HCS Score
Red Line Violations
Research Opinion, Not a Fatwa
These are absolute prohibitions in Islamic finance. If any red line is triggered, the asset is automatically classified as HARAM.
Ecosystem Riba Exposure
Not directly or indirectly connected to interest generating mechanisms
Gambling / Betting
No gambling or betting mechanism
Haram Industry
Not involved in haram industry
Based on Red Line Screening and HCS Scoring.
Haram / Non Compliant
This cryptocurrency is evaluated as Haram for investment and use because the asset demonstrates material Sharia compliance concerns within the CoinStudy HCS framework.
Explanation
This asset shows significant concerns related to Sharia compliance, financial structure, or speculative design.
Reviewed by
CoinStudy Shariah Board
CoinStudy classifies USDT as Haram under its HCS structural methodology because the token's issuer maintains a substantial reserve portfolio containing interest-generating Treasury securities, which CoinStudy treats as material Ecosystem Riba Exposure at the instrument level. This is a structural HCS classification of the instrument and does not mean that every user transaction involving USDT is itself an interest-bearing transaction. The CoinStudy Shariah Board Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance, reaches a different conclusion regarding USDT's use as a digital currency, considering the issuer's backend interest exposure insufficient by itself to prohibit the user's permissible use. Both positions are documented in full on this page and the methodological basis for each is explained precisely. Muslim investors who use USDT in Bangladesh, Pakistan, Nigeria, Indonesia, Turkey, and across every Muslim-majority country where it has become a practical financial tool deserve both positions presented honestly rather than only one.
CoinStudy's HCS structural classification: Haram / Non-Compliant based on material Ecosystem Riba Exposure from the Treasury bill reserve structure. Chairman Dr. Usman Quddus's ruling: permissible for use as a digital currency with caution, with the complete ruling and its specific conditions documented in the Scholarly Disagreement section. These two positions are methodologically distinct rather than contradictory. The HCS methodology classifies the instrument at the issuer and reserve architecture level. The Chairman's ruling addresses the user's actual transaction and does not treat the issuer's backend interest activity as automatically transferring to the user's conduct. Both methodologies are serious and both are documented fully here.
Tether is a fiat-collateralized stablecoin issued by Tether Limited, incorporated in the British Virgin Islands and headquartered in El Salvador following its January 2025 relocation. USDT is designed to maintain a value of approximately one US dollar through a reserve backing system. For every USDT in circulation Tether maintains reserve assets intended to support redemption at approximately one dollar. USDT is a major settlement and liquidity layer across the cryptocurrency ecosystem, operating on more than a dozen blockchains including Ethereum, Tron, Solana, and BNB Chain. According to CoinMarketCap research, USDT's market capitalization as of September 30, 2026 is approximately $183.8 billion with 24-hour trading volume of approximately $70.68 billion. According to Datawallet research, Tether reached a peak market capitalization of approximately $187 billion in 2026, representing approximately 58% to 63% of the total stablecoin market.
Reserve Composition: June 30, 2026
According to the June 30, 2026 BDO Italia assured attestation, Tether's reserve composition as documented by eco.com research consists of approximately 74.91% cash and cash equivalents, 10.03% precious metals, 7.17% secured loans with none to affiliated entities, 3.09% Bitcoin, 2.79% other investments, and 2.00% public equities. According to Stablecoin Insider research from Q1 2026, US Treasury bills represent approximately 81% of the cash and cash equivalents component, making them the dominant single asset in the overall reserve portfolio.
Tether's 2026 Financial Performance
According to Coinlaw research, Tether reported Q1 2026 net operating profit above $1 billion with net equity at $8.23 billion. According to Forkast News research, Tether reported net operating profit of $1.5 billion for a recent quarter representing a 50% increase over the previous period. Interest income from Treasury bill holdings is a major source of this profitability and contributes materially to the economics supporting Tether's reserve-management business. According to Datawallet research, as government debt yields remain high in 2026, Tether captures substantial returns from its reserve holdings while paying zero income to USDT holders.
The GENIUS Act: Non-Compliance as Regulatory Context
The GENIUS Act, signed into US law on July 18, 2025, establishes a federal regulatory framework for payment stablecoins. According to KuCoin research and Stablecoin Insider research, USDT is not GENIUS Act compliant because Tether is incorporated outside the United States without a US banking charter, and approximately 25.1% of reserve composition including Bitcoin, precious metals, and secured loans does not qualify as GENIUS Act-eligible reserve assets. The GENIUS Act requires eligible reserves to consist of cash, Treasury bills maturing within 93 days, repurchase agreements, money market funds, and Federal Reserve balances, explicitly excluding gold and Bitcoin.
