Challenges of Collecting Zakat on Digital Assets

Abstract

This paper aims to investigate the challenges associated with collecting Zakat on Bitcoin, one of the digital assets in Malaysia. The study is qualitative as interviews were conducted with Zakat officers, Chief Executive Officer f MAIPs Perlis, Muftis, Scholars, and experts. The study identifies key challenges. Firstly, limited knowledge among the general population complicates determining whether specific digital assets are Zakatable. Additionally, the study highlights that technological infrastructure deficiencies hinder the efficient management of digital assets for Zakat purposes. The findings also reveal that the challenge of credit risk arises from the unpredictable nature of digital asset prices, leading to uncertainties in when to liquidate digital assets (Bitcoin) after receiving Zakat. Note that regulatory uncertainty due to the absence of clear guidelines impacts the establishment of standardized procedures. The digital assets are unstable since they are not properly regulated by Bank Negara. It was discovered that the challenge is also related to security concerns related to cybersecurity risks, including hacking and unauthorized access, which pose significant threats to Zakat funds collected as digital assets. It is expected that the findings of this research will educate Muslims on Zakat's obligations to digital assets. It will also inform policymakers, regulators, and stakeholders, guiding future initiatives and policies to foster compliance, transparency, and security in collecting Zakat from digital asset holdings.