How to Calculate Zakat on Crypto

Zakat on crypto is simpler than most Muslims expect, and the reason people find it confusing is that they start from the wrong idea of what zakat is.

Zakat al-mal is not a tax on income or on gains. It is an annual obligation on wealth you hold. Once you have that straight, crypto stops being a special case and becomes an ordinary asset with a market price.

Four steps.

Step 1: find your zakat date

Zakat is due once every lunar year, the hawl. Your date is the anniversary of when your wealth first passed the nisab threshold and stayed above it.

If you have no idea when that was, which is most people, pick a date and keep it. Many Muslims use Ramadan for the reminder and the extra reward on giving in that month. What matters is that you pick one and use the same one every year, because the whole calculation is a snapshot on that day.

Two notes people miss. The lunar year is about eleven days shorter than the Gregorian one, so a fixed Gregorian date drifts. Some scholars address this by applying 2.577% instead of 2.5% when you calculate on a solar year, which is the rate adjusted for the extra days. Either approach is defensible. Being consistent is not optional.

Step 2: check you are above nisab

Nisab is the minimum wealth at which zakat becomes due. It is expressed in gold or silver:

• Gold: roughly 85 grams (some scholars use 87.48g)
• Silver: roughly 595 grams (some use 612.36g)

Look up the current price of whichever metal and that is your threshold in your currency. The two produce very different numbers, because the gold-to-silver price ratio today is nothing like it was in the seventh century. The silver nisab is much lower, which means using silver brings more people into the obligation.

Most contemporary scholars recommend silver for exactly that reason: it favours the poor, who are the ones with a right to this money. That is the position I would follow, and I would not describe using gold as illegitimate.

Your nisab check is on your total zakatable wealth, not on your crypto alone. Cash, bank balances, gold, business inventory, receivables and crypto all count together.

Step 3: value your crypto at market price

On your zakat date, take the market value of your holdings. Not what you paid. Not your profit. The value on the day.

This follows from treating crypto as trade goods, 'urudh al-tijarah, which are valued at market price on the zakat date rather than at cost. There is a nice convergence here: the Securities Commission Malaysia's Shariah Advisory Council classified digital assets as 'urudh precisely, goods rather than currency, at its meetings in June and July 2020. That classification resolves the valuation question as a side effect.

Two consequences that trip people up in both directions.

You pay on unrealised gains. If you bought at $10,000 and it is worth $40,000 on your date, the base is $40,000. You have not sold, and it does not matter, because zakat is on wealth held rather than on profit taken. There is a short piece on just this question because it comes up more than anything else.

You pay on the loss too, in the sense that the lower number is what counts. Bought at $40,000, worth $10,000 on your date, the base is $10,000. The symmetry is the same principle.

Step 4: deduct debts, then take 2.5%

Subtract immediate liabilities. Overdue bills, this month's rent, a debt that is currently payable.

Do not subtract the entire remaining balance of a long-term mortgage. The mainstream position is that only currently due liabilities reduce your zakatable wealth, because otherwise almost nobody with a mortgage would ever pay zakat, which is plainly not the intent.

Then 2.5% of what remains. One fortieth.

Our zakat calculator does the arithmetic if you would rather not.

A worked example

Your zakat date arrives. You hold:

• 0.4 BTC, market value $36,000
• 2,000 USDC, $2,000
• $5,000 in a bank account
• Gold jewellery beyond normal use, $3,000

Total: $46,000. You owe $1,200 on a credit card, currently due, so deduct it. Base: $44,800.

Silver nisab at, say, $28 per ounce works out to roughly $600. You are far above it.

Zakat due: $1,120.

Notice what did not enter the calculation. Not your entry prices. Not whether you are up or down. Not how long you held any individual coin.

The mistake almost everyone makes

You do not need to have held each coin for a full lunar year.

The hawl runs on your wealth, not on each asset. If you were above nisab a year ago and you are above nisab today, you pay on what you hold today, including a coin you bought last week.

This is the single most common error, and it always runs in the same direction: people exclude recent purchases and underpay. If you have been doing that, it is worth going back and estimating.

Which of your holdings count

All of it, at market value. Coins, tokens, stablecoins, tokenized equities like the ones on our tokenized stocks list, balances on exchanges, balances in your own wallet.

Stablecoins are worth a specific mention because people treat them as not-quite-money. USDT and USDC are zakatable at face value like cash. There is no exemption for holding your wealth in a dollar-pegged token.

Staked, locked and airdropped positions have genuine complications, and there is a separate piece on those.

Zakat is not purification

These get conflated constantly and they are entirely different obligations.

Zakat is an act of worship and a right of the poor, calculated as 2.5% of qualifying wealth, owed annually whether your holdings are clean or not.

Purification is removing income that was not yours to keep, from an otherwise permissible holding. It is a percentage of impure income rather than of wealth, it can be owed at any time, and paying it earns you no reward because you are returning something rather than giving it. Our Tesla tokenized share carries a purification rate of about 1.5%; MicroStrategy's is 1.46%. The mechanics are here.

You may owe both. Calculate them separately and keep separate records.

One thing I will not pretend

The four steps above reflect the mainstream contemporary position and I am confident in them. The genuinely contested cases are locked assets with long unbonding periods, unvested allocations, and illiquid tokens with no real market, and reasonable scholars differ on all three.

Final authority on your own zakat rests with a qualified scholar, and this is one area where it is worth actually asking rather than reading, because underpaying zakat is withholding something that belongs to someone else.