Is Ethereum (ETH) Halal? Islamic Finance Analysis

Quick Verdict

Ethereum (ETH) is DOUBTFUL under mainstream Islamic finance. The underlying technology is neutral, but Ethereum's ecosystem is deeply intertwined with DeFi (decentralized finance) applications that often involve riba-like interest products, speculation (gharar), and leveraged trading.

The Proof-of-Stake Issue

Ethereum transitioned to Proof-of-Stake in 2022 (the Merge). ETH holders can now "stake" their tokens to validate transactions and earn staking rewards — currently around 3-4% annually. Is this riba? Most scholars who permit Ethereum argue staking rewards are more like profit-sharing (you're providing a service to the network) than interest. Others disagree, seeing guaranteed yield as riba-like. This is an active scholarly debate.

DeFi Ecosystem Concerns

The majority of DeFi applications run on Ethereum — lending protocols like Aave and Compound, liquidity pools on Uniswap, and leveraged trading platforms. Owning ETH means you hold the "gas token" that powers this ecosystem, some of which is clearly impermissible. However, owning ETH doesn't mean you're using these applications any more than owning TCP/IP protocol stock would mean you're responsible for all internet activity.

Scholarly Positions

Some scholars (including those advising Wahed Invest, which at one point offered ETH) consider Ethereum permissible as a utility token for a neutral network. Others argue the ecosystem's DeFi integration is too entangled with riba to permit. There is no consensus as of 2026.

Practical Guidance

If you invest in Ethereum, avoid using it in DeFi lending protocols. Holding spot ETH is a more defensible position than providing liquidity to lending pools. Consult a qualified Islamic finance scholar if you're uncertain.

Bottom Line

Ethereum is more complex than Bitcoin from an Islamic perspective. The underlying blockchain is neutral, but the DeFi ecosystem creates genuine concerns. Classify it as doubtful and invest only if you've done your own scholarly research or have a fatwa from a trusted scholar.