Zakat is a religious obligation that Muslims are required to pay. Use these steps to learn more about how to calculate the zakat on your cryptocurrency.
How to pay Zakat on Cryptocurrency
Zakat is a religious obligation that Muslims are required to pay in order to purify their possessions. The zakat amount for cryptocurrencies is 2.5% of the total value of the cryptocurrency. You can use these steps to learn more about how to calculate the zakat on your cryptocurrency portfolio if you are unsure how to do so.
What is Zakat?
It is mandatory to give a fixed percentage (2.5%) of one’s capital, assets, and income to the poor, needy, and residents of a specific country, as dictated by Islamic law. Zakat is regarded as a religious obligation rather than as a charitable contribution. Ordinary zakat (almsgiving) is divided into two categories: the obligatory zakat (almsgiving) that every Muslim is required to give each year, and what we call ‘extraordinary zakats,’ which are those that are given occasionally when necessary or desired by Muslims who live in affluent circumstances, such as when on pilgrimage.
What is Cryptocurrency?
Cryptocurrency refers to any type of digital currency that is secured through the use of cryptography. However, Bitcoin was the first of these types of cryptocurrencies, and there are now a few dozen other types of cryptocurrencies available.
Blockchain technology is the underlying technology that underpins all cryptocurrencies. In order to transfer value between two people, blockchain operates by utilising public keys and private keys, also referred to as cryptocurrency addresses, which eliminates the need for an intermediary or central clearinghouses such as a bank or Paypal.
Using the best-case scenario, a crypto-based transaction is faster than anything we are accustomed to in our regular everyday lives, and it is also immutable- meaning that no one can alter or adjust the transaction once it has been posted to the transaction log/blockchain.
How do I pay Zakat on Cryptocurrency?
If the value of your cryptoproperty is fluctuating, you must make a decision about how to proceed.
If you sell it at a later date and calculate the total gain, you can either take 20% of the current market price and pay zakat on that (with no guarantee that it will retain its equivalent value!) or wait until you sell it and calculate the total gain, then take 5% of the total gain as zakat.
It would be equivalent to paying 1 out of 4 cents per dollar in long-term investment planning for retirement, whereas saving zakats by amassing more crypto-wealth before paying their due could net you $2 million by 2030 – demonstrating that there are both financial and moral benefits to delaying Islamic tax payments until they have been fully remitted.
Where can I donate my Zakat by crypto?
Donate Crypto Today is the first and only platform that allows Muslims to donate their Zakat on cryptocurrency. We are committed to providing an easy, fast, and secure way of donating your Zakat. Our goal is not just to help people with their donations but also to provide them with a safe place where they can keep their money in the long term.