Zakat on Cryptocurrency

Cryptocurrency is zakatable wealth under Islamic law

When Bitcoin emerged in 2009 followed by thousands of alternative cryptocurrencies, Islamic scholars needed to determine whether these novel digital assets fall under existing Zakat categories. After extensive research and deliberation, the majority of contemporary scholars have concluded that cryptocurrency is indeed zakatable wealth. Organizations including the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Fiqh Council of North America, and numerous individual scholars have issued rulings establishing that Zakat on cryptocurrency is obligatory for Muslims who meet wealth and time thresholds.

The scholarly reasoning is that cryptocurrency functions as a store of value and medium of exchange, characteristics that make assets zakatable under traditional Islamic jurisprudence. While Bitcoin and Ethereum are not gold, silver, or government issued currency, they possess monetary attributes. People accept cryptocurrency as payment, hold it as savings, trade it for goods and services, and recognize it as having purchasing power. These functional similarities to traditional money place cryptocurrency within the scope of zakatable assets. The digital and decentralized nature of crypto does not exempt it from Zakat, just as having money in digital bank accounts rather than physical cash does not exempt it. Form changes but substance remains wealth subject to purification through annual Zakat.

The minority position and areas of scholarly debate

A small minority of Islamic scholars have expressed hesitation about cryptocurrency Zakat, primarily due to concerns about crypto legitimacy, extreme volatility, and regulatory uncertainty in various jurisdictions. Some scholars argue that until cryptocurrency achieves broader acceptance and legal clarity, Muslims should be cautious. However, this minority position does not exempt crypto from Zakat but rather suggests heightened due diligence. The predominant view is that regardless of regulatory status or price volatility, if cryptocurrency has monetary value and you own it, it is zakatable wealth.

Areas of ongoing scholarly discussion include NFT treatment, whether certain DeFi protocols involve prohibited elements that affect Zakat, and specific valuation methodologies for highly illiquid altcoins. These edge cases do not undermine the core consensus that major cryptocurrencies like Bitcoin and Ethereum are clearly zakatable. Muslim crypto investors should follow the majority position requiring Zakat on cryptocurrency unless they have consulted scholars and received specific guidance for their unique situations. For traditional investment Zakat principles that also apply to crypto, see our Investment Zakat guide.

Snapshot valuation at a specific moment on Zakat date

The biggest practical challenge in Zakat on cryptocurrency is valuation due to extreme price volatility. Bitcoin can fluctuate thousands of dollars in a single day. Altcoins can swing 10% or more in hours. This creates anxiety about which price to use when cryptocurrency values change constantly. Islamic scholars provide clear guidance: value your cryptocurrency at the market price at a specific moment on your chosen Zakat date. You are not required to use the highest price of the day, the lowest price, or any average. Simply take a price snapshot at one moment.

The recommended approach is to choose a specific time on your Zakat date when you will check prices and calculate. For example, on 1st Ramadan, you might decide to calculate at 12:00 noon your local time. At that exact moment, check Bitcoin price on a major exchange or price aggregator like CoinMarketCap or CoinGecko. Note the prices for all cryptocurrencies you hold. Multiply each quantity by its price at that moment. Sum the totals. This becomes your cryptocurrency value for Zakat calculation. Prices one hour earlier or later are irrelevant. You needed one snapshot and you took it. This is Islamically sufficient for volatile assets where perfect precision is impossible.

Which price sources to use for cryptocurrency valuation

For major cryptocurrencies like Bitcoin, Ethereum, and large cap altcoins, use reputable price aggregators or major exchanges. CoinMarketCap and CoinGecko aggregate prices across hundreds of exchanges and provide reliable spot prices. If you hold crypto on a specific exchange like Coinbase, Binance, or Kraken, you can use that exchange's displayed price at your chosen moment. For cryptocurrencies with significant liquidity and trading volume, small price differences between sources are acceptable. Use whichever reputable source you can access reliably.

For smaller altcoins with low liquidity, valuation becomes more complex. Illiquid tokens might show significantly different prices on different exchanges or have virtually no trading volume. In these cases, scholars suggest using the most conservative realistic valuation. If a token shows $1.00 on one exchange with zero volume and $0.50 on another with minimal volume, and you genuinely could not sell for $1.00, use the lower realistic value. For tokens you truly could not sell at any price, some scholars allow excluding them as having no ascertainable market value, though the cautious approach is including them at whatever price is displayed. The principle is honest realistic assessment of what your cryptocurrency could actually be converted to.

