#EduSeries (1): NFTs — HALAL OR NOT?
Non-fungible tokens (NFTs) are causing a stir because they provide a variety of financial opportunities. Muslims who would like to profit from this industry could have concerns about how well it adheres to Shariah law. In this article, we go over our thoughts on NFTs and shed light on their compliance with Islamic laws.
WHAT ARE NFTs?
Non-fungible tokens (NFTs) are cryptographic assets based on blockchains that retain unique identifiers and characteristics which distinguish them from one another. Because NFTs are unique tokens that cannot be duplicated or fabricated, they ensure exclusive ownership, which is one of their most remarkable characteristics.
As such, NFTs cannot be traded or exchanged for counterparts, in contrast to other digital assets like cryptocurrencies. However, as an NFTs’ value is mostly decided by the market and demand, they may be bought and sold similarly to other tangible works of art.
The creative sector has been dramatically transformed by NFTs, and they are still creating waves. A ferociously profitable market has been created by the surge in their sales over the past year, and the situation has grown more complicated since NFTs first gained widespread popularity.
WHAT IS THE SIGNIFICANCE OF NFTs
Due to the distinct nature of NFTs, they can be applied in a variety of use cases.
NFTs are an ingenious method of representing real-world concepts digitally. Since NFTs are constructed on blockchains, they may also be used for authentication and authorization, to link creators and consumers directly, and do away with middlemen. NFTs can also be used by enterprises to symbolize possession of services or tangible goods.
NFTs continue to disrupt various industries, ranging from art and music to gaming and real estate, and are a vital component of the metaverse as NFT platforms and play-to-earn games currently rule the evolving metaverse.
NFTs AND ISLAMIC VALUES
NFTs and their role in Islamic financial frameworks are topics that are frequently questioned. Many of these concerns still have no clear resolution, and some Muslims are unable to enunciate whether or not digital assets like cryptocurrencies and NFTs are halal.
Muslim scholars categorically designate some digital assets (fungible or non-fungible) and methods of getting them as haram, whilst others have indicators of halal, and Muslims may use them to pay for products, services, and transfers.
Before we continue, it is necessary to note that Islamic lawmakers and schools of Islamic law have extensively addressed the topic of fungible and non-fungible. In Fiqh, fungibles are referred to as Mithliyyat and non-fungibles as Qimiyyat.
A property or asset that is fungible, or Mithliyyat, has an easily accessible asset that is identical to it or almost so. On the other hand, a Qimiyyat, or non-fungible, item, is a comparable asset in its surah. It is a asset that does not have a standard substitute on the market, and as a result, its pricing significantly differs from other products in the same category.
THE ISLAMIC JURISPRUDENCE ON NFTs
In theory, the composition of an NFT determines whether it is in accordance with Islamic laws or not. The NFT would be regarded as compliant if it adheres to the tenets of Sharia. An NFT may be categorized as non-compliant if it had non-compliant components or if there were extrinsic problems that would result in Shariah non-compliance.
As an illustration, calligraphy, inanimate objects, landscapes, and abstract events are all regarded to be halal. Nevertheless, it is crucial to make clear that scholars and Islamic clerics have differing opinions about what qualifies as animated art. According to some scholars, Taswir should not be violated by animated artwork that depicts every facet of the living world. Some academics disagree, however, and assert that digital animation and art are not covered under Tasweer. They contend that this prohibition applies to statues and 3D animated objects instead.
However, it would be haram to invest in or produce any non-Sharia compatible art. Presented below are the features of such non-fungible artworks:
Anything forbidden by Sharia to view, such as a vice, an illicit drug, or an object; anything sacred by Shariah that is forbidden to depict, such as Allah or the Prophets; mocking or deforming other people’s limbs and private parts; and so on.
Nonetheless, NFT creators may face the danger of breaking Sharia law if they create an NFT using materials that are either not legal or that might have unintended consequences as scholars could categorize it as non-compliant in certain situations. Also, creating NFTs that are not considered useful in the eyes of the Shariah law should be avoided. This is due to the fact that something may be valuable financially, but it may not be useful from a Shariah perspective. Hence, Sharia’s principles of usefulness and perceived worth must be adhered to for anything to avoid violating the ban on wasting money on pointless and insignificant things.
Yet, others have claimed that purchasing an NFT amounts to purchasing something useless just for the purpose of touting it as a rare item. However, as the buyer’s intentions are often kept private, purchasing an NFT with the intention of protecting its value or watching it increase over time is comparable to purchasing a bar of gold as an investment.
FINAL THOUGHTS
To facilitate the advancement and mass adoption of blockchain technology, the halal status of digital assets should be a topic for discussion in the Muslim community. Generally speaking, the halal status of NFTs can only be determined based on their composition and use cases.
As a Muslim, before you deal with any NFTs, it must:
● Represent anything that is both halal and legal
● Not be anything that is pointless or just for fun.
● Possess actual value for the welfare of the world or the soul.
● Not be something that the Sharia would deem to be an extravagant use of resources or waste.
Hence, provided the features of the NFT in question do not express or encourage anything deemed haram by Sharia such porn, illicit substances, or anything that fosters animosity against Islam. Then, Muslims are allowed to deal with such NFTs.
NFTs currently possess a handful of possibilities in the Islamic market. Irrespective of the fact that there are not many Halal NFT marketplaces, Islamic artwork, and NFTs are still being produced by several platforms. These firms ensure that Islamic art and artists have a platform on a worldwide scale.
