Rulings on Currency Exchange

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Its Definition

Currency exchange is selling of one currency for another, for example, the selling of dinars of gold for dinars of silver.

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Its Ruling

Currency exchange is permissible, because it is a part of trading, which is allowed in the Qur’an and the Sunnah. Allah said:

  “Allah has permitted trading.” (2:275)

The Messenger of Allah ﷺ said:

 “ “Sell gold for silver however you wish if it is hand to hand (i.e. if payment is made on the spot”

Its Wisdom

The wisdom behind allowing the exchange of currency is to grant ease to the Muslim in transferring his currency to another currency, which he is in need of.

Its Conditions

The condition for allowing the currency exchange is the receipt of the currency on the spot, which means hand to hand. This is due to the Messenger of Allah’s statement:

 “ “Sell gold for silver however you wish if it is hand to hand (i.e. if payment is made on the spot.”

And the statement of Umar, may Allah be pleased with him,

  “No, by Allah! Do not separate from him until you take (the price) from him.”

The Messenger of Allah ﷺ said:

 “ “The sale of gold for silver is Riba, unless it is from hand to hand (i.e. payment is made on the spot)”

Umar said this to Talhah bin Ubaydullah when Malik bin ‘Aws sought to make an exchange with him. So he (Malik) took the dinars and said to him, “Wait until my treasurer comes back from the forest.” He meant that at that time he will pay him the dirhams for the dinars he took. (Al-Bukhari)

Its Regulations

There are certain rules for currency exchange. They are as follows:

1. It is permissible to exchange gold for gold and silver for silver as long as they are both equal in measurement, whereas neither of them should be more than the other. This is due to the statement of the Messenger of Allah ﷺ:

 “ “Do not sell gold for gold unless equivalent in weight. And do not sell fewer amounts for greater amounts or vice versa. And do not sell silver for silver unless equivalent in weight. And do not sell fewer amounts for greater amount or vice versa. And do not sell gold or silver that is not present (at the moment of exchange) for gold or silver that is present.” (Al-Bukhari and Muslim)

2. The exchange should take place on the spot. This is due to the statement of the Messenger of Allah ﷺ|:

 “ “The sale of gold for gold is Riba except if it is from hand to hand, and the sale of silver for silver is Riba except if it is from hand to hand.” (Al-Bukhari and Muslim)

3. It is permissible to trade a variation of quality with
different types of items. For example, selling gold for silver if
the deal takes place on the spot. This is due to the
statement of the Messenger of Allah ﷺ:

 “ “If these items differ, then sell as you wish if it is from hand to hand.” (Al-Bukhari Muslim)

4. If both parties depart before the receipt of their payment,
then the exchange is invalid. This is due to the statement of
the Messenger of Allah ﷺ:

 “ “Unless it is from hand to hand.” (Al-Bukhari and Muslim)

And his ﷺ statement:

 “ “If it is from hand to hand.”) (Al-Bukhari and Muslim)

Extracted from Minhaj al Muslim published by Dar as Salam

(NOTE: If you want to build a strong and powerful relationship with Allah, check out Islamia TV, where you can watch Islamic speakers from across the globe deliver inspiring and motivational courses. Learn more at www.islamia.tv.)



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