Converting cryptocurrency value to your local currency

Most cryptocurrency prices are quoted in US dollars, but Muslims around the world pay Zakat in their local currencies and compare to nisab in local currency. After valuing your cryptocurrency in dollars using the methods above, convert the total to your local currency using exchange rates at your Zakat date moment. If your total crypto is $60,949 and you are in the UK where the exchange rate is 1 USD to 0.79 GBP, your cryptocurrency value for Zakat is approximately £48,150. If you are in the UAE where rate is 1 USD to 3.67 AED, your cryptocurrency value is approximately 223,682 AED. Perform this conversion once at your snapshot moment.

Bitcoin: The foundation of cryptocurrency Zakat

Bitcoin is the original cryptocurrency and the one scholars examined first when developing Zakat rulings for digital assets. Bitcoin's Zakat treatment is completely clear: it is zakatable wealth. Any Bitcoin you own on your Zakat date must be valued and included in your total wealth calculation. Whether you own 10 BTC, 1 BTC, 0.1 BTC, or 0.001 BTC, multiply your quantity by Bitcoin's price at your Zakat moment. Bitcoin held for long term investment and Bitcoin held for active trading are treated identically. Your intention makes no difference. All Bitcoin is zakatable on the date you calculate.

Ethereum and major altcoins

Ethereum, the second largest cryptocurrency, and other major altcoins like BNB, Cardano, Solana, and Polkadot are treated exactly like Bitcoin for Zakat purposes. These are digital assets with clear market values and significant liquidity. They function as stores of value and are widely accepted in crypto ecosystems. Value them at market price on your Zakat date and include them in your zakatable wealth. The specific blockchain technology, consensus mechanism, or use case does not change the fundamental Zakat obligation. If it is cryptocurrency you own with monetary value, it is zakatable.

Stablecoins: USDT, USDC, DAI, and others

Stablecoins are cryptocurrencies designed to maintain stable value by pegging to fiat currencies, most commonly the US dollar. Tether (USDT), USD Coin (USDC), Dai (DAI), Binance USD (BUSD), and similar stablecoins are unquestionably zakatable. In fact, stablecoins are the easiest cryptocurrency to handle for Zakat because valuation is straightforward. One USDT is worth approximately one US dollar. If you hold 10,000 USDT on your Zakat date, include $10,000 in your zakatable wealth. Stablecoins function exactly like holding US dollars in a digital form, making them clearly subject to the same Zakat treatment as fiat currency.

Many crypto traders hold significant stablecoin positions as a parking spot between trades or as their primary holding while waiting for market opportunities. All stablecoin holdings must be included in Zakat calculation. Do not exclude them thinking they are "just cash for trading." They are digital cash, which is zakatable wealth. Sum all stablecoins across exchanges, DeFi protocols, and wallets, use face value, and add to your total wealth.

Utility tokens, governance tokens, and protocol tokens

Many cryptocurrencies are tokens created for specific platforms and protocols. Uniswap (UNI), Aave (AAVE), Chainlink (LINK), and thousands of others serve various functions in decentralized applications. Some grant governance rights, others provide access to services, some represent stake in protocols. The question for Zakat on cryptocurrency is not what utility the token provides but whether it has monetary value you own. If you hold tokens that trade on exchanges with ascertainable market prices, they are zakatable assets. Include them at market value on your Zakat date regardless of their specific technical purpose.

Staking rewards are immediately zakatable income

Cryptocurrency staking allows you to earn additional coins by locking your holdings to support blockchain networks. When you stake Ethereum 2.0, Cardano, Polkadot, or other proof of stake cryptocurrencies, you receive staking rewards periodically. These rewards are new cryptocurrency entering your wealth, similar to investment dividends or rental income. Islamic scholars treating staking rewards as immediate income that becomes zakatable wealth the moment you receive it.

On your annual Zakat date, you must include both your original staked cryptocurrency and all accumulated staking rewards in your total wealth calculation. If you staked 100 ETH and earned 4 ETH in rewards over the year, you value 104 ETH at current market price. The rewards are not exempt simply because they were earned rather than purchased. All cryptocurrency you own on Zakat date is zakatable regardless of acquisition method. Note that some scholars have concerns about certain staking mechanisms from a Sharia compliance perspective, but that is a separate question from whether the resulting coins are zakatable. For similar principles applied to traditional investments, see our Long Term Investments guide.

DeFi yield farming and liquidity provision

Decentralized Finance (DeFi) protocols enable earning yield through various mechanisms. Liquidity providers deposit cryptocurrency pairs into automated market makers like Uniswap or PancakeSwap and earn trading fees plus liquidity mining rewards. Yield farmers move assets between protocols chasing highest returns. Lenders provide cryptocurrency to platforms like Aave or Compound and earn interest. All earnings from these activities are zakatable income entering your wealth immediately.

