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Is it religiously acceptable for Muslims to trade KuCoin futures?

To decide, you need to understand the transactions, and consider whether they serve any social purpose. Applying legalistic tests is the wrong approach.

Posted 2 October 2022

In June 2022 I received some email questions from a website reader. While his or her questions (see below) looked quite technical, I was able to answer them in a way that illustrates how I tackle almost all religious questions.

I used the email exchange as the basis for my July 2022 column in the magazine "Islamic Finance News." You can read it below.

Is trading KuCoin futures halal or haram?

I regularly receive Islamic finance questions from visitors to my website. An email last month asked me about something I had never previously heard of, KuCoin. The incoming text below has edited for clarity and brevity.

“I have read your article about futures trading and recommendation of Muhammed Hashim Kamali’s book [“Islamic Commercial Law: An Analysis of Futures and Options.”] As most Islamic scholars consider cryptocurrencies halal, will trading KuCoin futures perpetual be halal or haram?

Some criticise it as based on gambling and excessive speculation. Will it be halal to take leverage for such commodity because as per my knowledge leverage is halal if there is no fixed interest on it and KuCoin does not charge fixed interest, it adjusts profit depending on market in trading fees. Also, every 8 hours KuCoin impose a funding rate between long traders and short traders which includes interest that is not fixed but is calculated every time and varies every time. Is it halal or haram?”

I was able to reply without needing to even look at the KuCoin website because the enquirer had in my view gone through entirely the wrong thought process.

I began by reminding the enquirer that each Muslim has to decide for themselves what God requires of them, since each of us is individually accountable to God on the Day of Judgement. Having made that preliminary point, I was willing to share my views.

In my opinion, fundamental factors make something halal or haram. It is not a question to be decided by applying a set of legalistic tests that can be, and often are, “gamed” or “manoeuvred around.”

The starting point of the analysis is that buying and selling physical commodities is beneficial for society and therefore desirable. It is the very essence of trade, allowing producers to be more efficient by specialising.

What then makes futures trading religiously acceptable is that futures trading has benefits for society by supporting the physical commodities market. For example, it enables farmers to plant with confidence, because they can know the future selling prices of what they will harvest.

Futures were invented for practical reasons, and only the ignorant believe they were invented primarily to enable speculation. However, speculators (people who have no need to buy or sell the underlying commodity) do play a useful role in futures markets by making them more liquid, validating their involvement.

As I explained in Islamic Finance News, volume 18 issue 44, I see no social purpose in Bitcoin, or indeed other cryptocurrencies. If there is no social purpose in cryptocurrency itself, then there can also be no social purpose in trading cryptocurrency futures, whether Bitcoin, KuCoin, or any other cryptocurrency.

When writing this article, I spent some time on the KuCoin website. It provides both a spot and futures market. There are explanations for beginners which I had no trouble following but given my professional background I start with a significant knowledge advantage.

I am not convinced that genuine beginners would understand what they are about to get into when they start trading futures on the platform. They should ask themselves honestly why they want to do it.

Mohammed Amin is an Islamic finance consultant and former tax partner at PwC in the UK.


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