The Mufti said the digital crypto-currency carried risks of "fraudulence, lack of knowledge, and cheating," according to the BBC.
Risks could arise because the virtual currency was not subject to surveillance by any centralized authority, the Mufti said.
"Bitcoin is forbidden in Sharia as it causes harm to individuals, groups and institutions," he said in his declaration, or fatwa, according to the Egyptian daily Ahram.
In August 2017, Egypt's first bitcoin exchange was opened. The crypto-currency was declared illegitimate by the authorities last month.
An adviser to the Grand Mufti, Magdy Ashour, told Egypt Today that Bitcoin was "used directly to fund terrorists". Egypt's Christian and Sufi Islam communities have reeled in recent months by a series of attacks on the Sinai Peninsula perpetrated by ISIS-linked militants.