The Quick Comparison
Bitcoin is generally considered more halal than Ethereum by most Islamic scholars and screening agencies. This doesn't mean Bitcoin is definitively halal — it remains doubtful — but Bitcoin's simpler design and absence of DeFi integration give it a cleaner profile.
Bitcoin's Islamic Finance Profile
In its favor: Bitcoin functions as digital gold — a store of value and medium of exchange. It doesn't generate yield, doesn't host lending protocols, and cannot be used to earn interest. The transaction model is simple: person A sends BTC to person B.
Against it: Most Bitcoin transactions are speculative trading. Bitcoin mining has environmental concerns. The extreme volatility creates gharar (excessive uncertainty) concerns for some scholars.
Ethereum's Islamic Finance Profile
In its favor: Ethereum enables innovative applications including legitimate ones (supply chain, identity, art). Its technology is neutral.
Against it: Ethereum's ecosystem is dominated by DeFi — riba-based lending, leveraged trading, speculative derivatives. ETH staking yields create an income stream that resembles interest. The platform's value is directly tied to the success of impermissible applications.
The Key Difference
Bitcoin is a commodity/currency. Ethereum is an application platform. The halal case for a neutral currency (Bitcoin) is simpler and stronger than the halal case for a platform whose primary applications are DeFi (Ethereum).
Scholars Who Have Ruled on This
Several Islamic finance scholars and institutions who have issued fatwas on crypto have been more favorable to Bitcoin than to Ethereum specifically, noting that Ethereum's ecosystem integration with interest-bearing finance makes it more problematic.
Practical Recommendation
If you must choose one, Bitcoin has the stronger Islamic finance case. If you hold Ethereum, avoid using it in any DeFi protocols and treat it strictly as a utility token for the network. In both cases, limit cryptocurrency to a small speculative portion of a diversified halal portfolio.
Bottom Line
Bitcoin > Ethereum from an Islamic finance perspective. Both are doubtful, but Bitcoin's simpler design and absence of DeFi entanglement gives it a cleaner profile. Neither should dominate a halal portfolio.