Zakat on Digital Assets

July 14, 2025
Ariful Islam

Zakat on Digital Assets

Zakat on Digital Assets: Shariah Perspectives for Islamic Finance

Introduction

The rapid advent of blockchain-based instruments – notably cryptocurrencies, tokenized assets, and non-fungible tokens (NFTs) – has transformed modern finance and captured widespread interest among Muslims. As Shomad & Ghani (2024) observe, “the rapid emergence of digital assets, specifically cryptocurrency, has transformed modern finance, introducing significant challenges and opportunities within the framework of Islamic finance”. With millions of Muslims now holding or trading such assets, Islamic scholars and regulators are urgently examining how classic Shariah rules apply. New digital tokens raise deep questions about mal (wealth) and its zakatable status, so authoritative guidance is needed. This article surveys definitions of digital assets, classical zakat principles (nisāb, ḥawl, al-namā’ etc.), and current scholarly models for imposing zakat on digital currencies and tokens. This article draws on recent research and fatwas to critically assess whether and how digital assets meet zakat conditions, and outline a Shariah-based model for calculating and collecting zakat on them. The goal is to inform students, professionals, and zakat institutions overall all muslims about evolving rulings and best practices in this novel area.

Digital Assets: Definitions and Classification

“Digital asset” is a broad term. At a basic level it means any valuable thing stored in digital form and it has value as (Rosele et al, 2025). PwC (n.d) categorizes digital assets into five main classes: crypto assets (decentralized digital currencies like Bitcoin, Ethereum, used as store-of-value or medium-of-exchange); stablecoins (tokens pegged to fiat or commodities for price stability); NFTs (unique tokens representing ownership of digital items); CBDCs (state-issued digital currencies backed by central banks); and security tokens (digital tokens representing equity, bonds or real-world assets). Alternatively, digital assets can be grouped by whether they are backed by physical assets: for example, asset-backed tokens (e.g. tokenized gold or real estate) versus purely unbacked tokens (cryptocurrencies, NFTs, social media “coins,” etc.). It also can be categorized whether they are currency or token. As TheSecurities Commission of Malaysia (SCM) (2020) defines DA as: “digital assets means digital currency or digital tokens”

Cryptocurrencies are perhaps the best-known digital assets. They are digital currencies created via blockchain protocols and cryptography, with no central issuer. By definition they are fungible (one Bitcoin equals another) and tradable on exchanges. Tokenized assets span a wide range: any token representing a share in a real-world asset (such as tokenized stocks, bonds, precious metals, or other commodities). For example, a gold-backed token is a stablecoin whose value is tied to physical gold. Non-fungible tokens (NFTs) are indivisible tokens each with unique metadata, used to represent ownership of a specific digital item (art, a music file, or a virtual collectible). Unlike cryptocurrencies, NFTs are not interchangeable with one another – each embodies a distinct digital artwork or asset. In short, digital assets include anything “minted and exchanged on a blockchain”: from purely virtual currency to tokens redeemable for real-world goods, or unique digital artworks.

Concept of Zakat in Islamic Law

Zakat is one of Islam’s Five Pillars, as beloved prophet and the Messenger of Allah Muhammad ﷺ said: “Islam has been built on five pillars: testifying that there is no god but Allah and that Muhammad is the Messenger of Allah, establishing the prayer, paying the zakat, making the pilgrimage to the House, and fasting in Ramadan.” ( Bukhari. Hadith: 8 and Muslim. Hadith: 114). It is a compulsory charity meant to purify wealth and redistribute it among the needy. Allah SWT said: “Take Sadaqah (alms) from their wealth in order to purify them and sanctify them with it” (surah Tawba: 103). Classical Islamic law defines specific categories of wealth that are zakatable, as well as conditions on the payer. Traditional categories include gold and silver (in any form), cash, trade goods/merchandise, livestock, agricultural products and dividends from rentals/businesses. Jurists also include Receivables, salaries saved, and shares/investments among zakatable assets. A unifying trait of all zakatable wealth is al-namā’ (productive growth). (Rosele, et al.2025)

That is, the asset must generate benefit or profit either naturally (such as gold, silver, cash) or through businesses and trade ( such as tradable goods or tradable anything). Wealth that produces nothing – or is used solely for personal consumption – is generally exempt. For example, an idle car or house (not held for trade) is not subject to zakat (Al-Mawsūʿah al-Fiqhiyyah al-Kuwaytiyyah, 1983 – 2006).

