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Q&A: Short Selling in Digital Currency

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This is an English translation (via GPT-5.4). Read the original Hebrew version.

Short Selling in Digital Currency

Question

Hello Rabbi, is it permissible to do short selling in a digital currency such as Bitcoin / Ethereum, etc.?
If so, is it also permissible to do such trading over a period longer than one day?
 
Thank you very much,

Answer

In my poverty, I’m not knowledgeable about this.
Do you mean making a contract in which you profit from a drop in Bitcoin’s value? (a short)
What would be the problem with that? And regarding a day, do you mean that the determining valuation date is more than a day away? Why would that matter?

Discussion on Answer

Z. (2021-09-01)

Hello Rabbi, thank you for the quick response. I mean actual short selling, just like with stocks. The broker lends me a share and I then sell it cheaply later if it goes down.
I don’t know whether there is any problem with trading that is not intraday.

Michi (2021-09-01)

I don’t see a problem with it. And I also don’t see why the time frame (a day or more) would make any difference.
Is there a specific problem that concerns you? Since I’m not familiar with this area, it’s possible I’m missing something.

Z. (2021-09-01)

I didn’t know whether a digital currency has the same status as a stock; that’s what I wanted to clarify.

Michi (2021-09-01)

As far as I understand, there is no difference at all. It is a commodity sold on the market, like any other commodity. The sale of money is already mentioned in the Talmud at the beginning of the chapter HaZahav (“gold acquires silver”).
Beyond that, I’m also not sure Bitcoin is money rather than a commodity. That seems to me a fairly arbitrary definition. It is a commodity like diamonds, which are rare and difficult to mine. But as I said, it doesn’t matter.

Oren (2021-09-01)

I’m attaching an old answer of yours to a similar question I asked you in the past:
Questioner:
Regarding the permissibility of the process of short selling through a broker abroad for foreign stocks. The process works as follows: the stock owner (me) lends shares to the party requesting the loan in the market (some random person abroad). That borrower pays me and the broker (the intermediary between us) interest on the share loan. After the shares have changed hands, the borrower sells the shares on the market. Toward the end of the loan period (say, a month), the borrower buys back those same shares on the market and returns the shares to me + interest. The economic logic behind the move from the borrower’s perspective is that if the borrower thinks the shares will go down during the loan period, he will profit. For example, suppose the borrower sold the shares he borrowed from me on 1/11 for 100 dollars, and bought them back at the end of the loan period (1/12) for 90 dollars; that way he made a profit of 10 dollars, and suppose he paid 1 dollar in interest, for a total net profit of 9 dollars.

The question is whether such an arrangement, in which I lend shares, is permissible, or whether there is a prohibition of interest here, or a prohibition of lending a se’ah for a se’ah.

I thought of one point that perhaps provides grounds for leniency because of the majority of non-Jews abroad. I would be happy to hear your opinion on the matter.
——————————————————————————————
Rabbi:
It is indeed somewhat similar to interest in a case of se’ah for a se’ah, but in my opinion there are several reasons for doubt: 1. There is no guaranteed profit here (after all, you disagree between yourselves about whether the stock will go down or up), so clearly this is at most rabbinic interest. 2. The whole issue of interest in relation to trade whose purpose is monetary profit (as opposed to a loan for the needy) is problematic. I very much doubt whether the prohibition of interest applies there at all. 3. The question is whether shares are like an ordinary tangible se’ah of produce (and I seem to recall that several halakhic decisors have already discussed this). 4. Add to that the majority of non-Jews, and it comes out to be even less than a rabbinic-level doubt.
Therefore, bottom line, it seems to me there is no obstacle to doing this.

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