Interest is Haram, so… Buy Bitcoin?

Muslims are a relatively underserved demographic in finance. That's also true on social media - financial content creators rarely directly address the Muslims in the room. 

So when it happens, it piques my interest. 

A couple of weeks ago, I stumbled on this tweet from Rajat Soni, a financial content creator with a large following on Twitter (or “X” or whatever it's called now). While I found the engagement with the Muslim community refreshing, the content of the tweet concerned me:

Rajat Soni is a Certified Financial Advisor. A CFA is to finance what a surgeon is to medicine: earning the designation requires extensive study, passing rigorous examinations, and results in a high degree of specialization.

As a CFA, Rajat is unique in his general promotion of Bitcoin. Because cryptocurrencies are a new asset class, certified financial professionals and advisors have mostly been reluctant to recommend them broadly. Nevertheless, Rajat's reading of monetary economics makes him bullish on Bitcoin for the long term.

I’ll save my comments on Bitcoin and cryptocurrency for a later post, but I should mention at the outset that I’m convinced by Mufti Faraz Adam’s position that buying Bitcoin is halal. Ibrahim Khan at IslamicFinanceGuru summarizes Mufti Adam's position here.

But determining if a financial transaction (like buying Bitcoin) is permissible is one thing.

Determining if it’s wise is something else.

A Concerning Tweet: Investing, Interest, and Bitcoin

I found Rajat’s tweet concerning because, while I think it was a well-intentioned message to help Muslims in his audience (Rajat isn’t Muslim himself), it misses the mark.

Here is how I read his tweet:

• Problem:
• Muslims avoid interest ✅
• Therefore, Muslims don't/can't invest ❓
• Solution:
• Bitcoin isn't interest ✅
• So, Buy Bitcoin ❓

Beyond getting the interest part right, Rajat’s tweet misconstrues both the problem and the solution for Muslims who are underinvested in assets:

Understanding the Barriers and Solutions to Halal Investing for Muslims

In my experience, there are two primary reasons Muslims are not investing -

1. They’re not saving money after expenses (i.e., there’s no money to invest).
2. They don’t know how halal investing works, where to start, or whom to trust.

In other words, Muslims are not investing because of behavioral and educational barriers - not because they are excluded from investing due to the prohibition of riba. 

That’s a worldwide phenomenon - low financial literacy is the rule, not the exception, and Muslims are in that mix. 

Buying Bitcoin doesn’t work as a comprehensive solution to these challenges, obviously. So with that in mind, here’s the problem-solution reconceptualized:

• Problem:
• Muslims avoid loan-based interest (riba) ✅
• Therefore, Muslims should learn about halal investing. ✅
• Solution:
• There are several non-riba-based investing options ✅
• So, build a passive, low-fee, diversified halal investment portfolio. ✅

And here’s how we might rewrite Rajat’s tweet:

So...Invest in Bitcoin?

Investing, at its core, is just saving for the long term. It's about buying assets and holding them for 5 or more years, hoping their value grows.  

But what does this mean for Muslims thinking about saving (i.e., investing) in Bitcoin?

Cryptocurrencies like Bitcoin are relatively new assets, different from traditional investments like stocks, real estate, or bonds. With Bitcoin's brief history, we lack the historical data to make sound evidence-based predictions of how it fits into investment portfolios meant to last decades.

If you choose to use your savings to buy Bitcoin for the long term anyway, doing so would be highly speculative. That doesn't mean that it won’t go up in value. Like any investment, its value could rise or fall, but its novelty adds an extra layer of uncertainty and risk. 

So, turning a large percentage of your savings into a highly speculative asset like Bitcoin might be unwise. If you feel compelled to use some of your savings to buy Bitcoin, it’d be wise to limit it to a small segment of your portfolio (say 5% - 10%) that can withstand extreme volatility.

Conclusion

Putting Bitcoin aside for a moment, the fundamental issues are that many Muslims simply aren't saving, and there's a widespread lack of education about how to invest, halal or otherwise. 

If Muslims are not actively saving, they won't have wealth available to invest; and without an understanding of how to invest halal, they'll be unable to preserve and grow that wealth effectively.

 What is the best way to start? Automate your long-term savings on a platform like Wealthsimple (Canada), Manzil (Canada), or Wahed (US, UK, etc) that offers diversified, halal investment options. 

For some, speculative assets like Bitcoin might be a small part of their savings strategy, but it’s certainly not where you’d begin.