NFTs and Digital Ownership: An Islamic Perspective
Over the past few years, non-fungible tokens (NFTs) have moved from a niche technical curiosity to a subject debated in both financial markets and religious councils. In Iraq and the Kurdistan Region, where interest in digital assets is growing among young people in Baghdad, Erbil, and Sulaymaniyah, a deceptively simple question keeps coming up: is owning an NFT halal or haram? And can a person even “own” something that has no physical existence? This article walks through the question from the perspective of Islamic jurisprudence, without issuing a final ruling, but rather offering a balanced educational overview of what contemporary Sharia bodies and scholars have said. This is educational content, not a fatwa.
What are NFTs and how do they actually work?
A non-fungible token is a unique digital record anchored on a blockchain that points to ownership of, or a right connected to, a specific asset — a piece of digital art, a video clip, an item inside a game, or even an entry ticket to an event. Unlike ordinary cryptocurrencies such as bitcoin, where every unit is identical to every other, each NFT carries a unique identifier that cannot be swapped for another unit of equal value. This uniqueness is what gives the token its “digital scarcity,” a property that most global NFT marketplaces are built around.
Technically, buying an NFT does not necessarily mean buying the underlying file itself (the image or video); it means buying a blockchain record that certifies you as the registered owner of that token, which usually points to an external link hosting the actual file. This precise distinction between “the token” and “the content it points to” is the essential starting point for any serious jurisprudential discussion of the subject.
Digital ownership in Sharia: can an intangible asset be owned?
The concept of ownership (milkiyyah) in classical Islamic jurisprudence was historically tied to tangible objects: land, livestock, goods, and coined money. But Islamic law did not stop at the boundary of the physical; jurists recognized, centuries ago, forms of non-material ownership such as usufruct rights (manfa’ah), easement rights, and even certain intangible rights in older commercial dealings. This opens the door to a contemporary discussion: can digital assets — including NFTs — be considered “mal” (property in the fiqh sense), such that sale and purchase contracts over them are valid?
Contemporary fiqh academies, chief among them the International Islamic Fiqh Academy of the Organisation of Islamic Cooperation (OIC), have discussed in earlier sessions the question of digital currencies and virtual assets, generally concluding that “maliyyah” (a thing’s quality of being property) does not necessarily require physical existence — it is sufficient that the thing hold recognized value among people, and that it be capable of possession, disposal, and delivery in a way that is customarily accepted. From this standpoint, a number of contemporary researchers hold that a blockchain-verified digital record, carrying proof of possession and uniqueness, can at a minimum satisfy the conditions of “maliyyah” — though disagreement remains over the details of application.
On the other hand, some scholars are hesitant to treat an NFT as independent property when it is merely a “pointer” or “link” that grants its holder no actual right over the content it references, viewing this as closer to gharar (excessive uncertainty) than to a valid sale, unless clear conditions define exactly what the buyer actually owns.
Utility tokens versus speculative tokens: where is the line?
One of the most important criteria contemporary Sharia researchers use to distinguish permissible from impermissible in the NFT space is the distinction between:
- Utility NFTs: tokens that grant their holder a real, clear benefit — membership in a service, an entry ticket, the right to use software, or a documented partial stake in a genuine real-estate or commercial project. This category is closer to permissible dealings because the buyer clearly knows what they are paying for and what they will receive.
- Purely speculative NFTs: tokens that carry no benefit beyond the expectation that their price will rise so they can be resold to someone else at a higher price, with no usage value or real underlying asset. This pattern comes close to forms of gambling and prohibited speculation (maysir), especially when pricing is driven by hype or manipulation rather than genuine value.
This distinction is not unique to Islamic jurisprudence; even conventional regulators such as the Securities Commission Malaysia look carefully at a token’s real economic purpose before classifying it, which intersects with the Islamic legal approach of examining “maqasid” (underlying purposes) rather than mere outward form.
| A token with a use | A token bought to resell | |
|---|---|---|
| What the buyer receives | A membership, a ticket, a right to use something, or a documented share in a real asset | A record pointing at a file anyone can look at for free |
| How the price is arrived at | Against the worth of the thing the token gives you access to | By whatever the last person paid, and how loud the market around it is |
| If nobody buys next | The use is still there | Nothing is still there |
| What researchers examine | Whether the right is clearly defined and can actually be delivered | Whether the uncertainty in what is being sold is excessive |
The underlying-asset question: what do you actually own when you buy an NFT?
