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Short and long selling crypto

Fatwaa ID: 1837

Question:
Asallam Alaikum,

My question is in regards to business transaction in cryptocurrency. I want to know if Short / long selling is halal.

The process is as follows when trading these currencies:

  1. You Buy the Cryptocurrency/digital currency at a price point without any loans and without any interest.
  2. When selling low, you buy at a fixed point. When the price is predicted to drop you make money on the difference which it dropped.
  3. When selling high. You buy at a fixed point and sell when it increases and keep the profit.

All money used for exchange is not borrowed and using personal assets.

Thanks

Answer:
In the Name of Allaah, the Most Gracious, the Most Merciful.
As-salaamu ‘alaykum wa-rahmatullaahi wa-barakaatuh.

We take note of the details of your query. The information provided does not exactly reflect the conventional method in the market. Shorting crypto refers to borrowing cryptocurrency and then selling it at the current market price, hoping to repurchase it later at a lower price to return to the lender and keep the difference as profit. Longing crypto is done generally with borrowed crypto as well. The conventional method of shorting or longing crypto is not permissible. Nabi ﷺ prohibited selling something that one does not own. Furthermore, in many cases, a contract is “purchased” instead of borrowing. That too is impermissible. Shari’ah does not recognize such sales as valid.

If your question was about something else, you may revert to us with further details.

And Allaah Ta’aala knows best.
Mufti Muajul I. Chowdhury
Darul Iftaa New York
https://askthemufti.us/

03/29/1445 AH – 10/15/2023 CE | 652

وصل اللهم وسلم وبارك على سيدنا محمد وعلى ءاله وصحبه أجمعين


https://finance.yahoo.com/news/5-best-exchanges-short-crypto-112157131.html

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