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Ethereum Blockchain and Ether classified as Halal

Additional rules apply to believing Muslims in financial transactions and those transactions are dictated by Sharia law, the Islamic law. So far, there is no general judgment as to whether cryptocurrencies meet the Sharia requirements. In order to promote the adaptation of the Ethereum platform in the Islamic region, the Ethereum Foundation has had its blockchain examined.

Are Muslims allowed to use the Ethereum platform? Islamic legal scholars from Amanie Advisors, an Islamic financial consultancy that have investigated this question in cooperation with the Ethereum Foundation.

The result should be gratifying for Muslim crypto enthusiasts: the scholars classified both the Ethereum platform and the associated cryptocurrency Ether as “Sharia-compliant”. Amanie Advisors summarized the results of their investigation in a Shariah white paper

Being Sharia compliant means that ether can be lawfully traded and exchanged by the Muslim community. It is permissible for a Muslim to buy, sell or hold Ether to participate in the Ethereum Blockhain and take full advantage of the technology.

The purpose of the investigation was to remove any uncertainties in order to stimulate interest in the Ethereum platform in the Islamic world. The head of the initiative is Virgil Griffith, who is responsible for special projects at Ethereum. He made contact with Amanie Advisors and the legal scholars then set out to highlight the “Sharia parameters” of Ethereum and Ether.

Ether is not considered a currency

In the Shariah White Paper , the authors first discuss the question of whether Ether should be classified as a currency from an Islamic perspective. The scholars deny such an assessment; instead, Ether is designated as a valuable commodity, because they recognize the primary function of Ether as a utility token for the Ethereum platform.

Ether therefore primarily serves as an incentive for miners to confirm transactions and as such, it only has value within a limited ecosystem. In contrast, the use of Ether as a store of value and a universally valid medium of exchange is only of marginal importance from the perspective of the experts.

The scholars then check whether Ether meets the Sharia requirements for goods. The principle applies here: What does not include anything prohibited is allowed. Following this maxim, they come to the conclusion that the exchange of Ether does not include interest nor is there an inevitable uncertainty. After all, trading in Ether could not be compared to gambling thus, from an Islamic perspective, there is no reason why Ether should be considered banned.

The Ethereum blockchain is also sharia-compliant

Amanie Advisors also assessed the other components of the Ethereum ecosystem. They classified both the platform and the mining of Ether as permitted. They also saw no fundamental objections regarding smart contracts and dApps, however, it is important to check the specific content of the contracts and applications from case to case.

Incidentally, Ethereum is not the first Crypto project to undergo a Sharia check. The Stellar cryptocurrency received a Sharia certificate in 2018 .

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