakat obligation. All Bitcoin under your control regardless of technical layer must be included in Zakat on Bitcoin calculations.

Lost Bitcoin and inaccessible wallets

Bitcoin lost through forgotten passwords, misplaced seed phrases, or defunct exchange collapses represents billions of dollars of technically existing but practically inaccessible BTC. The question for Zakat on Bitcoin is whether permanently lost Bitcoin remains zakatable. Scholarly consensus is that Bitcoin you genuinely cannot access and have zero recovery possibility is not zakatable because it is no longer functional wealth despite technically existing on the blockchain. If you definitively lost your seed phrase with no backup and cannot access your hardware wallet Bitcoin, you do not pay Zakat on those inaccessible amounts.

However, the standard for exclusion is high because Bitcoin recovery techniques continue advancing. If you forgot your wallet password but the file still exists and password cracking is theoretically possible, most scholars say that Bitcoin remains zakatable until proven irrecoverable. If you had Bitcoin on Mt. Gox or another collapsed exchange but recovery through bankruptcy proceedings remains possible, include the Bitcoin until recovery is definitively impossible. Only when access is permanently, completely, and irrevocably lost with zero recovery possibility can you exclude Bitcoin from Zakat. The burden of proof is on you to demonstrate genuine inaccessibility with reasonable certainty.

Bitcoin mining rewards and Zakat treatment

Bitcoin miners receive newly minted BTC as block rewards plus transaction fees from processed transactions. These mining rewards are Bitcoin entering your wealth as income. Scholarly consensus treats mining rewards like any earned income that becomes zakatable when it contributes to wealth exceeding nisab for one year. When you successfully mine a Bitcoin block and receive 6.25 BTC (current block reward), that Bitcoin immediately becomes yours. On your annual Zakat date, include all mined Bitcoin along with purchased Bitcoin or Bitcoin acquired through other means in your total holdings for Zakat calculation.

Some Bitcoin miners ask whether they should pay Zakat immediately when receiving mining rewards since the rewards are income. The answer is no. Zakat on Bitcoin follows the accumulated wealth method, not income based calculation. You receive mining rewards throughout the year, and they accumulate into your Bitcoin holdings. On your chosen annual Zakat date, you calculate Zakat on total accumulated Bitcoin including all mined amounts that remain in your possession. If you mined 2 BTC during the year but sold 1 BTC for expenses and still hold 1 BTC on your Zakat date, you only include the 1 BTC that actually accumulated. For principles about income versus wealth based Zakat, see our Zakat on Income guide.

Bitcoin trading activity and Zakat frequency

Active Bitcoin traders buying and selling frequently sometimes wonder if trading activity changes Zakat obligations. The answer is absolutely not. Whether you are an active trader making daily Bitcoin trades or a long term HODLer who has never sold a single satoshi, Zakat on Bitcoin is calculated once per year on your chosen Zakat date based on whatever Bitcoin quantity you own at that moment. Your trading history during the year is completely irrelevant. You might have bought and sold Bitcoin 500 times, but you still calculate Zakat only once annually on the BTC you actually hold on your Zakat date.

This means active traders do not pay Zakat every time they realize gains from selling Bitcoin. You do not calculate Zakat per trade, per month, or based on trading profits. The annual accumulation method applies to all Bitcoin holders regardless of activity level. On your Zakat date, check your current Bitcoin holdings across all platforms, value at current price, add to other wealth, and calculate once. This simplifies enormously for active traders who would otherwise face impossible recordkeeping trying to track Zakat on every transaction.

Long term Bitcoin holding and HODL strategy

Many Bitcoin holders adopt long term holding strategies, planning to keep BTC for years or decades regardless of price fluctuations. The Bitcoin HODL philosophy emphasizes holding through volatility. Some Muslims ask whether long term holding creates different Zakat rules or potential exemptions. The answer is no. Long term holding strategy does not affect Zakat on Bitcoin in any way. Whether you plan to hold Bitcoin for 50 years or sell tomorrow, the Zakat obligation is identical. You own Bitcoin today, it has value today, and if your total wealth exceeds nisab today with the hawl requirement met, you pay Zakat today on the current Bitcoin value.

Future intentions are irrelevant to current Zakat obligations. The fact that you intend to never sell your Bitcoin does not change that it is wealth in your possession now. Similarly, if you designate Bitcoin for your children's inheritance in 30 years, it is still your current wealth requiring current Zakat. Islamic law bases Zakat on present ownership and wealth status, not future plans. Long term Bitcoin holders pay Zakat annually on their holdings at current values, contributing to wealth purification and supporting those in need through the Zakat system. For related concepts about long term investment Zakat, see our Long Term Investments guide.

Partial Bitcoin, satoshis, and minimum amounts

Bitcoin's divisibility into 100 million satoshis enables ownership of tiny fractions. Some Muslims owning small Bitcoin amounts like 0.01 BTC or 0.001 BTC wonder if there is a minimum Bitcoin quantity before Zakat applies. The answer is that any amount of Bitcoin you own counts toward your zakatable wealth, with no minimum Bitcoin specific threshold. The only threshold is overall nisab comparing your total wealth including Bitcoin to the minimum zakatable amount, typically equivalent to around $5,000 depending on nisab calculation method and current precious metal prices.

If you own 0.05 BTC worth $3,000 at current prices and have no other wealth, you do not meet nisab so no Zakat is due. But if you own 0.05 BTC worth $3,000 plus $4,000 in savings plus $1,500 in gold, your total wealth of $8,500 exceeds nisab, triggering Zakat on the complete amount including your partial Bitcoin. Value partial Bitcoin exactly like whole Bitcoin by multiplying your exact quantity by current price. 0.15 BTC times $67,000 equals $10,050. Even 0.001 BTC (100,000 satoshis) times $67,000 equals $67. All Bitcoin amounts are valued proportionally and included in total wealth calculations for Zakat purposes.