Is Zakat Valid When Transferred Via USDT or Through Agents?

Answered by Shaykh Muhammad Carr

Question

I gave Zakat to a contact in Gaza who used USDT to transfer and distribute it to his wife’s brother. Is my Zakat valid?

I gave Zakat to someone in Gaza who claimed to be eligible, but I later discovered that he owned more than the nisab. However, all his wealth was allocated for his father’s surgery. Is my Zakat valid, or do I need to repay it?

For retirement accounts that cannot be accessed without penalty before the age of 59.5, should Zakat be calculated on the full balance or only on the amount remaining after deducting taxes and penalties?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

May Allah reward you for ensuring that your zakat is dispensed diligently.

Zakat Payment via USDT in Gaza

Dispensing of your zakat in USDT for your zakatable dollars is valid according to Imam Abu Hanifa. You may adopt this view without compunction.

Imam Shafi‘i does not permit zakat to be paid in another currency. He says, “Gold will not suffice for silver, and neither silver for gold, because it is not the subject matter of the obligation.” [See: Mawardi, al-Hawi li al-Mawardi]

Distributing the zakat to his wife’s brother is valid and beyond reproach. The contact is acting as your agent. As you are not financially responsible for your agent’s wife’s brother, your zakat is validly dispensed.

Recipient Eligibility and Gaza Context

Owning more than the minimum zakatable amount is not a criterion for eligibility. Khatib says,

“There is no difference if he owns the nisab or not, since it may not cover his needs.” [Khatib, al-Mughni]

If the recipient owns or earns less than half of what they need, or more than half but still short of what they require, they qualify for zakat on both fronts. Imam Nawawi defines a poor person as one who lacks sufficient funds or earnings to meet their basic needs.  Insufficient funds would be when a person needs ten but only has two combined from his wealth and earnings, or three or four. [Ibid.]

In other words, he has collectively less than half of what he requires.

Allocating for something means you set aside funds or resources for a purpose, but you haven’t necessarily spent them yet. It’s more like earmarking or reserving. He would then technically not qualify for zakat from this perspective.

However, since he resides in Gaza, he is eligible for zakat both as a poor and indigent person as well as under the category of “in the path of Allah.”  Sh Ali al-Qaraghdaghi says, “What appears to us, and our inclination is, that this issue requires further elaboration, because the Muslim peoples who are colonized or occupied, if they actually take up jihad (for example the Afghan people against the Russians, and the Palestinian people in our present time), are mujahidin and have a share in the cause of Allah; all the rulings concerning jihad apply to them, including support and assistance with money and lives’. [Qaraghdaghi, Wajiz]

Zakat on Penalized Retirement Accounts

Deduct taxes/penalties first, since you do not realistically have access to the full balance. You only “own” the net amount you could withdraw. Taxes and penalties are an obligation similar to zakat. If you have 200 dirhams, which is the minimum zakatable amount, and you keep it for several years, you only have to pay for one year. In consequent years, you would have had 200 less than the 2.5 percent zakat that should have been dispensed. In other words, zakat is levied on the net amount.

I pray this is of benefit and that Allah guides us all.
[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 benefited 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 to 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‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.