Most contemporary Sharia researchers who have written on this topic agree that the ruling on any NFT cannot be built in isolation from answering a central question: what is the underlying asset that this token represents?
If the token represents a clear, defined right — proof of ownership of an original artwork along with its rights, a documented share in a real asset, or the right to use a digital product — then the contract is closer to being valid, because the subject of the contract is known and defined. But if the token is merely an empty “wrapper” that represents nothing specific beyond an image anyone can copy and view for free outside the marketplace, many researchers consider this to approach the excessive gharar prohibited in transactions, since the buyer pays real money for something of ambiguous value and benefit.
The practical rule many specialists recommend is this: before buying any NFT, ask yourself clearly — what will I actually own after the purchase? Is there a clear legal and Sharia-recognized right being transferred to me, or am I merely buying the hope that someone else will buy it from me later at a higher price?
Intellectual property and authorship rights in Islamic jurisprudence
Contemporary Islamic jurisprudence recognizes the concept of “invention and authorship rights” as a legitimate financial right that may be sold and disposed of, a position affirmed in resolutions of the International Islamic Fiqh Academy on intangible rights. This jurisprudential foundation supports the possibility that an NFT can be a legitimate means of protecting and documenting the intellectual-property rights of digital artists and creators, provided that the original work’s rightful owner is the one who mints the token, and that no third party’s right in the content is violated.
This point matters especially in the NFT market, where numerous problems have arisen involving people minting tokens for artworks they do not actually own — which falls under usurpation (ghasb) and consuming people’s wealth unjustly, regardless of the general ruling on NFT technology itself.
Ongoing royalty structures: are they permissible?
One feature that distinguishes many NFT platforms is the ability to program automatic “royalties” paid to the original creator every time the token is resold on the secondary market, executed automatically through a smart contract with no need for an intermediary. From a Sharia perspective, this kind of entitlement is closer to a conditional financial right agreed upon in advance between the parties, resembling a stipulated benefit within a contract, as long as it is clearly disclosed at the time of the first purchase and is not imposed afterward in a way that undermines the buyer’s consent.
The concern some researchers raise relates to specific cases where very high royalty percentages are imposed retroactively, or their terms are unilaterally changed after the first deal is completed — which could fall under gharar or an unjust condition if the buyer was not adequately informed beforehand.
Gaming NFTs and tradable virtual assets
Recent years have seen a rise in blockchain-based video games (play-to-earn), where players own in-game items — weapons, characters, virtual land — as NFTs that can be bought and sold for real money. This model raises compound Sharia questions:
- If the game itself contains prohibited elements (gambling, betting, or indecent content), the ruling on the asset is affected by the ruling on the container that holds it, regardless of NFT technology itself.
- If the game’s “earning” mechanism is essentially built on recruiting new players to fund the profits of earlier ones (a pattern closer to a pyramid scheme), this approaches unjustly consuming wealth regardless of the technical wrapper.
- But if the game offers genuine, legitimate entertainment, and the virtual items represent clear usage value (such as character customization or an enhanced gameplay experience) without gambling or excessive gharar, many researchers lean toward permitting their trade as ordinary digital assets, similar to buying and selling traditional game accounts.
The ruling on image content in NFTs from a Sharia perspective
Another matter deserving attention is the ruling on the content an NFT itself represents. Some NFTs are avatar-style images bearing human or animal features, which brings back to the fore the classical jurisprudential debate over image-making and statuary — an area where scholars, past and present, have differed based on the nature of the image (three-dimensional or flat, digital or hand-made) and its purpose. Most contemporary scholars who permit non-three-dimensional digital imagery hold that digital images within NFTs generally take the ruling of flat photographic images, provided they do not carry indecent content or promote something already prohibited, such as alcohol, gambling, or offensive religious symbols.
