Investment

How to invest in crypto the Islamic way

So you’ve decided to take the plunge and actually start investing in crypto. Now you’re delving into actually buying it and you’re not sure where to start.

Fear not: we’ve been exactly in this position recently so we’ve collated our knowledge here to make sure that Muslims know exactly how to invest in crypto safely and in a halal way.

We think the best place overall to buy crypto is Binance. Honourable mentions go to Coinbase Pro and Swissborg as well.

We’ve based that view on 3 key metrics:

  1. Fees
  2. Choice
  3. Ease of use

This article is part of our crypto series.

Methodology

First it was a question of narrowing down the search to a few brokers. Our view is that for this narrowing down exercise, you have to look at the 3 things above in roughly equal measure. Swissborg, for example, has a really good user experience and got rave reviews in our IFG Crypto Telegram chat for exactly that reason. Binance is great on the fees side but perhaps not as amazing on the design side. Coinbase Pro is a bit of a hybrid. 

After this initial filtering, we’ve given our highest weighting to fees. That’s because our mission at IFG is to make Muslims wealthier. When it comes to investing, fees are something you should look at very closely.

Fees

Let’s compare the same trade for all 3 brokers. Let’s suppose we are buying £100 of Ethereum.

The costs would be as follows:

Binance:  £0.10

Coinbase Pro: £0.50

Swissborg: £0.99

Binance is the clear winner when it comes to fees. We think that’s the most important thing here. 

Choice

Broadly speaking most major crypto exchanges will feature all the major coins. We did not see any major gaps in any of the exchanges in discussion.

However, we’re going to give Binance the number 1 spot for choice simply because it was the only place we could buy the HBAR token.

Ease of use

This is where Binance is light years behind Swissborg and Coinbase Pro. Binance’s interface is clunky and complicated. Their mobile app seems to acknowledge this as they have a “lite” mode which simplifies the interface. But it still feels a bit clunky and the whole things needs an overhaul in our view.

Coinbase Pro and Swissborg, on the other hand, are a delight to use.

In terms of the sign-up process, we had no problems with any of them. Everything was relatively swift and the deposit mechanism works well.

We did run in to a couple of hitches personally though which are worth flagging:

  1. Ibrahim took a while to get verified on Binance. Mohsin was pretty much instant though. We don’t think this is a slight on Binance though, perhaps Ibrahim just needed to get manually pushed through or something.
  2. We know from our Telegram group that lots of people struggle to deposit to crypto exchanges from their banks. For instance, we were unable to send money to Binance from a Starling account, but Lloyds and HSBC worked fine. Again, there is no slight on any of the exchanges here, just that some banks are taking a blanket policy of not letting their customers deposit into crypto exchanges.

On this front, Swissborg edges the number 1 spot but Coinbase Pro is a close second. Binance is a very distant third.

Coinbase v Coinbase Pro

Just a quick note on the difference between Coinbase and Coinbase Pro.

Coinbase and Coinbase Pro have no difference between them, except Coinbase Pro is cheaper than Coinbase. I have no idea why they do it this way! But it obviously makes Coinbase Pro a no-brainer over Coinbase.

Both have different apps and are accessed via different domains. It should be obvious which one you are using.

Depositing fiat

You may be used to buying shares with a broker. Crypto is not the same because you are dealing with two different worlds in one place – fiat and crypto.

With some tokens it will genuinely be as straightforward as depositing your currency (e.g. USD, GBP) and buying the token with that. 

However, sometimes it can get a little more complex. To give you an example, we wanted to buy a token called HBAR (worth checking out by the way). To do that on Binance, you can’t just deposit GBP and buy HBAR. Instead, you have to deposit GBP, convert that to Binance’s own local token called BNB.

BNB acts as a kind of halfway house between crypto and fiat. Binance created it to be a common medium on their platform. So to buy HBAR this is the flow:

Send GBP from my bank account to my Binance account > convert GBP to BNB > buy the HBAR/BNB pair on Binance.

Sharia compliance

Check out our crypto page for our breakdown of which tokens are halal or haram.

Once you’ve established that the token you want to buy is halal, you just need to make sure you’re buying the actual token on your broker of choice and not a derivative.

