Zakat on Digital Assets: A New Frontier in Islamic Finance
In the age of digital transformation, wealth is no longer limited to physical assets like cash, gold, or real estate. The rise of digital assets—cryptocurrencies, NFTs, e-wallet balances, and tokenized securities—has reshaped the financial landscape, raising crucial questions in Islamic finance. Among these, one key issue stands out: Are digital assets subject to Zakat?
Understanding Digital Assets in Islamic Finance
Digital assets as regulated under the jurisdiction of Securities Commission Malaysia (SC) consist of digital currency and digital token. It is an entities that hold value and can be owned. They exist in a virtual form, are intangible, and do not have a physical presence.
1. Digital currency that is based on technology without any underlying
Digital currency in this form is categorised as `urudh and it is not a currency from Shariah perspective. Such digital currency is not categorised as ribawi items.
2. Digital currency that is backed by ribawi items
- Digital currency that is backed by gold, silver and currency.
If a digital currency is backed by ribawi items comprising gold, silver and currency, it is categorised as a currency from Shariah perspective. Hence, the trading of such digital currency is subject to the principle of bai` al-sarf.
- Digital currency that is backed by ribawi items other than gold, silver and currency
If a digital currency is backed by ribawi items other than gold, silver and currency, it is categorised as amwal ribawiyyah (ribawi items). Therefore, the trading of such digital currency is subject to the Shariah requirements of ribawi items.
Is Zakat Applicable to Digital Assets?
According to the Shariah Advisory Council of the Securities Commission Malaysia (2020), digital assets fulfill the characteristics of asset (al-Mal) in Shariah: they can be owned, provide benefits, and hold intrinsic value.
According to Akademi Zakat from Pusat Pungutan Zakat-MAIWP (PPZ-MAIWP), if an asset is considered a commodity, Shariah-compliant, holds value, and is traded, business Zakat may be applicable to the digital asset.
Sharlife's Crypto Zakat Project
Recently, Pusat Pungutan Zakat-MAIWP (PPZ-MAIWP), the zakat authority in Malaysia, introduced a groundbreaking initiative that enables Zakat payments using digital assets, including cryptocurrencies. This initiative is a collaboration between Sharlife and PPZ-MAIWP, designed to simplify the calculation, collection, and distribution of Zakat on cryptocurrencies. By providing a Shariah-compliant and transparent solution, this platform ensures that Muslim investors can fulfill their Zakat obligations with ease and confidence.
How Does It Work?
- Calculate – Users input their wallet address into Sharlife’s Zakat on Digital Asset platform. The system scans asset holdings and calculates Zakat based on Shariah-compliant tokens.
- Pay – The platform facilitates secure and easy crypto Zakat payments.
- Distribute – Funds are managed by PPZ and distributed to eligible asnaf (Zakat recipients).
- Track – Donors can monitor their Zakat contributions through PPZ’s platform.
Conclusion
Digital assets represent a new frontier in Islamic finance and Zakat jurisprudence. As technology continues to redefine wealth, Islamic scholars and financial institutions must establish clear Zakat guidelines. Until then, Muslim investors should proactively assess their digital holdings and consult qualified scholars to ensure they fulfill their Zakat obligations.
With Sharlife’s Crypto Zakat Project, the process of paying Zakat on digital assets has never been more accessible. As the financial world embraces digital transformation, Islamic finance must evolve to ensure that all wealth, including digital assets, aligns with Shariah principles.
