Cryptocurrency

Do I pay Zakat on crypto?

Do I Pay Zakat on Cryptocurrency? A Comprehensive Guide

Zakat, an obligatory act of charity in Islam, is one of the five pillars of the faith. It requires Muslims who meet specific financial criteria to donate a portion of their wealth annually to those in need. Traditionally, Zakat is calculated and paid on various forms of wealth, including money, gold, silver, livestock, agricultural produce, and business assets. The rise of cryptocurrencies has introduced a new dimension to this religious obligation, leading many Muslims to wonder about the applicability of Zakat to this digital asset class.

This guide will explore the Islamic rulings on Zakat concerning cryptocurrencies, providing detailed insights on whether Zakat is applicable, how to calculate it, and the permissible methods of payment. We aim to clarify the complexities surrounding Zakat on crypto, ensuring Muslims can fulfill their religious duties in accordance with Islamic principles.

Zakat on Crypto: What You Need to Know

Zakat is one of the five pillars of Islam, and it is the obligatory charity that every Muslim who meets certain criteria must pay annually. Zakat is a way of purifying one’s wealth, expressing gratitude to Allah, and helping those who are in need. Zakat is calculated and paid on various types of wealth, such as money, gold, silver, livestock, crops, and business assets. But what about crypto? Crypto is a digital form of money that can be transferred securely and quickly over the internet. Crypto has become more popular and widely used in recent years, especially among young and tech-savvy Muslims. But do you have to pay Zakat on crypto? And if so, how do you calculate and pay it? In this article, we will answer these questions and provide some guidance on how to fulfill your Zakat obligation on crypto.

Do you have to pay Zakat on crypto?

The short answer is yes, you do have to pay Zakat on crypto, if certain conditions are met. these conditions are:

You own crypto that is equivalent or above the nisab, which is the minimum amount of wealth that makes one liable for Zakat. The nisab is based on the value of gold or silver, and it may vary depending on the source and the date of calculation. You can use a Zakat calculator to determine the nisab and the amount of Zakat you owe.
You have held the crypto for one lunar year, which is about 354 days. This means that you have not sold, exchanged, or spent the crypto during this period. If you have acquired more crypto during the year, you need to add it to your total and pay Zakat on it as well.
You intend to use the crypto as a form of currency or investment, not as a personal asset or utility. This means that you have bought the crypto with the intention of reselling it, trading it, or using it for transactions, not for storing data, accessing services, or expressing opinions.

If you meet these conditions, then you need to pay Zakat on your crypto at the rate of 2.5%, which is the same as the rate for money. You need to calculate the market value of your crypto in your local currency at the time of paying Zakat, and then multiply it by 0.025 to get the amount of Zakat you owe.

Is Zakat Obligatory on Cryptocurrency Holdings?

The consensus among Islamic scholars is that Zakat is indeed applicable to cryptocurrencies if they meet certain conditions. The rationale behind this ruling stems from considering cryptocurrencies as a form of wealth, similar to other assets subject to Zakat. The following three conditions must be met:

Nisab Threshold: Your cryptocurrency holdings must meet or exceed the Nisab threshold, which is the minimum amount of wealth that triggers the Zakat obligation. The Nisab is traditionally based on the value of either gold or silver, with scholars often recommending the silver standard as it is more favorable to the poor. The current value of Nisab fluctuates, so it’s important to verify it at the time of Zakat calculation.
Holding Period (Hawl): The cryptocurrency must be held for a complete lunar year (Hawl), which is approximately 354 days. If the value of your crypto holdings fluctuates throughout the year but remains above the Nisab threshold, Zakat is still due. Any crypto acquired during the year should be added to your total holdings for Zakat calculation at the end of the lunar year.
Intention: Zakat is due if the cryptocurrency is held with the intention of investment, trading, or generating profit. Cryptocurrencies held for personal use as a medium of exchange or speculative investment are also subject to Zakat.