An important methodological note: regulatory non-compliance does not equal Shariah non-compliance. GENIUS Act exclusion and MiCA non-compliance are governance and transparency context for CoinStudy's assessment. They inform the Transparency and Governance dimension rather than the Ecosystem Riba Exposure determination. CoinStudy documents them as context that Muslim investors should understand rather than as evidence of Riba.
USAT: Tether's US Domestic Response
According to Coin360 research, Tether launched USAT on January 27, 2026, a US-specific stablecoin issued by Anchorage Digital Bank under OCC oversight with Cantor Fitzgerald as reserve custodian. USAT is designed to meet GENIUS Act reserve composition and transparency requirements. USAT and USDT are structurally distinct instruments requiring separate individual compliance assessments. USAT's GENIUS Act-compliant reserve structure and different regulatory standing make it a separate object from USDT for CoinStudy's analytical purposes.
MiCA Non-Compliance: EU Governance Context
USDT was delisted from EU-regulated cryptocurrency exchanges following non-compliance with MiCA, the European Union's Markets in Crypto-Assets regulation. This regulatory exclusion from two of the world's major regulated financial markets is the most significant governance development in USDT's 2026 history and is reflected in the Transparency and Governance assessment as a governance and regulatory accountability concern rather than as a Riba finding.
Reserve Transparency: BDO Italia Attestation
Tether's reserves are attested quarterly by BDO Italia under ISAE 3000R standards. This attestation is not a full audit by a Big Four accounting firm. The absence of a full independent audit by a globally recognized firm is an ongoing transparency concern that the Chairman's ruling directly acknowledged, noting that it is not certain that there is a dollar behind every unit.
Tether's Freeze Capability: Governance Observation
According to Coinlaw research, on May 8, 2026 Tether published a public address freeze action across hundreds of wallets, demonstrating the seize-freeze-burn technical capability. This confirms that USDT is not censorship-resistant: Tether can freeze individual wallets unilaterally. This is a Transparency and Governance concern reflecting centralized control over a token widely used as a payment instrument. It creates governance and counterparty risk concerns for users rather than creating an additional Riba concern. It is documented here as governance context rather than as a Riba finding.
CoinStudy applies principles relevant to AAOIFI Sharia Standards using the framing principles relevant to rather than asserting direct standard applicability. The most important AAOIFI-relevant analytical question for USDT is what the holder actually owns. The principles relevant to AAOIFI Sharia Standard 21 on Financial Papers provide a framework for this analysis. USDT represents a redemption claim against Tether's balance sheet for approximately one dollar rather than ownership of specific reserve assets or a claim to the income those assets generate. Whether this redemption claim represents a claim on specifically defined permissible assets or a general creditor relationship with Tether whose economic operations include interest-bearing reserve management is the central analytical question that different scholarly frameworks answer differently. The same USDT token can be used in materially different ways: as a currency or payment medium, as a redemption claim held briefly in transit, as a digital asset held for investment, or as collateral for leveraged positions. The Chairman's ruling specifically addresses use as a digital currency. CoinStudy's structural classification addresses the instrument's reserve architecture. These are analytically distinct objects requiring distinct assessments and the Chairman's ruling cannot be read as extending permissibility to uses of USDT beyond what his ruling specifically addresses.
CoinStudy's Ecosystem Riba Exposure assessment of USDT proceeds through an explicit analytical pathway addressing the four objects identified in the scope section above. At Object 3, the USDT token level: a USDT holder owns a redemption claim against Tether's balance sheet representing approximately one US dollar. The holder does not directly own Treasury bill assets. The holder has no contractual claim to T-bill coupon income. The holder is not a depositor in the conventional bank sense with associated interest rights. At issuance and redemption Tether manages fiat and other reserve assets supporting USDT. Those reserves generate income for Tether including income from Treasury securities. Secondary-market USDT holders often did not interact with Tether directly at all, acquiring USDT through exchanges, payments, transfers, or other transactions without depositing dollars with Tether.
