Every Stablecoin Ranked by Shariah Compliance
ShariaQuant Research Board
Islamic Finance & Quantitative Cryptography
Every token in this article is worth one dollar. They all say fully backed. Several are issued by regulated entities with published attestations.
One of them passes our screen. Four are doubtful. Five fail outright.
If you are holding a dollar-pegged token because you assumed the peg made it safe, this is the ranking, and the single question that produces it.
The question that sorts all of them
Does the interest reach you, and can someone switch off your balance?
Two variables, and between them they explain every verdict below.
Fiat-backed stablecoin issuers all earn interest on their reserves. Tether earns billions from Treasury bills and secured loans. Circle's revenue model runs on Treasuries, repo agreements and bank deposits. That is riba, and it is enormous.
But if none of it reaches the holder, holding the token generates no impure income for you and requires no purification. The issuer's business being interest-heavy is worth knowing and worth weighing. It is not what breaks the ruling.
What breaks the ruling is the yield landing in your wallet. And what downgrades an otherwise clean token is a third party retaining the power to freeze your balance, because our methodology requires that recognised property be holdable and transferable without permission.
Apply those two variables and the ranking falls out.
Tier 1: passes
Ripple USD (RLUSD). The only stablecoin on our list currently rated Halal.
Fiat-backed with clear 1:1 peg and reserve documentation. No yield flows to holders. Its core business, providing a stable digital currency for cross-border payments and enterprise settlement, is a recognised permissible utility with genuine institutional adoption inside Ripple's payment infrastructure. The issuer earns interest on reserves and none of it accrues to the token or reaches the user.
There is a purification note that applies to every entry in Tiers 1 and 2, and it matters: if you deposit RLUSD into a third-party lending protocol or an exchange yield product, 100% of that interest must be donated to charity. The token being clean does not survive you lending it out.
Tier 2: doubtful
Same basic structure as Tier 1 on the riba question. No interest to holders, no purification required for holding. On business activity, token utility and revenue purity for the holder, all four pass.
They are Doubtful because you hold a redemption claim against a company that retains discretionary authority to blacklist an address. Tether can freeze and has done so publicly at law enforcement request. Circle retains centralised smart contract authority to freeze balances and blacklist addresses. Your possession is conditional, which is a gharar problem rather than a riba problem, and gharar produces Doubtful rather than Haram.
Worth noting the difference in verification quality inside this tier. Circle publishes regular attestations confirming full backing by cash and short-term Treasuries, and complies with frameworks including MiCA. Tether relies on attestations rather than full audits from major accounting firms, and an attestation is a point-in-time existence statement rather than an examination of controls and valuation. Both are Doubtful; they are not equally verifiable.
The freeze argument is the substantive one here and I have set it out properly in a separate piece on stablecoin possession.
Tier 3: fails, because the yield reaches you
The cleanest failure on the list. USYC is a tokenized money market fund holding short-term US Treasury bills and reverse repurchase agreements, representing a share in a short duration yield fund. As the fund earns, the token's net asset value rises and the holder automatically accrues the interest.
You are not near the riba here, and you are not merely funding someone else's interest business. You are receiving it, passively, as a function of holding. Its non-compliant revenue share exceeds every threshold in the AAOIFI screen. Purification cannot help, because purification addresses incidental impure income inside a sound holding rather than an asset whose entire purpose is to deliver the payment.
If you hold anything marketed as tokenized Treasuries, on-chain yield, or an RWA money market product, this is the category it is in.
Tier 4: fails, because the peg is a derivative
This is the one that will catch the most people, because it is sold as a stablecoin and behaves like one.
USDe maintains its peg by holding crypto assets and delta-hedging with short perpetual futures positions. Funding rates are not a side business. They are the stability mechanism. When funding turns negative, the reserve fund rotates into liquid stablecoins earning Treasury rates to protect the peg, which swaps one form of riba for another.
Both legs fail. The protocol does earn some permissible income from proof-of-stake validation such as staking ETH, which is worth acknowledging and is nowhere close to sufficient. Over 33% of revenue comes from non-compliant sources: funding rates, basis spreads, lending and Treasuries. Staking into sUSDe or sENA makes your participation direct rather than incidental.
A dollar peg engineered out of perpetual futures is not digital cash. It is a derivatives position that happens to be priced at one dollar.
Tier 5: fails, because the collateral is a loan book
Muslims often assume decentralised stablecoins are the safer choice, on the reasoning that no corporation controls them. The mechanics say otherwise.
Dai and USDS come from the same ecosystem, and revenue comes from stability fees charged on collateralised crypto loans plus interest earned on tokenized real-world assets including Treasuries and private credit. Over 33% of protocol revenue is non-compliant, against an AAOIFI screen that fails anything above 5%. The opt-in Sky Savings Rate pays yield funded entirely by that interest revenue. Governance holders of SKY benefit from surpluses used for token buybacks funded the same way.
USDS has a second defect worth naming: its token contract uses an upgradeable proxy allowing centralised governance to implement a freeze function at their discretion. There is no freeze today, only the standing ability to add one, which is precisely the kind of unresolvable ambiguity that fails a property test.
Decentralisation is an architecture. It is not a Shariah property. A protocol that mints its dollar by lending at interest is a bank with different plumbing.
The alternative nobody mentions
If what you actually want is a non-volatile store of value that is not somebody's promise, gold is sitting right there and it screens better than every fiat-pegged token on this page.
PAX Gold and Tether Gold both come back Halal. Gold is mal in the most classical sense available, the tokens are backed by allocated metal, and no interest accrues to holders. Gold carries its own considerations, including the sarf rules that govern exchanging monetary metals, and it is not a dollar substitute for someone who needs dollar exposure for a specific liability.
But for a Muslim holding six months of savings in USDC because it felt like the responsible choice, gold is the option that was never on the shortlist and probably should have been.
Three rules
Never deposit a stablecoin into a yield product. This is where most Muslims actually go wrong. The token pays nothing, so holding is clean, and then a platform offers 8% on idle balance and the whole analysis collapses. That yield is interest on a loan of your money. If you have earned it, all of it goes to charity.
Treat stablecoins as rails, not as savings. Settling a trade, sending a remittance, sitting in cash for a few days. Defensible. Holding a redemption claim against a corporation for three years is a different decision, and conditionality compounds with time.
Read the peg mechanism before you read the ticker. USDe and USDC both look like dollars in a wallet interface. One is backed by cash and Treasuries, the other by a short perpetual futures book. The interface will never tell you which.
All ten assessments, with the full reasoning on each, are on the screening list. Final religious authority rests with a qualified scholar, and the point of publishing the mechanics is so you can ask a specific question rather than a general one.
