If the process of currency trading does not involve the broker’s leverage system, which is the well-known Forex system that we have previously explained in detail, and if the traded money is solely the trader’s own capital used to benefit from currency price differences, then this is what we refer to in Islamic jurisprudence as “Ṣarf”.

Ṣarf refers to the exchange of currencies, i.e., trading money for money. This is the definition agreed upon by the majority, though the Mālikī school restricts it to the exchange of currency with a different type, such as gold for silver or dollars for pounds. If the exchange involves the same currency, the jurists call it “Murāṭalah” or “Mubādalah” (bartering).

The default ruling in Ṣarf—i.e., currency exchange—is that it is permissible because it is a type of sale, as Allāh Almighty said: “But Allāh has permitted trade” [Al-Baqarah: 275]. This is the view held by the four major schools of Islamic law.

This ruling is also supported by the Sunnah, such as the ḥadīth of Mālik ibn ᾽Aws, where he sought to exchange one hundred dinars. [He said:] Ṭalhah ibn ῾Ubaydullāh called me, and we negotiated until he exchanged it from me. He took the gold, examined it, and then said: “Wait until my treasurer arrives from the grove.” ῾Umar heard this and said: “By Allāh, you will not leave until you have taken it from him.” The Messenger of Allāh (peace be upon him) said: “Gold for gold is ribā unless it is hand to hand; wheat for wheat is ribā unless it is hand to hand; barley for barley is ribā unless it is hand to hand; dates for dates are ribā unless it is hand to hand.” [Al-Bukhārī and Muslim].

Here, ῾Umar’s statement refers to the necessity of immediate exchange in the transaction to avoid any dispute or disagreement over the price.

There is also a narration from Sulaymān ibn Abī Muslim, who said: “I asked Abu Al-Minhāl about Ṣarf (currency exchange) being conducted hand to hand, and he said: ‘My partner and I bought something hand to hand and on credit. Then Al-Barā᾽ ibn ῾Aāzib came to us, and we asked him, and he said: ‘My partner and I did the same, and we asked the Prophet (peace be upon him) about it, and he said: ‘If it is hand to hand, take it; and if it is on credit, leave it.'” [Al-Bukhārī and Muslim].

What is required in Ṣarf is equivalence when the currencies are of the same type, such as exchanging dollars for dollars, and immediate exchange when the currencies differ, such as exchanging dollars for pounds. In the latter case, equivalence is not required because the currencies are different, but immediate exchange is necessary to avoid disputes, especially in a market that fluctuates with time and operates continuously.

It is also important to note that “immediate exchange” here refers to a constructive exchange, not necessarily a physical one. The buyer and seller do not need to be physically present; it suffices that the exchange is executed through actions like submitting and accepting. This is similar to the traditional Islamic concept of Ḥawālah (Transfer) or Saftajah (Bill of exchange), which is mentioned in classical Islamic legal texts.

Fatwā issued by Dr. Khālid Naṣr