The conditions for zakat are well-established: the payer must be a sane, adult Muslim who owns the property freely and in excess of basic personal needs. The wealth must exceed the nisab (the minimum threshold, traditionally the value of ~85g of gold or 595g of silver). Finally, the wealth must remain above nisab for one hawl (one lunar year). After one year of possession, zakat is due at 2.5% of the zakatable amount. (The classic hadith “every owner of gold/silver should pay one-fortieth as zakaat” is generally interpreted as 2.5% once nisab and hawl are satisfied). In short, zakatable wealth must be owned outright, productive, above nisab, and held for a lunar year. (Al-Mawsūʿah al-Fiqhiyyah al-Kuwaytiyyah, 1983 – 2006)

Zakatability of Digital Assets: Ownership, Nisab and Nama’

Applying these rules to digital assets raises immediate questions. Are cryptocurrencies or tokens zakatable? Are they treated like naqḍ (currency/money), or like merchandise inventory, or something else? In either case, if their value exceeds nisab and is held for a year, zakat must in principle be paid. Most contemporary jurists agree that digital currencies and tokens can be part of one’s zakatable wealth if they meet Shariah criteria. Rosele et al. (2022) conclude that “Bitcoin is among the zakatable assets since it meets the conditions of zakat on assets”. Likewise, Muneeza et al. (2022) find “divergent views among contemporary Shariah scholars on the permissibility of cryptocurrency,” but note that once a token is deemed mal under Shariah, “it can be qualified to be part of one’s wealth from which zakat shall be paid”. For instance, the Shariah Advisory Council of Bank Negara Malaysia has taken the view that cryptocurrencies are permissible unless legally banned, and that their volatility alone does not preclude zakatability (noting that even fiat currencies fluctuate). Similarly, Darul Uloom Zakariyya (South Africa) ruled that cryptocurrencies qualify as maal (wealth) subject to zakat, even if they do not meet classical criteria for state currency. (Muneeza et al. 2022))

Darul Ifta Egypt, Sheikh Ali Qaradaghi, and Darul Iftaa Misriyyah – deem crypto impermissible or too unstable. Interestingly, they view crypto as haram still stress zakat must be paid on existing holdings (redistributing “concentrated wealth” among Muslims). Diallo’s analysis of seven major fatwas finds that despite permissibility differences, every major fatwa genre argued that zakat applies to cryptocurrencies, with thamaniyya as the common underpinning. This shows broad consensus: digital tokens are not exempt from zakat just because they are new; rather, scholars leverage classical principles (value, ownership, social benefit) to include them (Diallo, A., & Aziz, A. B. H. A. 2025).

This article argues that most modern cryptocurrencies have yet to fully meet the necessary Shariah conditions to be considered Shariah-compliant. This is primarily due to their lack of intrinsic value, absence of a stable standard of measurement, and extreme price volatility. However, despite these shortcomings, the author holds that cryptocurrencies are zakatable, even if they are not yet fully Shariah-compliant.

This position is grounded in two key considerations:

Protection of the rights of the poor (ḥimāyah li-ḥaqq al-faqīr): According to the schools of Imams Mālik, al-Shāfiʿī, and Aḥmad—as mentioned in Bidāyat al-Mujtahid (v. 2, p. 5)—the objective of zakat is to safeguard the rights of the needy. Digital assets today hold substantial monetary value, and excluding them from zakat calculations would unjustly deprive the poor of their rightful share.
Recognition of value (māl) in society: Even if an asset does not fully meet Shariah compliance standards, it may still be considered māl—something that holds recognized value. While classical jurists exempted certain impermissible wealth from zakat, they also made exceptions. For instance, although using gold and silver utensils is prohibited in fiqh, scholars such as Ibn Qudāmah states–as mentioned in Al Mughni (v. 4, p. 228)-, “there is a consensus amongst scholars that zakat is applicable to golden and silver utensils”. This example demonstrates that zakat may still apply to non-compliant assets due to their economic significance.

