eToro is a trading platform that allows users to trade various financial instruments, including stocks, currencies, and cryptocurrencies. Whether eToro is considered halal or not depends on various factors, such as the type of financial instruments being traded and the compliance of the platform with Islamic finance principles.
In general, Islamic finance prohibits transactions that involve riba (usury/interest), gharar (uncertainty/speculation), and maysir (gambling). Therefore, any financial instrument that involves these elements is considered haram (forbidden) in Islam.
Keep on reading to know whether or not eToro is halal.
Overview
eToro trading is primarily done through the use of interest-bearing overnight fees and financial staking, along with CFDs, which is considered haram.
The eToro platform offers both halal and haram financial instruments. For instance, the platform offers cryptocurrency trading, which is not considered halal by some Islamic scholars due to its speculative nature.
However, eToro also offers halal investment opportunities such as stocks and Islamic investment funds that comply with Islamic finance principles.
Therefore, whether eToro is halal or haram depends on the individual's use and the financial instruments being traded. If you are an eToro user, it is recommended to consult with a qualified Islamic scholar or financial advisor to assess the compliance of your trades with Islamic finance principles.
eToro’s Halal Compliance
Sharia law prohibits the following activities:
- Overnight rollover
- Forward sales and short
- Margin deposit and interests
- Loan
- Margin trading
eToro offers Islamic accounts, also known as swap-free accounts, to accommodate the needs of Muslim traders who wish to comply with sharia principles. The Islamic account is designed to provide a trading platform that complies with Islamic finance principles, prohibiting the charging or earning of interest on trades.
Here are some of the features of eToro's Islamic account:
- Swap-free trading: Islamic accounts are free from swap fees, which is a fee charged by some brokers for holding positions overnight.
- No interest-based trading: eToro's Islamic account does not charge any interest on open positions, which is in compliance with Islamic finance principles.
- Compliant financial instruments: The Islamic account is restricted to trading financial instruments that are considered halal, such as stocks, ETFs, and commodities.
- No hidden charges: eToro's Islamic account does not charge any additional hidden fees.
- Full access to eToro's trading platform: Islamic account users have access to all the trading features and tools available on eToro's platform.
- Personal account manager: eToro provides dedicated account managers to Islamic account holders to help them with their trading needs and queries.
- Same trading conditions: Islamic account users receive the same trading conditions as non-Islamic account holders, including spreads, leverage, and other trading terms.
To apply for an eToro Islamic account, users need to submit a request to the customer support team, along with relevant documentation to verify their identity. Once approved, the Islamic account is created, and users can begin trading in compliance with Islamic finance principles.
What Business Practices are Considered Halal?
Islamic finance principles require that investment and business practices should be ethical, socially responsible, and comply with the sharia law. Some of the investment and business practices that are considered halal in Islam are:
- Equity-based investments: Investments in companies that operate in compliance with Islamic finance principles, such as companies involved in healthcare, education, and technology, and those that do not engage in haram activities, such as alcohol, tobacco, and gambling.
- Real estate investments: Investment in properties that comply with sharia principles, such as those used for residential or commercial purposes, without engaging in any haram activity.
- Islamic banking: Banking products and services that are compliant with Islamic finance principles, such as Islamic savings accounts, Islamic mortgages, and Islamic credit cards.
- Profit-sharing partnerships: Investments in partnerships or joint ventures where the profit and loss are shared by the partners.
- Socially responsible investments: Investments that promote social and environmental causes, such as renewable energy, fair trade, and ethical business practices.
- Sukuk: Islamic bonds that are based on the principle of asset-backed financing.
- Islamic mutual funds: Mutual funds that invest in halal assets, such as shariah-compliant stocks and bonds.
It is essential to note that compliance with sharia principles can be subjective, and different scholars may have different opinions on what is considered halal or haram. Therefore, it is recommended to seek guidance from a qualified Islamic scholar or financial advisor before making any investment or business decision.
How to Open an Islamic Account with eToro?
Creating an eToro account that complies with Islamic law is as easy as following only these four steps.
1. Create an Account on eToro
Sign up for a real account first. To create an account, fill in your preferred username, password, and the email address you'd want to link to your profile.
2. Complete Your Profile Verification to Verify Your Account
You'll next be asked to finish setting up your account by adding further information and submitting identification documents: Proof of address (POA) and Proof of identity (POI). This will only take a few minutes to finish.
3. Put in $1,000 to Open an Account
Fund your trading account with a minimum of $1000 using one of their accepted payment methods.
4. Get in Touch With the Service Staff so that you can Set Up Your Islamic Account
The last step is to contact their customer service staff and request an Islamic account. They will start working on your request when they've confirmed you meet their criteria, and they'll let you know when your account has been changed to an Islamic account.
Worldwide Availability
Most of the user base of eToro comes from the United Arab Emirates and Saudi Arabia. That said, users from other countries can also use it without restrictions. Some countries supported by eToro are:
- Algeria
- Azerbaijan
- Jordan
- Malaysia
- Morocco
- Saudi Arabia
- Senegal
- United Arab Emirates
- Bangladesh
- France
- India
- Indonesia
- Ivory Coast
On the other hand, this platform is blocked in the following regions due to changes in regulations:
- Afghanistan
- Burkina Faso
- Cameroon
- Mali
- Niger
- Nigeria
- Pakistan
- Russia
- Sierra Leone
- Somalia
- Sudan
- Syria
- Tajikistan
- Tanzania
- Tunisia
- Turkey
- Turkmenistan
- Uzbekistan
- Yemen
- Chad
- China
- Congo (DR)
- Ethiopia
- Guinea
- Iran
- Iraq
- Libya
Does eToro Ask for Proof of Religion?
Islamic account is provided only to the Muslim clientele of eToro. When registering, the app requires you to confirm your identity and submit proof of religion to verify your Muslim identity. This can be done by submitting a document acquired from your local religious organization.
But here’s one last caveat, you might be thinking, how does the Islamic version eToro adhere to rules if it makes money from trading? This is possible because this platform gets revenue from all the spreads which are sourced based on the difference between the currency pair’s selling & buying prices. Furthermore, any extra account management fees are also waived.
Conclusion
While certain practices on the conventional eToro platform do not abide by Islamic rules for what’s halal and what’s not, they offer a dedicated Islamic account that can be accessed easily using a few simple steps.
Make sure to weigh your options and compare your pick with other similar platforms to see what is best for you.
