Malaysia enables Zakat payments through cryptocurrencies

Malaysia has begun accepting Zakat payments through cryptocurrencies, in what is being viewed as a latest initiative to keep pace with the growing digital economy. 

The country's Federal Territories Islamic Religious Council Zakat Collection Centre (PPZ-MAIWP) launched a channel for digital asset zakat payments earlier this month. 

According to local media reports, Abdul Hakim Amir Osman, PPZ-MAIWP chief executive stated that with blockchain technology and the increasing use of digital assets such as cryptocurrencies, digital tokens and NFTs (non-fungible tokens), there is a need to guide Muslims on Zakat obligations related to these assets.

"Individuals can now pay Zakat directly using cryptocurrency. This initiative aligns with technological progress and ensures that no one is excluded from fulfilling their Zakat obligations, regardless of the form of assets they own." 

The 134th meeting of the Federal Territories Shariah Advisory Committee concluded that digital currency is a tradable commodity, hence zakat is applicable on the ownership and trading of digital currency. Malaysians own digital assets worth 16 billion Malaysian ringgits, with 54.2% of investors aged between 18 and 34. 

PPZ-MAIWP has appointed Sharlife as the zakat collection agent to use cryptocurrency. 

"This system allows payments to be made directly using crypto wallets, without having to convert their assets to ringgit value first. The platform will screen users' crypto tokens to ensure Sharia compliance, calculate the asset ownership period, and determine a zakat rate of 2.5% before transactions are made," the Malaysia Gazette quoted Sharlife management director, Muhammad Arham Munir Merican Amir Feisal Merican as saying. 

"This system accepts various types of blockchain-based crypto such as Solana and Ethereum. To overcome the issue of crypto price instability, payers are asked to convert their crypto to stablecoins such as USDT (USD Tether) before payment.

"This is to ensure that the value of zakat is guaranteed and reaches the beneficiaries in the maximum amount, and the payment process is more transparent and easier," he added.