In conclusion, while this article does not categorically declare cryptocurrencies as ḥarām, it is also premature to affirm them as fully permissible. Due to the absence of explicit divine texts declaring them unlawful, and given their social and economic utility, they occupy a grey area. Thus, despite their Shariah shortcomings, cryptocurrencies remain subject to zakat because they are valuable, productive, owned assets with societal impact.

A key issue is al-namā’: do digital assets inherently grow or produce profit? Classical fiqh holds that only productive assets incur zakat. Fuqahas (traditional Jurists) explain that “wealth that does not produce anything is therefore not considered for zakat”. Rosele et al. (2022) argues cryptocurrencies pay no rent or fixed profit, so holding idle crypto might seem unproductive. On the other hand, tokens are often held as investments precisely for capital appreciation, and they can be actively traded in business. If viewed as business merchandise, any appreciation can be seen as akin to namā’. Diallo & Abdul Aziz (2025) analyze fatwas on cryptocurrency and note a unifying theme: the juristic concept of thamaniyya (value-retaining quality of money) links cryptos to zakat applicability. In essence, many scholars treat the rising market value itself as the ‘growth (nama)’ that must be zakated once it pushes one’s wealth over nisab. Thus even purely digital coins, like an asset that can be traded, are often treated like other wealth: above nisab, 2.5% is due. Rosele et al. point out that if a country recognizes Bitcoin as currency, it becomes zakatable like any regulated money.

This article argues that cryptocurrency qualifies as a productive (nāmi) asset. Therefore, it is subject to zakat, regardless of whether it is held for trading or personal use. In terms of zakat rulings, it is treated similarly to fiat currency. As for digital tokens, those held for trading purposes are considered zakatable assets. However, tokens acquired solely for personal use—such as access rights or membership benefits—are exempt from zakat, as they do not fulfill the conditions of productive wealth.

Figure: 1. Short table for digital zakatable assets

Digital Assets	Classification	Zakat Ruling
	Assets(Tokens)	✅ Zakatable if the intention is to resell it
		❌ Not zakatable if the intention is to hold it
	Currency	✅ Zakatable as naqd (gold and silver)

Whether viewed as currency or commodity, the form of calculation is generally 2.5% of the asset’s market value (in terms of a stable currency or gold) once nisab and hawl are met. For example, the findings of Rosele et al. confirm the classical rate (one-fortieth) applies to digital holdings. The Shari’ah Review Bureau (Jakarta) similarly advises that zakat on crypto equals 2.5% of its current market price once conditions are met. In summary, most contemporary models simply extend traditional zakat formulas to digital assets: a Muslim holding cryptocurrencies beyond nisab for a year should pay zakat on 2.5% of their value, whether that means converting 2.5% of the coins into fiat to give, or otherwise paying the equivalent. (Rosele et al. 2023)

Regarding valuation, this article prefers the current market value of a cryptocurrency to be used for zakat calculation, particularly when the asset is not backed by a physical commodity. Cryptocurrencies are actively traded, and their real-time market prices are easily accessible, making the calculation straightforward. In the case of crypto-assets backed by physical assets (such as gold-backed tokens), the current market value of the underlying asset should be used as the zakat valuation basis.

For digital tokens, the zakat calculation depends on their nature:

If the token is backed by a tangible asset, then zakat should be based on the current value of that underlying asset.
If the token is not backed by any physical asset, two scenarios arise:
- If the digital token is widely accepted and its market value is stable and clearly established, then the current market value should be used to calculate zakat.
- If the token lacks widespread acceptance and its value is uncertain or highly volatile, then it is more appropriate to calculate zakat based on the original purchase price paid by the zakat payer.

This approach ensures a fair and practical assessment of zakatable wealth, taking into account the asset’s underlying value, market recognition, and price stability.