How to Calculate Zakat on Cryptocurrency

Calculating Zakat on cryptocurrency involves determining the market value of your holdings at the end of the lunar year. You can use cryptocurrency exchanges or price tracking websites to find the current value in your local currency. Once you have determined the total value, multiply it by 2.5% (0.025) to calculate the amount of Zakat due.

Zakat = (Current Market Value of Cryptocurrency Holdings) x 0.025

Example: If, at the end of the lunar year, the market value of your cryptocurrency holdings is $10,000, your Zakat obligation would be:

$10,000 x 0.025 = $250

you can calculate the zakat of all your assets, including crypto assets, from here and pay directly with crypto.

Permissible Methods of Paying Zakat on Cryptocurrency

There are several permissible ways to fulfill your Zakat obligation on cryptocurrency:

Direct Cryptocurrency Donation: Donate your cryptocurrency directly to reputable Islamic charities or organizations that accept crypto donations. Ensure the charity is Zakat-eligible and uses the funds for permissible purposes.
Converting to Fiat Currency: Convert your cryptocurrency into your local fiat currency (e.g., USD, EUR) and pay Zakat in cash, bank transfer, or any other conventional method. But we are here so that you don’t have to. You can easily give your Zakat directly to those in need in cryptocurrency.
Exchange for Goods and Services: Exchange your cryptocurrency for essential goods and services that directly benefit Zakat-eligible recipients, such as food, clothing, medicine, or educational resources. This method requires careful consideration to ensure the exchange aligns with Islamic principles.

Addressing Common Concerns

Fluctuating Value: If the value of your cryptocurrency holdings fluctuates throughout the year, the Zakat calculation should be based on the value at the end of the lunar year.
Multiple Cryptocurrencies: If you hold multiple cryptocurrencies, calculate the value of each at the end of the year and sum them up to determine the total value subject to Zakat.
Staking and Yield Farming: Cryptocurrency earned through staking or yield farming is considered income and should be included in your Zakat calculation if it meets the Nisab threshold and is held for a lunar year.

Zakat on Cryptocurrency: Diverse Scholarly Opinions and Practical Guidance

While the general consensus supports the obligation of Zakat on cryptocurrencies, nuances exist within different scholarly opinions. Some scholars draw parallels between cryptocurrencies and commodities, while others view them as currencies. These differing perspectives impact the specifics of Zakat calculation. This guide presents a comprehensive overview of these various viewpoints and provides practical guidelines to help individuals navigate the complexities and fulfill their religious obligations.

You can pay Zakat on your crypto in different ways, such as:

Converting your crypto into fiat currency and paying Zakat in cash or by bank transfer.
Donating your crypto directly to a charity that accepts crypto donations, such as our islamic charity which works to provide humanitarian aid and relief to the most vulnerable and marginalized people around the world.
Exchanging your crypto for goods or services that benefit the eligible recipients of Zakat, such as food, water, medicine, shelter, education, or protection.

FAQ for Pay Zakat on Cryptocurrency

1.How to calculate Zakat on cryptocurrency?

To calculate Zakat on cryptocurrency, first determine the market value of all your cryptocurrency holdings on the day Zakat is due (end of the lunar year). Add up the value of all your different cryptocurrencies. Then, multiply the total value by 2.5% (0.025). The result is the amount of Zakat you owe.

2.Is Zakat compulsory on all cryptocurrencies?

Zakat is compulsory on cryptocurrencies that are held for investment, trading, or as a store of value, provided that the total value meets or exceeds the Nisab threshold and has been held for a complete lunar year. Cryptocurrencies held purely for personal use might be exempt.

3.What is the Nisab for cryptocurrency Zakat?

The Nisab is the minimum amount of wealth that makes one liable to pay Zakat. For cryptocurrency, the Nisab is typically based on the current market value of either 85 grams of gold or 595 grams of silver. Many scholars recommend using the silver standard as it usually benefits more people. Check the current value of silver or gold to determine the Nisab in your local currency.

4.Can I donate cryptocurrency for Zakat?

