Hanafi Jurisprudence and Crypto currency: Comparative Analysis

Abstract

This study examines how classical Hanafi Islamic law on money, trade, and riba (usury) relates to modern crypto currencies. It first outlines Hanafi principles regarding what constitutes valid currency and permissible sales transactions, noting especially the requirement of hand-to-hand exchange and prohibition of gharar (excessive uncertainty) and qumar (gambling) in trade. We then describe key features of crypto currency and block chain (digital, decentralized currencies and smart contracts) and their contemporary uses (remittances, decentralized finance, peer-to-peer exchanges). In comparing these, we identify potential compatibilities (e.g. crypto currency as community-accepted medium) and conflicts (e.g. volatility and lack of intrinsic value) with Hanafifiqh. For example, Hanafi sources emphasize that lawful money must be valued and storable, and only gold/silver are riba items. By contrast, crypto currencies have no fixed intrinsic backing and can fluctuate wildly. Many contemporary Hanafi scholars therefore caution that crypto currencies may involve riba (through delayed unequal exchange) and gharar (through speculation). This paper also discusses implications for Muslim communities using crypto-based remittances: how Hanafi rulings might limit the use of volatile crypto currencies, and how certain designs (e.g. asset-backing or immediate settlement) could address Shariah concerns. Throughout, we cite classical texts (e.g. Al-Hidāya, Fatāwá-i-ʿĀlamgīri) and modern Islamic finance literature to frame the analysis.