Figure: 2.Structured Zakat Model for Digital Assets

Digital Assets	Type/Sub-Type	Usage	Zakat Status
→ Other Digital Assets	Traded	—	✅ Zakatable
	Non-Merchandise but sold for profit	—	✅ Zakatable
	Assets to generate profit	—	✅ Zakatable
	Assets for necessary use	—	❌ Non-Zakatable
→ Digital Tokens	Token as Money	—	✅ Zakatable
	Security	Resell	✅ Zakatable
	Security	Dividend	✅ Zakatable
	Utility	Resell	✅ Zakatable
	Utility	Use	❌ Non-Zakatable
	Asset	Resell	✅ Zakatable
	Asset	Investment	✅ Zakatable
	Governance	Resell	✅ Zakatable
		Use	❌ Non-Zakatable
→ Cryptocurrency	Not backed by:
	→ Currency	Resell	✅ Zakatable
	→ Currency	Use	✅ Zakatable
	→ Commodity	Resell	✅ Zakatable
	→ Commodity	Use	❌ Non-Zakatable
	Backed by:
	→ Ribawi Items	Resell	✅ Zakatable
	→ Ribawi Items	Use	❌ Non-Zakatable
	→ Non-Ribawi Items	Resell	✅ Zakatable
	→ Non-Ribawi Items	Use	❌ Non-Zakatable
	→ Gold/Silver	—	✅ Zakatable
	→ Other Ribawi Items	Not merchandise but sold for profit	✅ Zakatable

Note: ✅ = Zakatable ❌ = Non-Zakatable

Paying Zakat by Cryptocurrency or Digital Assets

In recent years, some zakat authorities—such as those in Malaysia—have begun accepting zakat payments in cryptocurrency, treating such assets as wealth. Provided that the holdings are fully owned, exceed the nisab, and have been retained for one lunar year, zakat is considered due on their full value.

This article supports the view that, as a general principle, zakat should be paid using a medium that is widely accepted and usable by recipients. This is based on the statement of the renowned Hanafi jurist, Imam al-Kāsānī (d. 587 AH), who explained that the asset used for zakat payment must be one of “commonly accepted worth” (qīmah maqbūlah ʿāmmatan), ensuring it serves the purpose of meeting the beneficiaries’ needs.

Similarly, the AAOIFI Shariah Standard No. 35, clause 5/2/4, states: “In principle, zakah on articles of trade is to be paid in cash. However, in case of trade recession, it can be paid in kind (from the same articles of trade), provided that the interest of zakah recipients could, thus, be achieved.”

Based on these principles, paying zakat directly in cryptocurrency is not preferable—particularly because most zakat recipients are unable to use or convert digital assets to fulfill their essential needs. Cash or fiat currency remains the most suitable and beneficial form of payment in most cases.

However, if a government body or a reliable zakat institution accepts cryptocurrency and transparently converts it into fiat currency before distributing it to eligible recipients (maṣārīf al-zakāh), then paying zakat through such channels may be acceptable. Even so, this practice raises practical challenges, particularly concerning the assurance of transparency, proper conversion, and Shariah compliance throughout the process.

In conclusion, while zakat in cryptocurrency may be theoretically permissible, the priority should be to ensure that the payment method genuinely serves the welfare of the poor and fulfills the objectives of zakat. Therefore, cash remains the preferable medium unless a clear and trustworthy mechanism for crypto-based zakat is established.

Conclusions

Zakat on digital assets is an emerging yet critical area in Islamic finance. Despite some debate over permissibility, most scholars agree that cryptocurrencies meeting nisab should be subject to 2.5% zakat. The key differences lie in classifying digital assets (as money or trade goods) and determining which are Shariah-compliant. Scholars emphasize that large crypto holdings should not remain zakat-free. To address this, formal fatwas, regulatory guidelines, and digital zakat platforms are needed to ensure proper collection and distribution. Ultimately, classical zakat principles like ownership, growth, and social welfare remain applicable to digital assets, aligning modern finance with Islamic ethical values.

References

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Author’s Note:

All views, analyses, and conclusions presented in this article represent the personal opinions of the author. References to “the article” throughout the text should be interpreted accordingly.