Yes, you can donate cryptocurrency directly to charities that accept crypto donations for Zakat purposes. Ensure the charity is reputable and uses the funds for Zakat-eligible recipients.

5.Which Islamic charities accept cryptocurrency for Zakat?

Many Islamic charities now accept cryptocurrency donations for Zakat.for examples include Islamic donate.

6.Do I pay Zakat on staked cryptocurrency?

Yes, you should pay Zakat on staked cryptocurrency. Staking rewards are considered income, so include both the principal amount of the staked crypto and any accrued rewards when calculating your Zakat.

7.How is Zakat calculated on crypto trading profits?

Zakat on crypto trading profits is calculated by including the profits you’ve made from trading within the total value of your assets at the end of the Zakat year. If your total assets, including these profits, exceed the Nisab, then you pay Zakat on the entire amount.

8.Is Zakat due on Bitcoin holdings?

Yes, Zakat is due on Bitcoin holdings if they meet the Nisab threshold and have been held for a lunar year with the intention of investment or trading.

9.Do I need to pay Zakat on crypto losses?

You do not pay Zakat on losses. Zakat is only applicable if your total wealth meets or exceeds the Nisab threshold after accounting for any losses. However, losses do not negate the Zakat if, overall, you still possess wealth exceeding the Nisab.

10.When is Zakat due on cryptocurrency?

Zakat on cryptocurrency is due at the end of a complete lunar year (approximately 354 days) after your assets first met or exceeded the Nisab value. This date becomes your Zakat anniversary.

11.How do I find the Nisab value for Zakat on crypto?

You can find the Nisab value by checking the current market value of 595 grams of silver or 85 grams of gold in your local currency. Many online Zakat calculators provide up-to-date Nisab values.

12.What is the Islamic ruling on Zakat for Ethereum?

The Islamic ruling on Zakat for Ethereum is the same as for Bitcoin and other cryptocurrencies: if it’s held as an investment or for trading, meets the Nisab, and has been held for a lunar year, Zakat is due.

13.Can I pay Zakat on crypto in installments?

Paying Zakat in installments is a complex issue. While Zakat is typically due annually, some scholars permit paying in installments if there is a pressing need. Consult with a knowledgeable scholar for guidance on this matter.

14.Is Zakat applicable to NFTs (Non-Fungible Tokens)?

The applicability of Zakat on NFTs is debated. If the NFT is held for investment or trading, it’s generally considered subject to Zakat, similar to other digital assets. If it’s held for personal use or collection, some scholars argue it is not subject to Zakat.

Paying Zakat on cryptocurrency is a religious obligation for Muslims who meet the specified conditions. Understanding the Nisab threshold, holding period, calculation methods, and permissible payment options is crucial for fulfilling this duty correctly. By adhering to Islamic principles and seeking guidance from knowledgeable scholars, Muslims can ensure their Zakat on cryptocurrency is accepted and beneficial to those in need. We hope this helps you understand how to pay Zakat on your crypto and fulfill your religious obligation. May Allah reward you for your generosity and bless you and your family. Donate today at IslamicDonate.com. May your charity be a source of mercy for others and blessings for you.

pay Zakat on your crypto

Cryptocurrency Ibadah / Acts of Worship Zakat

Stack of bitcoin coins with a red bow, representing crypto donations for Islamic relief efforts. Donations processed via BTC.

Satoshi is the smallest unit of Bitcoin

Satoshi is the smallest unit of Bitcoin, the most popular and widely used cryptocurrency in the world. It is named after Satoshi Nakamoto, the mysterious person or group who created Bitcoin in 2008. One Satoshi is equal to 0.00000001 Bitcoin, which means that one Bitcoin is equal to 100 million Satoshi. You can think of Satoshi as the pennies or cents of Bitcoin, allowing you to make transactions with very small amounts of money.

