How to Calculate and Pay Zakat on your crypto assets and crypto holdings
Yes, many fiqh-based arguments support that cryptocurrency is an object of zakat. Zakat should be paid on cryptocurrency holdings. This is due to cryptocurrency position as an asset (maal), which is analogue with gold and cash in hand.
According to the fiqh issued by Darul Fiqh UK. Bitcoins are Zakatable as they are Māl (entity), have Taqawwum (Islamic legal value) and are in the ruling of a currency (Thamaniyyah).
Therefore, the method of zakat calculation for cryptocurrency is similar to the standard of zakat on gold and on cash in hand.
It is also to be noted that Zakat needs to be paid on the current market value of the tokens on zakat anniversary day. This is because any crypto-assets bought for capital gain will be zakatable at 100% its market value.
How to calculate Zakat on cryptocurrency?
You can calculate Zakat on your cryptocurrency holdings in the same way as Zakat payment is calculated on money. The Prophet, on him be peace, who set the Zakat rates on all five types of Zakatable wealth, specified the Zakat rate for currency at 2.5%. Following easy steps will help you calculate your zakat on your crypto holdings.
To convert your personal or business wealth, including crypto holdings, into money for Zakat payment, you must first assess what the current niṣâb for currency is on the day your Zakat is due. If your crypto holdings for the Islamic (Hijrî) year equal or exceed the niṣâb threshold, multiply its total dollar (or Sterling Pound (£), Euro (€), United States Dollar (USD $)or whatever denomination amount) by 2.5% or (0.025). The product amount is your Zakat payment on that crypto denomination.
If you own, say, one Bitcoin and your Zakat Due Date were today, your Zakat payment calculation on it would be this:
Current Value to your crypto Holdings x 0.025 = Zakat Payment
eg at time of writing 1 Bitcoin was valued as 38,560.60 and If you had 1 BTC in your crypto assets then your zakat can be calculated as follow
$38,560.60 (Bitcoin value per 1) x 0.025 = $964.02 (Zakat Payment)
Note that all forms of currency have Zakat due on them. Once one accumulates currency or money in any form at the level of its niṣâb, that begins one’s ḥawl, or Zakat year, on that wealth type. Also, if you have an established Zakat Due Date, then typically your Zakat assessment on monies will be ongoing throughout that period.
How to Pay your cryptocurrency zakat ?
According to Islamic scholars,cryptocurrency and all other associated tokens are Zakatable. One may pay 2.5% of their cryptocurrency holdings as Zakat or alternatively pay Zakat in one’s domestic currency equivalent to the value of 2.5% of one’s crypto assets.
You can pay zakat on your crypto currency holdings online using cryptocurrency by purchasing Digital Quran NFTs, a project by to preserve the Quran Verses and their SHA256 value on the blockchain one verse at a time. These 1 of 1 NFTs are created by using the ANSI text of ayat from the Holy Quran. The ayat and its hash value are used to create an image(jpg).
Thanks to the immutable nature of blockchain, we have an opportunity to preserve the Quran. Together, we can add one verse at a time to the blockchain so it may be retrieved in a distributed way. We can work together in spreading and serving the Noble Book of God — free from the tampering of those who would seek its diminishment through adulteration.
ANSI text of the Qur’an Size :700k v. 2, 2009 — Tanzil
Total No Of Verses : 6236 (excl Bismillah) — Largest verse: 2167 bytes (record# 289) — Smallest verse: 7 bytes (record# 4274) — Number of verses smaller than 678 bytes: 6134 records — Number of verses smaller than 218 bytes: 3909 records — Average size of 6236 verses: 208.55 bytes
The Digital Quran NFT project is based on the research by King Saud University which involves Integrity verification for digital Holy Quran verses using cryptographic hash function and compression. This gives an opportunity to pay your zakat and also hold a unique Token and a verse in your crypto wallet (for Barakat) which will be part of The noble Quran as it is written on the Block chain.