At Object 2, the reserve portfolio level: according to the June 30, 2026 BDO Italia attestation, approximately 74.91% of Tether's reserves are in cash and cash equivalents primarily consisting of US Treasury bills. US Treasury bills are interest-bearing government debt instruments. Interest income from these reserves is a major source of Tether's reported profitability and contributes materially to the economics supporting its reserve-management business. The approximately 25.1% of reserves in precious metals, Bitcoin, secured loans, public equities, and other investments does not generate direct interest income. CoinStudy acknowledges this precision honestly.
The HCS analytical question: does the material presence of interest-generating reserve assets at the substantial majority of the issuer's reserve portfolio trigger the Ecosystem Riba Exposure red line for the USDT token even though holders do not directly receive or own those interest-generating assets?
CoinStudy's HCS answer: yes, under the specific rule that CoinStudy applies consistently across all stablecoin analyses. CoinStudy's Ecosystem Riba Exposure red line asks whether the classified asset's economic function and stability mechanism materially depend on interest-generating mechanisms at the issuer and reserve architecture level. Because Treasury securities constitute a substantial portion of Tether's reserve portfolio and interest income from those securities materially supports the economics of Tether's reserve-management business, CoinStudy treats this as material Ecosystem Riba Exposure at the instrument level triggering the red line.
This HCS rule produces the structural Haram classification. It does not mean holders own Treasury bills, receive interest, or conduct interest-bearing transactions when using USDT for legitimate purposes. The classification is an assessment of the instrument's reserve architecture rather than an assessment of any specific user transaction. The methodological basis for this HCS rule is the principle that instruments whose stability and redemption capability materially depend on prohibited income sources carry that structural concern at the instrument level even when individual holders are structurally removed from the prohibited income. This is the same principle CoinStudy applies to USDC, USAT, FDUSD, and all other T-Bill-backed stablecoins consistently.
Layer 1 HCS Result: Haram / Non-Compliant : One Red Line Failure
Ecosystem Riba Exposure: ❌ Failed. Treasury bill holdings constitute a substantial majority of Tether's reserve portfolio and interest income from those holdings materially supports the economics of Tether's reserve-management business at the issuer level. CoinStudy treats material issuer-level interest dependence of this scale as Ecosystem Riba Exposure under the HCS structural methodology. This is one analytical finding through one pathway.
Gambling and Betting: ✅ Passed.
Haram Industry: ✅ Passed.
No Double-Counting Methodology Note: The Ecosystem Riba Exposure red line reflects the complete structural compliance concern from Tether's interest-bearing reserve portfolio through a single analytical pathway. CoinStudy does not assess the same underlying mechanism as multiple independent red-line failures.
Overall HCS Structural Classification: Haram / Non-Compliant : One Red Line Failure
Under CoinStudy's structural HCS classification of the USDT instrument:
Holding USDT as an investment or store of value = Haram ❌ under CoinStudy's structural instrument-level assessment
Depositing USDT into DeFi lending protocols to earn yield = Haram ❌ lending mechanism creates a separate Riba concern layered on top of the structural concern
Holding USDT in yield-bearing accounts that distribute reserve interest income to depositors = Haram ❌ direct interest income distribution is definitively Riba
Using USDT as collateral for interest-bearing loans = Haram ❌
USDT perpetual futures or leveraged derivative products = Haram ❌ based on the prohibited mechanisms in those products
Under the Chairman's conditional permissibility ruling documented in full in the Scholarly Disagreement section below:
Using USDT purely as a transient medium of exchange for genuinely permissible commercial transactions = addressed by the Chairman's ruling. Read the complete ruling and its specific conditions below before acting on this.
Do I understand that CoinStudy's Haram classification applies to the USDT instrument's reserve architecture at the issuer level, and that the Chairman's conditional permissibility ruling for use as a digital currency addresses the user's actual transaction through a different analytical framework, and that both positions deserve honest engagement rather than simply selecting the one that is more convenient? Am I aware that a USDT holder owns a redemption claim against Tether's balance sheet rather than specific Treasury bill assets, and that CoinStudy's structural classification is an assessment of the instrument's reserve architecture rather than a statement that holding USDT is identical to personally holding interest-bearing bonds? Do I understand that depositing USDT into DeFi lending protocols to earn yield, holding USDT in yield-bearing accounts, and using USDT as collateral for interest-bearing loans are each Haram under both the structural HCS classification and under the Chairman's conditional ruling which specifically limits permissibility to use as a digital currency? Am I aware that Tether can freeze any USDT wallet unilaterally as demonstrated in May 2026, and that USDT is not GENIUS Act compliant and has been delisted from EU exchanges under MiCA, and that these governance characteristics are relevant context for my assessment of USDT regardless of which compliance position I follow?