Why do we need Satoshi? Well, because Bitcoin is a digital currency that has a limited supply of 21 million coins, its price can fluctuate significantly depending on the market demand and supply. As of today, one Bitcoin is worth about $47,000, which makes it very expensive for most people to buy or use. Imagine if you wanted to buy a cup of coffee with Bitcoin, you would have to pay 0.0002 Bitcoin, which is not very convenient or practical. That’s why we have Satoshi, which allows us to use fractions of Bitcoin for everyday purchases and transactions.

How do we convert Satoshi to Bitcoin and vice versa? The conversion is very simple and straightforward. All you have to do is divide or multiply by 100 million. For example, if you have 10,000 Satoshi and you want to know how much Bitcoin that is, you just divide 10,000 by 100 million and you get 0.0001 Bitcoin. Conversely, if you have 0.01 Bitcoin and you want to know how many Satoshi that is, you just multiply 0.01 by 100 million and you get 1 million Satoshi.

How do we donate based on Satoshi? Donating based on Satoshi is also very easy and beneficial for both the donor and the recipient. As a donor, you can choose how much Satoshi you want to donate according to your budget and preference. You can donate as little as 1 Satoshi or as much as you want. As a recipient, you can receive donations from many people around the world who support your cause and mission. You can also convert your donations from Satoshi to your local currency or use them directly for your charitable activities.

Donating based on Satoshi is also compatible with the principles of Islamic finance and charity. As Muslims, we are encouraged to give Zakat (obligatory charity) and Sadaqah (voluntary charity) to help the poor and needy, as well as to purify our wealth and souls. We are also forbidden from dealing with interest (Riba), gambling (Maisir), uncertainty (Gharar), and unethical transactions. Cryptocurrency such as Bitcoin and its unit Satoshi can be a good alternative to conventional money that may involve these prohibited elements.

Therefore, we need to be careful and prudent when using cryptocurrency for charity purposes. We need to do our research and due diligence before choosing a reliable and trustworthy platform or organization that accepts cryptocurrency donations. We need to check their reputation, track record, policies, procedures, fees, and compliance with Shariah principles. We need to also monitor the market trends and fluctuations of cryptocurrency prices and exchange rates. We need to also consult with qualified scholars and experts who can guide us on the Islamic rulings and opinions regarding cryptocurrency.

I hope this article has given you some insights and understanding about Satoshi and Bitcoin and how they can be used for charity purposes. I also hope that you will continue to support our Islamic charity institution with your generous donations and prayers. May Allah reward you for your kindness and generosity. Thank you for reading this article and please share it with others who may benefit from it. Peace be upon you.

Cryptocurrency What We Do

Hands typing on a laptop with a network overlay and Bitcoin symbols, illustrating secure blockchain transactions and crypto donations like BTC.

Wallet to Wallet Donations

Islamic Charity: Wallet to Wallet Crypto Donation

We’ve all heard the adage, “Charity begins at home.” But in the digital age, we might as well say, “Charity begins at your digital wallet.” That’s right, my friends – our Islamic Charity is taking a leap into the future with a revolutionary new way of accepting donations. We’re talking about the “Wallet to Wallet” (W2W) initiative, a game-changing approach that allows our generous donors to send their contributions from their own digital wallets directly to ours.

Secure, Simple, and Swift Donations

So, what’s the fuss about these fixed addresses, and why are they a game-changer? Well, imagine having your own charity box that’s secure, always accessible, and incredibly easy to use. A fixed address in your digital wallet is just that. It’s like having a direct, secured line between you and your chosen cause.

With a fixed address, you can set up recurring donations without going through the hassle of inputting payment information every single time. It’s akin to setting up a standing order with your bank, but without the paperwork. You decide the amount and frequency, and your wallet handles the rest. It’s a simple, one-time setup for a lifetime of giving.

Building Trust, One Transaction at a Time

Now, let’s talk about transparency. In traditional charitable giving, sometimes it’s hard to see exactly where your money is going. But with the W2W initiative, each transaction is recorded on the blockchain, a public ledger that’s nearly impossible to tamper with. This means you can see exactly when and where your donation is delivered. It’s the future of trust in charitable giving.

