Emerging Risks of *Gharar* (Uncertainty) and *Riba* (Usury) in Cryptocurrency Smart Contracts: An Analytical Jurisprudential Study

Abstract

This research explores the emerging patterns of Gharar (uncertainty/hazard) and Riba (usury/interest) risks arising from the application of smart contracts within the ecosystem of cryptocurrencies and Decentralized Finance (DeFi) platforms. It achieves this by defining their technical reality, determining their Islamic legal status (Fiqhi characterization), and analyzing potential Shariah prohibitions.

The study adopts an inductive methodology to gather relevant technical concepts and Islamic jurisprudence rulings, alongside an analytical methodology to examine and evaluate instances of Gharar and Riba in light of Islamic legal maxims and resolution bodies.

The research concludes that judging a smart contract does not depend merely on its nature as a digital or self-executing contract, but rather on the substance of the transaction, its subject matter, terms, and outcomes. Furthermore, it reveals that automation, and the immutability of code may lead to novel forms of Gharar, such as those originating from software vulnerabilities, reliance on external data sources (oracles), or sharp volatility in digital asset values. It also finds that certain DeFi applications involve usurious increases or conditional returns on lending and liquidity deposits, even if marketed under different terminology.

The paper recommends subjecting smart contracts to joint Shariah and technical audits prior to deployment, enforcing transparency and auditability on platforms, and incorporating clear mechanisms for contract rescission (Iqalah) and error correction, while verifying the permissibility, ownership, and deliverability of the transaction’s subject matter.