A good way to test this is to see once you have bought it, can you withdraw your tokens on to your own private wallet? If you cannot, chances are you don’t actually own any tokens and instead you just own a derivative. 

This is an area where I initially had some concerns on Binance. The way they display some of their tokens is as a “pair”. E.g. BTC/USD. Those familiar with forex will know that you buy pairs in forex too which got me wondering if I was actually buying the token or if I was just buying a derivative.

Pleasingly though, I checked and since you are able to withdraw the tokens to your offline wallet, it is clear that you are actually buying the tokens. The reason Binance label it as a pair is because with crypto more than anything, people are buying using potentially different currencies – e.g. GBP, USD or even other types of crypto like BTC or ETH. So it helps to have a market for each particular pair.

Conclusion

Getting started with investing in crypto isn’t that complicated once you get past the initial fear. We think that the most important metric is fees – that’s why we think Binance is number 1.

If you want the best hybrid of fees and ease of use, then Coinbase Pro is good.

And if you just want a super-slick experience and you’re willing to pay more on fees, then Swissborg is the one for you!

5 Comments

Keep Reading

5 Comments. Leave new

  • Mehmet Sadık PEKTAŞ
    January 30, 2021 9:57 am

    How can a speculative system be Halal? Both Stock Exchange, Crypto Exchange, Forex etc.

    Reply
  • Brothers I love the content you produce and I am an avid subscriber. I have a lot of debates regarding cryptocurrency and its use case for integrating and advancing on today’s modern financial system. The general consensus is that it is gearing towards mass adoption and using the underlying blockchain technology to make our financial system better. On the other hand, its classed as a disruptive technology where two people transact without a third-party intermediary knowing (i.e. a bank/financial institution), which in its core is a liberating concept especially for those who are living in countries where the masses are underbanked.
    I have done my extended research into cryptocurrency. I would like to ask two questions on the ‘Ethereum’ cryptocurrency.

    I would be grateful if you could answer and give your expert verdict on the ‘Halal’ nature if this token or cryptocurrency. As you may know the cryptocurrency industry is evolving and this new wave of DEFI or decentralised finance is creating a buzz. I am little confused with the concept of Staking which in the crypto industry/space refers to as ‘rewards’ given for locking up the no. of tokens one possess into the network. My understanding one is gaining tokens (i.e. capital) on top of their initial capital but its terms as ‘reward’. This to me is similar to having your pounds and dollar in a traditional bank in which in turn earns you interest. We all know that banks use your deposits and use excessive leverage to loan this out using the ‘deposit multiplier concept’. My confusion is we shouldn’t invest shares in Lloyds banking group or Barclays group but can in Ethereum??

    1) What is staking? Is it halal? Is it in the same class as interest?
    2) The Ethereum network is upgrading to 2.0 and gives staking rewards to its investors? Could we as Muslim invest into a company that deals with staking?
    https://www.theblockcrypto.com/linked/95040/coinbase-eth2-staking-waitlist

    I would be grateful if clarify these concepts as it leaves me scratching me head. Thanks.

    Reply
  • This is so helpful, thank you so much for taking the time to explain this crypto/ bitcoin phenomena in Islamic perspective.

    Reply
  • Is the short-term crypto trading halal? Like for 1 minute, 1 day, or week? Any resource on your website to address it?

    Reply
  • Ahmad Faris bin Najamuddin
    May 7, 2021 5:53 am

    Assalamualaikum. We need to know if BTT is halal or not? I see the white paper for BTT is under project TRX. TRX as u listed is halal. Please review BTT.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Fill out this field
Fill out this field
Please enter a valid email address.
You need to agree with the terms to proceed

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.

$GME – how Muslims should act
What is Gharar? | Islamic Finance Definitions Series
Access the Top Haram Stock Funds – The Halal Way. See the IFG Fund Replicator.
Free (very detailed) Halal Investing 101 Guides
Every British Muslim needs a will. IFG Wills is an affordable quality option entirely online.
Get exclusive tips, resources and courses delivered straight to your inbox from IFG.
  • This field is for validation purposes and should be left unchanged.
Menu