Moreover, these transactions are anonymous. So, while everyone can see that a donation has been made, nobody needs to know who made it. It’s an ideal balance of transparency and privacy that respects the Islamic principle of giving in secret.

Embracing the Future of Philanthropy

The “Wallet to Wallet” initiative is not just an innovation; it’s a celebration of our shared commitment to making the world a better place. By providing our dear donors with fixed address donation options, we’re embracing the future of philanthropy. It’s a future that’s secure, transparent, and incredibly easy to be a part of.

So, dear friends, let us embark on this journey of generosity together. Our fixed addresses are now available for you to store in your digital wallets. Just follow the “Wallet to Wallet” link, and join us in making a difference, one digital coin at a time.

In the spirit of giving, let us not forget the words of our beloved Prophet Muhammad (peace be upon him), “Charity does not decrease wealth.” With the W2W initiative, we hope to make this beautiful act of giving more accessible, more secure, and more impactful than ever before. Indeed, every little bit helps, and every little bit counts.

Remember, the future of giving is in your hands, or rather, in your wallet. Let’s embrace it together!

Cryptocurrency Report

Can You Donate to Charity with Crypto?

Yes. Crypto is short for cryptocurrency, which is a type of digital money that is created and managed by computer algorithms. Crypto is not controlled by any central authority, such as a government or a bank, but rather by a network of users who verify and record transactions on a public ledger called a blockchain. Crypto is designed to be secure, transparent, and decentralized, meaning that no one can manipulate or censor it.

You may be wondering why you should consider donating to charity with crypto instead of using conventional money. Well, there are several benefits of using crypto for charitable purposes, such as:

Crypto can reduce the cost and time of transferring money across borders, especially to countries that have limited access to banking services or face economic sanctions. This means that more of your donation can reach the people who need it most, without being diluted by fees or delays.
Crypto can enhance the accountability and transparency of charitable organizations, as donors can track how their donations are used and verify the impact they have on the ground. This can also prevent fraud and corruption, as crypto transactions are immutable and verifiable on the blockchain.
Crypto can empower the recipients of your donations, as they can have more control over their own finances and access to a global market. Crypto can also help them preserve their wealth and protect it from inflation or currency devaluation.
Crypto can align with the principles of Islamic finance, as it is based on a profit-and-loss sharing system rather than interest-based lending. Crypto also avoids the involvement of intermediaries or middlemen who may charge unjust fees or exploit the poor. Crypto can also be used for zakat, which is the obligatory charity that every Muslim must pay annually.

However, before you decide to donate to charity with crypto, you should also be aware of some challenges and risks that may arise, such as:

Crypto is volatile and unpredictable, meaning that its value can fluctuate significantly in a short period of time. This can affect both the donor and the recipient, as they may lose or gain money due to market movements. Therefore, you should only donate what you can afford to lose and be prepared for price changes.
Crypto is not widely accepted or regulated in many countries, meaning that there may be legal or practical barriers to using it for charitable purposes. Some countries may ban or restrict the use of crypto, while others may impose taxes or reporting requirements on it.
Crypto is not immune to cyberattacks or human errors, meaning that your funds may be stolen or lost if you do not take proper security measures. You should always keep your private keys (which are like passwords) safe and secure, and use reputable platforms and wallets to store and transfer your crypto. You should also backup your data and use encryption and antivirus software to protect your devices.

How to donate to charity with crypto

If you are ready to donate to charity with crypto, here are some steps you can follow:

Choose a charity that accepts crypto donations. At Islamic Charity, we accept crypto and you can donate with crypto.
Choose a crypto that you want to donate. You can use any crypto that the charity accepts, but some of the most popular ones are Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Dogecoin (DOGE). You can also use stablecoins, which are crypto that are pegged to a fiat currency like the US dollar, such as Tether (USDT) or USD Coin (USDC).
Choose a platform or wallet that you want to use to make the donation. You can use an exchange like Coinbase or Binance that allow you to buy and sell crypto with fiat money, or a wallet like Metamask or Trust Wallet that allow you to store and send crypto directly from your device.
Make the donation by following the instructions provided by the charity or the platform. You will need to enter the amount and the address of the charity’s crypto wallet, which is like an account number. You will also need to pay a small fee called gas or network fee, which is used to process your transaction on the blockchain.
Confirm the donation by checking the transaction ID or hash on a blockchain explorer like Etherscan or Blockchain.com.

