Are Crypto Perpetual Contracts Still Haram If There’s No Interest, and the Asset Price Tracks?
Answered by Shaykh Muhammad Carr
Question
Some scholars deem crypto perpetual contracts impermissible due to factors such as interest (riba), lack of actual ownership, or their resemblance to gambling. However, if the exchange does not charge interest, the contract mirrors the asset’s price, and the trader employs leverage, stop-loss, and take-profit tools based on thorough research and a clear strategy—does this still render it haram? Is merely holding a virtual position impermissible, even when it does not involve blind or speculative risk?
ِAnswer
In the Name of Allah, the Most Merciful and Compassionate.
I pray you are in good faith and health. Thank you for your question.
Allah says, “O you who believe, devour not your wealth between you through falsehood; but only through trade by your complete mutual consent.” [Quran, 4:29].
Crypto perpetual contracts remain impermissible (haram) even if no interest is involved, the price tracks the underlying asset, and trades are executed with research, strategy, and risk management because they do not involve actual ownership of the underlying asset.
Crypto perpetual contracts are a type of derivative in cryptocurrency trading that allows traders to speculate on the price movements of a digital asset—like Bitcoin—without actually owning the asset. Unlike traditional futures, they have no expiry date.
Managing Risk Responsibly
Market-related risk does not determine whether a contract is permissible or not. Therefore, while taking steps to mitigate such risk is commendable, in this case, it is applied to a fundamentally impermissible contract. Although the derivative may track the underlying asset’s price, it does not involve actual ownership. In Islamic Law, profit is justified through ownership. The Prophet (Allah bless him and grant him peace) said, “Do not sell what you do not own.” [Tirmidhi]
What are Derivatives?
A derivative is a financial contract whose value is based on (or “derived” from) the price of an underlying asset—such as a stock, commodity, currency, or cryptocurrency.
In simple terms:
A derivative doesn’t have value on its own; it gets its value from something else.
Examples include futures, options, and swaps. Traders use derivatives to hedge risk or speculate on price movements without directly owning the asset.
And with Allah alone is our success.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Faraz Rabbani
Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door for students. As an imam, he has the unique opportunity to serve his community in daily life.
In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari’ah Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.
