Global عربي
KSA عربي
Global عربي
Crypto Currencies are at the forefront of modern fintech today. Many countries have even started implementing the technology for everyday use.
Unfortunately, due to the rapid changes in the industry and lack of financial and technological know-how, most people find it confusing to differentiate between the various coins on the market, one of which is Binance.
Binance Coin (BNB) was created by Binance in 2017. Binance is considered to be the largest cryptocurrency exchange by trading volume.
Initially the Binance blockchain was created using Ethereum blockchain (Binance Exchange Whitepaper, Pg7), it used a token called ERC-20, later it was moved to its own blockchain BNB Chain (Mallick, S.K, 2020).
Binance has a maximum capacity of 200 million BNB tokens. One of the key advantages of BNB was its discounted trading fees, where users could get up to 25% fee reduction.
However, its uses have expanded exponentially, from providing a crypto debit card that allows for real world transactions, to being a currency on the Binance blockchain. In short , it serves as a utility coin for the Binance ecosystem and can be traded on the market independently
BNB mainly operates on the BNB chain, which uses a Proof-of-Stacked-Authority mechanism runned by users known as validators. Validators are users who stake at least 10,000 BNB to help secure the network and transactions.
As a reward, validators receive a share of the transaction fee, which means that BNB is not mined since all coins were created at launch.
Consequently, Binance manages its supply by burning coins rather than minting new ones. Each quarter, Binance burns its coins by using 20 percent of its profit to buy back the coins. Since early 2024, it has burned tens of millions of BNB from circulation. The goal is to reduce the supply from 200 million to 100 million.
One of the unique features of Binance is that it operates and runs on a dual chain architecture, consisting of two blockchains with different purposes.
The first one is Binance Chain aka BNB Beacon Chain; started in 2019 , it was originally designed to support fast trading and exchanging assets quickly.
Unfortunately, despite having been optimized for speed it lacked sufficient programmability, i.e. it did not support complex smart contracts
The second chain, which was introduced in 2020, is the Binance Smart Chain (BSC, now BNB smart chain). BSC was created specifically to solve the issue of smart contract functionality.
Unlike the previous chain, which only allows a small validator set, this chain uses a Proof of Stake Authority consensus with 21 validators, and also has lower fees than Ethereum’s mainnet
Due to the fact that BSC operates simultaneously with Binance coin, users benefit from both the chains, which combine the high performance of Binance Chain and the smart contracts capabilities of BSC.
In early 2022, Binance merged and rebranded both the chains under one name, “ BNB chain.”
Binance Chain was renamed BNB Beacon Beacon Chain which handled governance and staking, and Binance smart change became BNB Smart Chain (BSC).
Under this rebranding, the Beacon chain was responsible for BNB’s governance features like , staking and voting, which is related to electing validators,while the Smart Chain continued to execute smart contracts and handle decentralized apps.
There are fundamental differences between in several of the cryptocurrencies on the market, in terms of design and purpose:
1- Bitcoin: Bitcoin is a decentralized digital currency that uses blockchain technology to enable peer to peer transactions without the need for a central authority (Investopedia).
It is aimed to be an alternative to fiat money, providing a fully decentralized network of miners securing it via Proof of Work.
Bitcoins supply is capped at 21 million, and the BTC are minted through mining, although it can only process about 7 transactions per second on-chain, which leads to scalability issues.
Read more about: Is Bitcoin Halal? Islamic view of bitcoin ownership as a digital asset
2- Binance Coin (BNB): BNB was launched in 2017 by the Binance exchange and initially served to facilitate discounted trading on the Binance network.
BNB serves multiple features on the Binance network, such as powering the binance chain and being used for various Binance services. Unlike Bitcoin and Ethereum, BNB is not totally decentralized, as it operates under the entity of the Binance platform, although the company claims that it does not directly control the BNB chain.
As mentioned before, BNB regulates its supply through burning of its coins rather than proof of work protocol. Another major risk is that due to Binance being an exchange business, it is more sensitive to regulatory crackdown which can affect BNB’s value and performance.
3- Ethereum (ETH): Ethereum launched in 2015, as a decentralized platform for facilitating smart contracts as well as decentralized apps or “Dapps”.
The smart contracts are just like real contracts, the difference being that they are written in code which a computer executes. Like Bitcoin, Ethereum has its own coin called Ether (ETC), which is decentralized, which comes into existence through the process of mining.
In the beginning, the process of Proof of Work was used for Ethereum, but since 2022, they have transitioned to a Proof of Stake protocol, where anyone who stakes 32 ETH can become a validator.
This flexibility has ad benefits, but the trade off has been that it has faced high fee issues along with scalability issues.
Theoretically the supply of Ethereum is infinite, and existing ETH in circulation is burned with each transaction.
This causes the supply of ether to fluctuate at times. In short, Ethereum represents more than just a digital currency, it performs as a platform for developers to create Dapp on a decentralized server.
From a Shariah Compliance perspective, Scholars have argued for and against the permissibility of BNB and other cryptos like it.
There is no clear cut ruling on this and both sides have valid arguments. The main issue comes down to whether BNB (or any crypto for that matter) is considered a halal asset and currency under the Shariah.