Tether (USDT) is classified as Haram / Non-Compliant under the CoinStudy HCS structural methodology. The classification is based on the Ecosystem Riba Exposure red-line failure arising from Tether's reserve portfolio in which Treasury securities constitute a substantial majority and interest income from those securities materially supports the economics of Tether's reserve-management business at the issuer level. This structural classification of the instrument does not mean that every user transaction involving USDT is itself an interest-bearing transaction.
The Chairman's ruling that use of USDT as a digital currency is permissible with specific conditions represents a different and serious scholarly position that Muslim investors are fully entitled to follow. The methodological difference is explained precisely in the Scholarly Disagreement section below.
CoinStudy's HCS structural classification and the Chairman's jurisprudential ruling reach different conclusions on USDT because they apply two methodologically distinct analytical frameworks to two different objects.
CoinStudy's HCS structural methodology classifies the USDT instrument based on material characteristics of its issuer's reserve architecture. It asks whether the instrument's stability and redemption capability materially depend on interest-generating mechanisms at the issuer level. The answer for USDT is yes based on the substantial Treasury bill reserve composition, producing the structural Haram classification. This methodology is applied consistently to every stablecoin CoinStudy assesses.
The Chairman's jurisprudential methodology distinguishes the issuer's backend transactions from the user's actual use of the token. It does not treat the issuer's Riba activity as automatically transferring to the user who uses the token as a medium of exchange. Under this framework the relevant question is not what the issuer does with its reserves but what the user does with the token. A user who uses USDT to transfer value, make a payment, or settle a permissible commercial transaction does not directly own Treasury bills, does not receive interest income, and does not contractually participate in the interest-bearing reserve management. The user holds a redemption claim briefly, uses it for a permissible purpose, and transfers it to another party. This framework finds that the issuer's Riba activity belongs to the issuer and does not automatically contaminate every downstream user's permissible transaction.
Both frameworks are serious scholarly methodologies held by serious scholars. Neither is obviously correct to the exclusion of the other. Muslim investors should understand both and follow the guidance of qualified scholars they trust.
Our Shariah Board Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance, reviewed the CoinStudy HCS analysis of USDT and provided the following direct ruling preserved exactly as stated:
"Scholars have differing opinions regarding USDT and other fiat-backed stablecoins. Some scholars consider it impermissible and some consider it permissible. According to our research, its use is permissible. Its backend structure and currency leveling method is not interest in totality, however caution is necessary due to the presence of interest-based transactions within it. There is also an element of Gharar in that it is not certain that there is a dollar behind every unit. Despite this, its use as a digital currency is correct. If it is used in halal means the profit will be halal, and if it is used in haram dealings it will be haram."
The Chairman's ruling is among the most carefully worded in CoinStudy's analysis series and must be read with the precision it deserves rather than selectively.
The Chairman begins by confirming genuine scholarly disagreement, validating that CoinStudy's structural Haram classification and his permissibility ruling for use both represent serious scholarly positions. He does not dismiss the structural concern but addresses a different analytical object.
He draws a careful technical distinction: the backend structure is not interest in totality. The June 30, 2026 reserve data confirms this technically: approximately 25.1% of reserves are in precious metals, Bitcoin, and other non-interest-generating assets. He immediately follows this by stating caution is necessary due to the presence of interest-based transactions within it, meaning the ruling explicitly acknowledges the Riba-adjacent elements in the reserve structure.
He identifies a specific Gharar concern: it is not certain that there is a dollar behind every unit. This reflects the documented reserve transparency limitations including the absence of a full Big Four audit. This Gharar concern applies under his permissibility ruling rather than being eliminated by it.
The operative conclusion is specific and conditional: its use as a digital currency is correct. If used in halal means the profit will be halal. If used in haram dealings it will be haram. This ruling addresses USDT as a transient medium of exchange for permissible commercial transactions. It does not extend permissibility to depositing USDT into DeFi lending protocols to earn yield, holding USDT in yield-bearing accounts that distribute interest income to depositors, using USDT as collateral for interest-bearing loans, or using USDT in perpetual futures and leveraged derivative products. Each of those activities involves a separate compliance question beyond what the Chairman's ruling on medium-of-exchange use addresses.
