Yes.
You do pay zakat on your cryptocurrency if it’s priced higher than 87.48 grams (7.5 tola) of gold and 612.36 grams (52.5 tola) of silver, and held for a minimum of 12 months.
Take the value of your Crypto and convert it to gold. If your cryptocurrency value is more than the value of 7.5 Tola of gold and 52.5 Tola of silver for a year or more, then you must pay 2.5% of your cryptocurrency assets in Zakat for the year.
- Zakat is due on the market value of your Crypto.
- Regardless of whether your cryptocurrency holdings are tokens (utility or work) or exchangeable coins, both are liable for Zakat.
If you’ve had a consistent value greater than 85 grams of gold in your wallet on the month’s end for an entire 12 months, then you will pay Zakat on the total value of your wallet. Pay 2.5% of your wallet’s value either in the same cryptocurrency or in it’s value of fiat currency or precious metals.
How Much Zakat I have to Pay on Crypto?
Let’s calculate with the prices as of 19 May 2024, as for future it may vary. Price of 1 gram of gold as of now is around Rs 19,145. so that makes Rs 1,674,804 (1.67m). So if your crypto savings are greater then Rs 1.674 m you have to pay zakat on the total crypto asset you have.
Crypto is Volatile How to Calculate What I Pay ?
When calculating Zakat on cryptocurrency, which is inherently volatile, the following principles should guide your approach:
- Valuation Timing:
- Calculate Zakat based on the current market value at the time your Zakat is due (i.e., the end of the lunar year/Hawl) or when you plan paying your Zakat. This aligns with the general principle that Zakat is assessed on the wealth you possess at the time of calculation, similar to other assets like cash or gold.
- Nisab Threshold:
- Ensure the cryptocurrency’s value (when converted to a benchmark like gold or silver) meets or exceeds the Nisab threshold both at the start and end of the Hawl. If the value drops below Nisab during the year but recovers by the due date, Zakat is still obligatory if the threshold is met at the end.
- Intentional Timing:
- Do not delay Zakat calculation to exploit price fluctuations. Intentionally waiting for a lower price to reduce your obligation contradicts the ethical purpose of Zakat, which is to purify wealth and support those in need. The valuation should reflect the asset’s fair market value at the due date.
- Practical Steps:
- Document the value of your crypto holdings at the end of each Hawl.
- Use a reputable exchange or platform to determine the fair market value on that date.
- If prices are highly volatile near the due date, some scholars permit using an average over a short period (e.g., a few days), but this should not be used manipulatively.
Meme Coins and Zakat ?
A general consensus on zakat is that anything which has real value falls under the zakat category, while some say that as apart from the famous coins there are many which currently can not be used to buy real world assets. so they may be exempted from zakat. However, any meme coin showing value in $ can be always converted to a stable coin and that that tangible value in real world, so in my humble opinion you should pay zakat for that aswell.
The Eight Kind of People Who CAN Receive Zakat
- The poor (al-fuqarâ’), meaning low-income or indigent.
- The needy (al-masâkîn), meaning someone who is in difficulty.
- Zakat administrators.
- Those whose hearts are to be reconciled, meaning new Muslims and friends of the Muslim community.
- Those in bondage (slaves and captives).
- The debt-ridden.
- In the cause of God.
- The wayfarer, meaning those who are stranded or traveling with few resources.
Indeed, [prescribed] charitable offerings are only [to be given] to the poor and the indigent, and to those who work on [administering] it, and to those whose hearts are to be reconciled, and to [free] those in bondage, and to the debt-ridden, and for the cause of God, and to the wayfarer. [This is] an obligation from God. And God is all-knowing, all-wise.
Al-Tawbah, 9:60
Do check out this detailed Zakat on Cryptocurrency explanation on Islamic Guru Finance.
