Layer 1: Business activity
Layer 1 asks: what is the protocol's core economic activity, and is any of it haram by category? Riba (interest-bearing yield, lending markets, T-bill-collateralised stables), maysir (gambling, prediction markets, lotteries), and haram sectors (adult content, conventional insurance fractional ownership, alcohol/pork industries) are exclusion categories. The threshold is 5% of network revenue — below this, incidental exposure is tolerated with disclosure.
Layer 2: Financial ratio
Layer 2 asks: how is the protocol financed? AAOIFI-derived debt-to-assets threshold of 30%. Protocols whose treasuries are predominantly held in interest-bearing instruments breach the ratio. Newly launched protocols without 12 months of on-chain treasury history are quarantined pending sufficient data.
Layer 3: Trade execution
Layer 3 asks: are we trading in a way the framework permits? Spot only. T+0 settlement. No leverage, no margin, no derivatives. Liquidity floors per tier ($50M / $10M / $5M 24-hour volume). Concentration caps per tier (33% / 25% / 20%). This is enforced at every trade — not just at universe construction.
Why all three matter
A coin can pass Layer 1 (the protocol does nothing haram) and still fail Layer 2 (its treasury holds interest-bearing assets that fund operations). A coin can pass both and still fail Layer 3 (it is too thinly traded for the tier's liquidity floor). The layers cover three different vectors and all three matter.