The Chairman's ruling applies to USDT and to structurally similar fiat-backed stablecoins. CoinStudy's structural HCS classification remains unchanged for the instrument itself. The Chairman's ruling adds the serious and important scholarly position that despite structural concerns the user's permissible use as a digital currency is correct under his assessment. Muslim investors should read both positions, understand the methodological basis for each, and consult qualified scholars they trust for personal guidance on their specific usage.
Read detailed analysis and concepts here:
Real Risks of Haram Crypto Projects
Disclaimer: This analysis is provided for educational and research purposes only based on guidance from CoinStudy's HCS Shariah Board including Chairman Dr. Usman Quddus, PhD in Islamic Studies & Finance. CoinStudy's structural Haram classification and the Chairman's conditional permissibility ruling represent methodologically distinct assessments documented here in full. The structural classification is an instrument-level assessment of reserve architecture and does not mean every USDT user transaction is interest-bearing. The Chairman's ruling is a jurisprudential assessment of user-level conduct and does not extend to yield-bearing or leveraged uses of USDT. Muslim investors should consult qualified scholars they trust for personal guidance. CoinStudy does not issue personal fatwas or financial advice.
Authoritative ruling from the Chairman of the CoinStudy Sharia Board.
"Scholars have differing opinions regarding USDT and other fiat-backed stablecoins. Some scholars consider it impermissible and some consider it permissible. According to our research, its use is permissible. Its backend structure and currency leveling method is not interest in totality, however caution is necessary due to the presence of interest-based transactions within it. There is also an element of Gharar in that it is not certain that there is a dollar behind every unit. Despite this, its use as a digital currency is correct. If it is used in halal means the profit will be halal, and if it is used in haram dealings it will be haram."
CoinStudy's assessment based on this ruling:
Dr. Usman Quddus's ruling on USDT is one of the most nuanced and carefully worded in our entire analysis series. It is important to read it precisely rather than selectively, because the chairman makes several specific and distinct points that together constitute the complete ruling.
The chairman begins by acknowledging genuine scholarly disagreement. This is intellectually honest and reflects the reality that qualified Islamic finance scholars examining the same instrument have reached different conclusions. CoinStudy's structural Haram classification represents one scholarly position. The chairman's personal ruling represents another. Both positions are documented openly on this page.
The chairman then draws a careful technical distinction. He does not say Tether's reserve structure is free from Riba concerns. He says the backend structure and currency leveling method is not interest in totality, and he explicitly follows this by saying caution is necessary due to the presence of interest-based transactions within it. This is not a blanket permissibility ruling. It is a nuanced position that acknowledges the interest-adjacent elements while declining to classify the total mechanism as pure Riba.
The chairman also identifies a Gharar concern directly: it is not certain that there is a dollar behind every unit. This confirms that even under his permissible ruling, USDT carries genuine uncertainty that Muslim investors must acknowledge. Tether's reserve transparency history and the composition of reserves with Treasury bills and other instruments are real concerns even in the ruling that permits use.
The operative conclusion is specific and conditional: its use as a digital currency is correct. If used in halal means the profit will be halal. If used in haram dealings it will be haram. This ruling addresses USDT as a medium of exchange for permissible transactions, not as an investment or yield-generating instrument.
This means the chairman's ruling permits using USDT to pay for goods, transfer value across borders, participate in permissible crypto transactions, and convert between currencies for legitimate commercial purposes. It does not permit depositing USDT into lending protocols to earn yield, using USDT as collateral for interest-bearing loans, or holding USDT in yield accounts that distribute Tether's reserve interest income to depositors.
This ruling applies to USDT and to other structurally similar fiat-backed stablecoins including USDC, FDUSD, and PYUSD. CoinStudy's structural Haram classification remains unchanged for the instrument itself, reflecting the interest-bearing reserve structure and Gharar elements the chairman himself identified. The chairman's ruling adds the scholarly position that despite these structural concerns, use as a pure medium of exchange in halal transactions is permissible under his assessment. Both positions are documented here so Muslim investors can make informed decisions in consultation with their own scholars.
Guaranteed Interest
No guaranteed interest obligations
Synthetic Interest Products
No synthetic interest instruments
3 Red Lines Failed
This asset is automatically classified as HARAM.
Is Ethena USDe halal?
USDE · HCS 0 · Haram