The scholars that allow its use, state that it qualifies as “mal” due to its adoption and uses, so it clearly holds value that people consider to be tradable and just because it doesn't have intrinsic value, isn't enough to constitute it as Haram, because if that is the case then fiat money also falls into that category.
However, scholars who deem it to be haram, have raised issues that these coins don't have any intrinsic value and have excessive speculation.
They claim that cryptocurrencies are just digital entries and are not backed by any central government. Also, its highly speculative nature causes them to foster a gambling environment, which is harmful for society.
Scholarly Opinions & Fatwas : Although there is no specific fatwa relating to BNB, Fatwas on cryptocurrencies vary. The Shariah Advisory Committee of the Securities Commission of Malaysia in 2021, came out with a resolution regarding digital assets and its compliance under the Shariah. They categorized crypto as assets (mal) from a Shariah perspective.
But they extended conditions on otis uses: The platforms must be licensed under SC and the assets should not be backed by rabawi items like gold and silver (In which case, they will follow currency exchange rules (Securities Commission Malaysia (2023).
Alternatively, The Grand Mufti of Egypt, Shaikh Shawki Allam in 2018, issued a fatwa in Arabic claiming that cryptocurrencies are haram. He pointed out the lack of government oversight and linked it to money laundering aspects (Dar al-Ifta’ al-Misriyyah, 2017).
The same goes for the MUI, which is the Majlis Ullema Indonesia. In 2021 they stated,” The use of cryptocurrency as money is haram because it involves gharar (uncertainty) and dharar (harm)” while also being incompatible with Indonesian monetary regulations. They also deemed it to be not valid for trade due to the very same reasons as well as failing to meet the criteria of sil’ah (clear ownership)..
Mufti Faraz Adam of Amanah Advisors in the UK, wrote a paper in 2017, in which he highlighted the various sides of the issues. His perspective is more balanced in the sense that he says that while crypto doesn't necessarily fit into the description of currency, it does fit the criteria to be Mal, and can be traded and bought as an investment.
Read more about: What Are The 6 Ribawi Items?
Staking is the concept of building additional blocks to the blockchain. This is done through “Staking” some of your owned cryptos in order to be chosen to receive a “coin”. So, the more you stake the more you are rewarded with.
From an Islamic perspective, there is no concern relating to staking as it is a rule based approach to deciding rights to add to the blockchain (IFG, 2025).
Two things need to be taken into consideration: Every crypto project has its own staking specifics, which should be checked to make sure there isn't anything Shariah Non-Complaint in that process.
Secondly, Just because the staking process is Halal, doesn't mean it's permissible, the project itself should also be investigated to make sure there are no haram elements in it. This is also the view of the Shariyah Review Bureau.
They say, “Before any staking operation is deemed Shariah compliant, it is necessary to screen the token itself to ensure it is Shariah compliant. This can be done through reviewing the legitimacy of a token, its project, the financials and the utility
of the token.” (Shariyah Review Bureau, 2022)
When it comes to Yield Farming, a paper written by The Shariyah Review Bureau says, “ The paper concludes that if tokens are provided to a lending platform,then such an activity is not Sharia compliant since interest-lending is involved.
Yield farming that involves DEXs has the potential to be Sharia compliant depending on the underlying mechanisms of liquidity mining and the nature of the income. Any such DEX must be reviewed for Sharia compliance before any definitive view can be established for a DEX.” (Shariyah Review Bureau, 2021).
Read more about: Why Riba is Forbidden and How It Differs from Trade?
As mentioned before, the crypto itself and investments with it can only be deemed halal if the crypto itself is considered Halal. Investing for appreciation is a way to gain capitals, which in itself isn't Haram.
If we follow the opinion of it being an asset, then holding BNB for long term appreciation is Permissible. However if you take the view of Impermissibility, then it is no longer an asset and cannot be used for investments or as assets.
References
- Adam, F. (2017, April). Bitcoin: Shariah compliant? Amanah Finance Consultancy Ltd
- Dar al-Ifta’ al-Misriyyah. (2017, December 28). Tadāwul ʿumlat al-Bitkūn wa-l-taʿāmul bihā [Trading in Bitcoin and dealing with it] (Fatwa No. 14139). Issued by Grand Mufti Shawki Ibrahim Allam.
- Latang, M. A., Fathurrahman, & Muhammad Faried. (2024). Fatwa on cryptocurrency as digital assets: An Islamic perspective amidst Indonesia’s regulatory landscape. PAREWA SARAQ: Journal of Islamic Law and Fatwa Review, 3(2), 96–106.
- MALLICK, S. K. (2020). Causal relationship between Crypto currencies: An analytical study between bitcoin and binance Coin. Journal of Contemporary Issues in Business and Government, 2172.
Securities Commission Malaysia. (2023, December 31). Resolutions of the Shariah Advisory Council of the Securities Commission Malaysia
Shariyah Review Bureau. (2021, September). Crypto yield farming: Can the mechanics address Sharia principles?
- Shariyah Review Bureau. (2022, September). Crypto staking: Nodes, rewards and Sharia compliance
Disclamer:
This post is for educational purposes only, and does not constitute investment advice or a solicitation to take any financial action. It should not be relied upon when making investment or financing decisions.
