What is the Zakat treatment of crypto-assets? – Mufti Faraz

In the Name of Allah, the Most Gracious, the Most Merciful

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh

Answer:

The Zakat treatment of crypto-assets depends on two things:

1. The type of crypto-asset
2. The investment and trading strategy in crypto-asset

To read more on our explanation of crypto-assets, you can read the article here.

Summary

ACTIVE-TRADING STRATEGY: Zakat is due on the full value of the investment at market value. Active trading here means an investment with the sole intention to sell and capture short-term positive price fluctuations.

BUY-AND-HOLD TRADING STRATEGY: Any crypto-asset purchased with another intention; Zakat will depend on the type of crypto-asset.

Types of Crypto-assets and their Zakat Treatment

COINS/EXCHANGE TOKENS/PAYMENT TOKENS: Zakat is always due on these types of crypto-assets at 100% of your current holding value regardless of the intention.

SECURITY TOKENS: If purchased to resell, it is Zakatable at 100% of your current holding value. If purchased for dividend income & long-term investment, Zakat will depend on the underlying assets of the company.

UTILITY AND PLATFORM TOKENS: If purchased to resell, it is Zakatable at 100% of your current holding value. If purchased to use, Zakat will not be due on these tokens.

ASSET-BACKED TOKENS: If purchased to resell, it is Zakatable at 100% of your current holding value. If purchased as an investment, Zakat will depend on the underlying asset. If it is a Zakatable asset, it will be Zakatable.

GOVERNANCE TOKENS: If purchased to resell, it is Zakatable at 100% of your current holding value. If purchased to use, Zakat will not be due on these tokens.

Allah knows best

Mufti Faraz Adam
Shariah Advisor
Amanah Advisors