Stablecoins (USDT, USDC): means of payment or prohibited investment?

Stablecoins are crypto-assets whose value is pegged to a fiat currency, generally the US dollar. USDT (Tether) is the most widely used in the world; USDC (Circle) is preferred in regulated environments. DAI is a decentralized stablecoin with a different structure.

HalalStack verdicts: all three are doubtful (HCS 65 for USDT). The rule is nuanced: transit (use as a means of payment or exchange) is tolerated. Long-term storage to generate yield is haram.

Why aren't stablecoins simply halal?

The question may seem simple: "It's just a digital dollar, and the USD itself isn't haram." But the problem stems from the reserve management mechanism.

The reserves problem

USDT (Tether): Tether issues USDT against deposited dollars. These dollars are then invested by Tether primarily in:

• US Treasury bills (T-bills) — interest-bearing instruments
• Bank deposits — potentially interest-bearing
• Commercial paper

Tether therefore earns interest income on these investments. This income goes to Tether, not to the USDT holder. But the holder benefits indirectly from this mechanism: the stability of the 1 USDT = 1 USD peg is ensured thanks to these reserves.

An asset whose stability rests on interest-bearing investments is structurally linked to riba, even if you do not personally receive any interest.

USDC (Circle): same structure. USDC reserves are placed in US T-bills and bank deposits. Same analysis.

DAI (MakerDAO): more complex. DAI is over-collateralized by crypto assets (ETH, USDC). The MakerDAO protocol includes a Dai Savings Rate (DSR) mechanism — an interest rate that DAI holders can activate. This mechanism is directly comparable to riba if activated.

Applying rule R6

Source: sharia-methodology-v1.0.md §R6; opinion of Mufti Faraz Adam (Amanah Finance, 2023-2024)

R6 — Fiat-pegged stablecoin:
  Audited 1:1 reserves, no yield → s_R6 = 1.0 (halal)
  Reserves partially in T-bills → s_R6 = 0.5 (doubtful)
  Yield shared with holder → s_R6 = 0.0 (haram)

USDT HCS calculation

B = 1 (R1 pass, R7 N/A for standard USDT)
R6: reserves partially in T-bills → s_R6 = 0.5
R8: no native yield → s_R8 = 1.0

F = 0.70 × s_R6 + 0.30 × s_R8
  = 0.70 × 0.5 + 0.30 × 1.0
  = 0.35 + 0.30 = 0.65

HCS = 65 → DOUBTFUL

The key distinction: transit vs. storage

This is the most important fiqh rule for stablecoins, documented by Mufti Faraz Adam:

In-transit usage: TOLERATED

You use USDT for 24-48h to transfer value from one platform to another, or as an intermediary trading pair. You are not seeking to earn a return from it — you are using it as a transfer tool.

This use is comparable to using a doubtful fiat currency to pay for a service: if the currency itself is not perfect but you do not benefit from it any differently than its normal transactional use, tolerance is possible.

Long-term storage: PROBLEMATIC

Keeping USDT in a wallet for 3 months without using it, hoping the peg holds, is different. You expose yourself to:

• An asset structurally linked to riba (T-bills reserves)
• A risk of mukhatarah (uncertainty of the reserves, no structural gharar)

Opinion of Mufti Faraz Adam (Amanah Finance, 2023): stablecoins are acceptable as a means of payment (transit) but not advised as a long-term store of value.

Yield on stablecoin: HARAM

Depositing USDT into a DeFi protocol or an Earn account to generate an APY is haram under R7 (interest-based lending) or R8 (guaranteed fixed yield). This use is distinct from simple transit.

Stablecoin comparison table

What does not yet exist (but should)

An ideal Sharia-compliant stablecoin would have:

• 1:1 reserves in physical metal or halal assets
• No placement of reserves in interest-bearing instruments
• Regular, transparent third-party audits

No mainstream stablecoin meets these criteria in 2026. A few Islamic stablecoin projects exist (e.g., gold-backed stablecoins), but they remain illiquid.

Disclaimer

This article is provided for informational purposes by HalalStack, based on methodology v1.0.0 (AAOIFI Sharia Standard No. 21, Hanafi school by default unless otherwise stated). It constitutes neither a personal fatwa nor investment advice within the meaning of Article L.541-1 of the French Monetary and Financial Code. HalalStack is not an investment advisor (CIF) licensed by the AMF.

The verdicts presented are the result of the deterministic application of objective criteria to public factual data. They do not take into account your personal situation (assets, objectives, investment horizon, risk aversion).

For any significant decision, we recommend consulting a scholar qualified in fiqh al-mu'amalat and, if necessary, a licensed wealth management advisor.

The HalalStack methodology is public, versioned, and contestable. Any disagreement can be reported to methodology@halalstack.app.