This means the ruling on an NFT may differ not only based on the ownership mechanism, but also based on the content of the image, video, or audio the token represents — a point often overlooked in purely technical discussions of the subject.
Contemporary writing on the subject keeps returning to four separate questions, and a token can satisfy three of them while failing the fourth: what asset does it actually represent, how clearly is the buyer’s right defined, is the uncertainty excessive, and what is in the image, video or audio itself.
That is also why minting matters as much as buying. A token issued over work its minter does not own raises a question about taking what belongs to somebody else, whatever one concludes about the technology. This is educational material, not a fatwa; for a specific case the article’s own advice is to ask a Sharia reference you trust.
Views of contemporary Sharia bodies and academies
There is, so far, no single unified and comprehensive ruling from one global Sharia authority that settles the NFT question in all its forms; the subject remains under study and continues to evolve given the diversity of the technology’s applications. But the general direction in contemporary Sharia literature can be summarized as follows:
- AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions): has not, as of this writing, issued a standard specific to NFTs, but its general standards on digital assets, contracts, and gharar are used as a reference framework by researchers analyzing these products.
- The International Islamic Fiqh Academy (OIC): has discussed, in earlier sessions, questions of digital currencies and intangible rights in general, and its resolutions on “maliyyah” and invention rights are used as a theoretical basis against which the ruling on NFTs is measured, though no explicit dedicated resolution on NFTs exists yet.
- National fatwa bodies (such as Dar al-Ifta in Egypt and others): have issued detailed fatwas in some cases distinguishing between NFTs as a legitimate ownership-documentation tool on one hand, and excessive speculation and gharar in some NFT markets on the other, while emphasizing the need to examine each case individually.
- Securities Commission Malaysia: among the first regulators to establish frameworks for classifying digital assets by their real economic nature — a regulatory (not necessarily Sharia) approach, but one that intersects with the maqasid al-Sharia method of examining the substance of a transaction rather than its outward form.
The common thread across these references is the insistence that no single ruling can cover “every NFT” without distinction, and the need to evaluate each token based on: the nature of the underlying asset it represents, how clearly the buyer’s ownership is defined, whether excessive gharar is present, and the content of the image, video, or audio itself.
Practical recommendations for Kurdcoin users and those interested in digital assets in Iraq
For those who wish to approach NFTs with Sharia caution, several researchers suggest practical points:
- Avoid buying any NFT purely on the expectation that its price will rise later, with no genuine benefit or underlying asset behind it.
- Verify the seller’s identity and confirm the token represents work they actually own, to avoid buying a token minted from stolen or plagiarized work.
- Clearly review the smart contract and royalty terms before buying, especially in the secondary market.
- Pay attention to the content of the represented image or video, and confirm it is free of anything already prohibited.
- Consult a trusted Sharia reference when in doubt about a specific case; caution in new financial dealings is always commendable.
This article is for educational purposes only and does not constitute an official Sharia ruling or investment advice; digital asset markets in general, including NFTs, are characterized by high volatility and real capital risk, and it is always advisable to consult a trusted Sharia specialist and an independent financial advisor before making any decision.
Frequently Asked Questions
Is buying an NFT absolutely halal?
There is no single ruling covering every NFT; the ruling depends on the nature of the underlying asset the token represents, how clearly the buyer’s ownership is defined, the presence of excessive gharar or speculation, and the content of the image or video itself.
What is the core difference between a utility NFT and a speculative one from a Sharia perspective?
A utility NFT grants a real, clear benefit or right the buyer knows in advance, while a purely speculative NFT carries no value beyond the expectation of reselling it later at a higher price — a pattern closer to the excessive speculation many Sharia researchers view with caution.
Are automatic royalty fees on NFTs considered riba?
They are generally not classified as riba, since they are not an increase on a loan, but rather a financial right agreed upon in advance between the parties, tied to the resale of the work, and are measured against the standards of a legitimate contractual condition, its clarity, and the consent of both parties.
Is there a unified fatwa from a global Sharia body on NFTs?
No single, globally unified and comprehensive Sharia standard specific to NFTs exists yet from one universally recognized body; the subject remains under study, and there are multiple individual and institutional rulings and fatwas that generally agree on the need for a case-by-case evaluation.
