Are meme tokens halal?
In the name of Allah, the Most Merciful, the Most Kind
Whilst it is not possible to give a specific ruling for a specific token, in principle, meme tokens should be avoided due to their high Shariah non-compliance risks and lack of bona fide utility and lack of genuine use cases. Having such tokens labelled as ‘payment tokens’ or alternative currencies without any such adoption does not always justify a real use case. In our view, such tokens do not align with Shariah principles.
What are meme tokens?
Definitions of meme tokens vary, however, there are certain characteristics and features which can assist in identifying such tokens such as:
- They are based on jest and jokes, with their prominence due to hype among people as opposed to any traditional and bona fide value recognised in Shariah.
- Social media platforms are a catalyst in the pumping of the value of such tokens.
- There is a relatively higher percentage of novice traders from the millennials and generation-z investing in such tokens.
- The popularity of such tokens is generally disconnected from any fundamental underlying value, and instead anchored to its popularity and that people think it’s funny or cool.
- Traders buy into the hype generated on platforms due to FOMO (fear of missing out).
- Panic-selling at the slightest headwind is common, adding to the stock’s volatility
- The tokens are generally overpriced.
- The tokens experience relatively higher volatility than other tokens.
- The tokens tend to experience spikes of rapid growth in short spaces of time.
- valuations are generally based around potential rather than financials and fundamental utility and use cases.
It is among the primary principles of Shariah that only an asset that has a bona fide benefit and utility is traded. The Maliki scholar Imam Ibn al-Arabi (rahimahullah) mentions that an asset worthy of transacting and trading is that asset which people genuinely aspire, which is capable of being used for a genuine purpose and it is lawful to use from a Shariah perspective. The Shafi’i Imam al-Zarkashi (rahimahullah) states that an asset in Shariah is that which has utility and benefit. The illustrious Hanafi jurist Ibn Nujaym (rahimahullah) quoting from al-Hawi al-Qudsi states a similar principle that assets have been created for the benefit of mankind. The great Hanbali jurist Imam al-Mardawi (rahimahullah) states that assets that are lawful in Islam are those which have a Shariah compliant and valid use case. These descriptions stem from a Shariah concept known as Mal. Mal is that thing which people incline towards. Generally, reasonable people are only inclined towards something when they perceive a benefit therein. And that is the essence of Mal, something that benefits. Anything that is beneficial and has a clear, Halal utility is Shariah compliant. Anything that doesn’t have a utility or does not have a Halal benefit, then it is not Shariah compliant.
The reason for this Shariah requirement is that Islam sees a transaction to be one where both parties are equal and have a level-playing field. As such, both parties should gain and benefit from a bargain and transaction. When one party is paying money or giving something of value with a clear use case, the counterparty must also deliver something of equal nature i.e. possessing value with utility and a clear use case. Furthermore, Shariah doesn’t recognise an asset that has no reasonable utility as a valid subject matter of the sale. The wisdom of that is clear, which is to prevent people from selling all crazy and useless items to those who are naive, gullible and not aware of what is going on. These principles safeguard and protect consumers from deception and being taken advantage of. The essence of Shariah is to establish that which is beneficial and prevent that which is harmful.
Finally, many such tokens state that they are currencies or payment tokens. In many instances, such tokens serve no such purpose. The use of ‘currency’ as a utility is very popular but such tokens do not generally function as such from a Shariah perspective.
Allah alone knows best
Mufti Faraz Adam
وقال ابْنُ العَرَبِيِّ: هُوَ ما تَمْتَدُّ إلَيْهِ الأْطْماعُ، ويَصْلُحُ عادَةً وشَرْعًا لِلاِنْتِفاعِ بِهِ (أحكام القرآن).
وعَرَّفَ الزَّرْكَشِيُّ مِنَ الشّافِعِيَّةِ المال بِأنَّهُ ما كانَ مُنْتَفَعًا بِهِ، أيْ مُسْتَعِدًّا لأِنْ يُنْتَفَعَ بِهِ (المنثور في القواعد).
وفِي الحاوِي القُدْسِيِّ. المالُ اسْمٌ لِغَيْرِ الآدَمِيِّ خُلِقَ لِمَصالِحِ الآدَمِيِّ وأمْكَنَ إحْرازُهُ والتَّصَرُّفُ فِيهِ عَلى وجْهِ الِاخْتِيارِ والعَبْدُ، (البحر الرائق)
الثّالِثُ، أنْ يكونَ المَبِيعُ مالًا، وهو ما فيه مَنفَعَةٌ مُباحَةٌ لغَيرِ ضَرُورَةٍ. فتَقْيِيدُه بما فيه مَنفَعةٌ، احْتِرازٌ عن ما لا مَنفَعَةَ فيه؛ كالحَشَراتِ ونحوِها. وتَقْيِيدُه المَنفَعَةَ بالإباحَةِ، احْتِرازٌ عن ما فيه مَنفَعَةٌ غيرُ مُباحَةٍ، كالخَمْرِ والخِنْزِيرِ ونحوِهما. وتَقْيِيدُه بالإباحَةِ لغيرِ ضَرُورَةٍ، احْتِرازٌ عن ما فيه منْفَعَةٌ مُباحَةٌ للضَّرُورَةِ، كالكَلْبِ ونحوِه. قالَه ابنُ مُنَجّى، وقال: فلو قال المُصَنِّفُ: لغيرِ حاجَةٍ. لَكانَ أوْلى؛ (الانصاف)