Calculate Zakat on cryptocurrency involved in DeFi by valuing everything you control on your Zakat date. Coins deposited in liquidity pools belong to you even though temporarily locked. Governance tokens earned as rewards are yours. Interest bearing tokens received from lending protocols like aTokens represent your deposits plus accrued interest. Value all of it at current market rates and include in Zakat calculation. The complexity of DeFi protocols does not change the fundamental principle that cryptocurrency you own and control is zakatable wealth. Some scholars raise concerns about DeFi mechanisms potentially involving prohibited elements, making certain earnings potentially impermissible to keep, but this is distinct from whether they are zakatable if you do keep them.

Cryptocurrency lending and interest considerations

Platforms allow lending cryptocurrency to borrowers and earning interest. From a Zakat perspective, cryptocurrency you lent to others remains your wealth and is zakatable. The fact that someone else temporarily possesses your coins does not exempt them from Zakat. Include the value of lent cryptocurrency on your Zakat date. Interest earned raises separate Islamic concerns about riba (prohibited interest). Most scholars consider cryptocurrency lending platforms problematic from a Sharia compliance perspective because they pay interest. This means Muslims should generally avoid these activities. However, if you did earn interest before understanding it was prohibited, or you are following a minority opinion permitting it, the earned coins are still zakatable wealth that must be included in calculation even if you plan to dispose of them charitably.

Cryptocurrency on centralized exchanges

Most people hold at least some cryptocurrency on centralized exchanges like Coinbase, Binance, Kraken, Gemini, or regional exchanges. From a Zakat perspective, location makes no difference to obligation. If you own Bitcoin on Coinbase, it is your Bitcoin even though Coinbase technically holds custody. You control it, can withdraw it, trade it, or sell it at will. All cryptocurrency on exchanges must be included in your Zakat calculation on your Zakat date. Log into each exchange you use, check your holdings, note the quantities of each cryptocurrency, and value them all at market prices.

Do not exclude cryptocurrency on exchanges thinking it is somehow different from other holdings. Scholars are clear that ownership and control determine Zakat obligation, not physical or digital custody arrangements. Even if you use multiple exchanges, aggregate all holdings. Your 0.5 BTC on Coinbase plus 0.3 BTC on Binance equals 0.8 BTC total for Zakat purposes. This principle extends to all custodial arrangements where you maintain control despite not holding private keys directly.

Hardware wallets and self custody

Security conscious crypto holders store significant amounts in hardware wallets like Ledger, Trezor, or Coldcard, or in software wallets like MetaMask, Trust Wallet, or Exodus where they control private keys. Self custody cryptocurrency is unquestionably zakatable. In fact, this is the purest form of ownership in the crypto world because you directly control the private keys. On your Zakat date, check all wallets, note the cryptocurrency and token balances, and include everything in your calculation. The enhanced security of hardware wallets does not create any Zakat exemption.

Lost access, forgotten passwords, and inaccessible cryptocurrency

A common situation in cryptocurrency is losing access to wallets through forgotten passwords, lost seed phrases, or defunct exchanges. The question for Zakat is whether permanently inaccessible cryptocurrency remains zakatable wealth. Scholarly consensus is that cryptocurrency you genuinely cannot access and have zero ability to recover is not zakatable. If you lost your Ledger device and seed phrase with no backup, and the cryptocurrency is permanently gone, you do not pay Zakat on it because it is no longer your functional wealth even if technically still exists on the blockchain.

However, the standard for exclusion is high. If recovery is theoretically possible but merely difficult or expensive, most scholars say the cryptocurrency remains zakatable until proven irrecoverable. If you forgot your wallet password but could potentially crack it through computational effort, the crypto is still yours and zakatable. If you had cryptocurrency on an exchange that went bankrupt but recovery through legal proceedings is possible, include it until recovery is definitively impossible. Only when access is permanently, completely, and irrevocably lost can you exclude cryptocurrency from Zakat. The burden of proof is on you to demonstrate genuine inaccessibility.

Cryptocurrency locked in protocols or vesting schedules

Some cryptocurrency is temporarily locked through staking lock periods, vesting schedules for team tokens, or smart contract timelock mechanisms. The majority scholarly position is that temporarily locked cryptocurrency is still zakatable because you own it and will regain full access. The fact that you cannot immediately sell does not change ownership. Include locked cryptocurrency at full market value in your Zakat calculation. A minority opinion suggests excluding truly inaccessible locked funds similar to retirement accounts, but the predominant view for cryptocurrency is that temporary locks do not exempt wealth from Zakat because blockchain locks are usually predictable and limited duration compared to long term retirement restrictions. For related discussion on locked assets, see our Locked Savings guide.