Donating to charity with crypto is a great way to support worthy causes and help those in need around the world. Crypto can offer many advantages over conventional money, such as lower costs, higher transparency, and greater empowerment. Crypto can also be compatible with Islamic finance, as it avoids interest, intermediaries, and harm. However, you should also be careful of the challenges and risks that crypto may pose, such as volatility, regulation, and security. Therefore, you should do your research and take precautions before making a donation. May Allah reward you for your generosity and kindness. Ameen.

Cryptocurrency Ibadah / Acts of Worship What We Do

Security of Financial Information

As an Islamic charity, we are committed to helping the needy and spreading the message of Islam. We are grateful for your generous donations that enable us to carry out our noble mission. However, we also understand that you may have some concerns about sharing your personal or financial information online. That is why we have created a secure and anonymous way for you to donate to our charity without revealing any sensitive data.

What is the problem with sharing personal or financial information online?

When you make a donation online, you usually have to provide some personal information, such as your name, email address, phone number, and physical address. This information can be used by hackers, scammers, or other malicious actors to steal your identity, spam you with unwanted messages, or harass you in other ways.

Moreover, when you make a donation online, you usually have to provide some financial information, such as your credit card number, bank account number, or PayPal account details. This information can be used by hackers, scammers, or other malicious actors to steal your money, make fraudulent transactions, or compromise your accounts.

How can you donate to our Islamic charity without sharing personal or financial information?
To protect your privacy and security, we have implemented a system that allows you to donate to our Islamic charity using cryptocurrency. Cryptocurrency is a digital form of money that is decentralized, encrypted, and anonymous. You do not need to provide any personal or financial information to use cryptocurrency. All you need is a digital wallet that stores your cryptocurrency and a token address that allows you to send and receive cryptocurrency.

To donate to our Islamic charity using cryptocurrency, you can follow these simple steps:

Specify the type of donation or payment and choose the payment intention.
Choose the amount you want to donate.
You go to the coin transfer section through the secure API (currently from the CoinBase exchange).
Choose a cryptocurrency that you want to use. We accept donations in Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB) and more.
Send your donation to our token address. A token address is a unique string of numbers and letters that identifies where you want to send your cryptocurrency or use QRCode. To send your donation, you need to enter our token address in your digital wallet and specify the amount that you want to donate. Then, you need to confirm the transaction and wait for it to be processed by the network.
Receive a confirmation email from us(between 3 to 5 days). Once we receive your donation, we will send you a confirmation email thanking you for your generosity and informing you about how your donation will be used. You do not need to reply to this email or provide any information to us.

From here, you can see the Islamic obligatory payment or donation intentions.

What are the benefits of donating to our Islamic charity using cryptocurrency?

By donating to our Islamic charity using cryptocurrency, you can enjoy the following benefits:

You can protect your privacy and security by not sharing any personal or financial information with us or anyone else.
You can avoid paying any fees or commissions that are usually charged by intermediaries such as banks, payment processors, or platforms.
You can support the development and adoption of cryptocurrency as a revolutionary technology that empowers people and promotes freedom.
You can fulfill your religious duty of zakat (obligatory charity) or sadaqah (voluntary charity) in a convenient and modern way.

How can you learn more about our Islamic charity and our projects?

If you want to learn more about our Islamic charity and our projects, you can visit our website where you will find:

Our mission statement and vision
Our history and achievements
Our team and partners
Our current and upcoming projects
Our testimonials and feedback
Our contact

We hope that this article has answered your questions about how to donate to our Islamic charity without sharing your personal or financial information. We appreciate your trust and support and we look forward to hearing from you soon. May Allah bless you and reward you for your kindness.

Cryptocurrency Report