Zakat and Crypto Question: Zakat on crypto

Everyday Islamic Finance Personal and Family Finance
#1

Salaam,

I have a question regarding zakaat on one of my crypto assets.

The asset in question was previously an ERC-20 which had moved to its own mainnet and subsequently been converted to its own mainnet token.

As a result, ERC-20 holders had to swap their tokens to the mainnet token.

The terms of the swap are that the new tokens will be distributed over three years to each investor.

Currently I have been given roughly 1% of the tokens while the rest are on hold and will be distributed to me over the next three years via a smart contract. The tokens will be distributed to my wallet and I own the private keys of the wallet.

My question is: do I pay zakat on the tokens which I have received and therefore own, or do I pay zakat on the tokens which I have received AND the tokens which are yet to be received but are currently on hold and not under my possession? My zakat anniversary is coming up in the next week.

Jzk

#2

Wasalam

May Allah bless you.

  1. Can you clarify what these tokens represent i.e. are they utility tokens etc

  2. What was the intention at the time of purchasing those tokens i.e. did you buy to resell or else?

1 Like
#3

These tokens would be classed as hybrid as they can be used for payments within the network, staking and for governance. I would compare this token to ETH and NEO in function.

I bought the tokens with the intention to resell.

#4

  1. You will pay zakat on the current market value of the tokens on your zakat anniversary day. This is because any crypto-assets bought for capital gain will be zakatable at 100% its market value.

  2. My understanding is that even before a mainnet swap, a person can trade the tokens. Therefore in my opinion, the ownership is established even before the swap. For that reason you will have to pay zakat on the outstanding tokens. @Mufti_Faraz_Adam might have a different view on this, so you can wait for him to express his opinion.

And Allah knows best!

1 Like
#5

Assalaamu alaykum,

I have written an article regarding Zakat on Cryptos, you can see it here:
https://afinance.org/research-paper-zakat-on-cryptocurrencies/

1 Like
#6

Jzk to both muftis.

Mufti Faraz, what is your opinion regarding my current situation where I don’t have access to the majority of tokens nor can I sell or transfer them. Please check my original post for context.

Jzk