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Key Takeaways
A prominent Islamic scholar issued a fatwa declaring cryptocurrency transactions impermissible, creating tension between religious guidance and Pakistan’s newly established crypto regulatory framework.
Pakistan’s crypto regulator emphasized evaluating digital assets individually, arguing that stablecoins, tokenized assets, and cryptocurrencies require separate technical and Sharia assessments.
The debate could shape Pakistan’s crypto future, particularly the licensing of exchanges, development of sovereign stablecoins, and Sharia-compliant tokenization initiatives.
Crypto Fatwa Tests Pakistan’s New Digital Asset Framework
A fatwa from prominent Islamic scholar Mufti Muhammad Taqi Usmani has triggered debate over Pakistan’s push to regulate cryptocurrencies. The ruling declared purchases made with digital tokens, including USDT, impermissible under Islamic law.
Fatwa rejects crypto as recognized wealth
Usmani issued the ruling after responding to a public question about purchasing goods with cryptocurrency. He concluded that cryptoassets do not qualify as maal, or recognized wealth and property, under his interpretation of Islamic law.
The ruling also rejected using cryptocurrency to buy an educational course. Usmani serves as president of Wifaq-ul-Madaris Al-Arabia Pakistan and leads Darul Uloom Karachi. He previously served on the Shariah Appellate Bench of Pakistan’s Supreme Court and chairs the Shariah board of the Accounting and Auditing Organization for Islamic Financial Institutions.
A fatwa is a religious legal opinion rather than state law. It does not overturn Pakistan’s Virtual Assets Act or prevent regulators from licensing crypto companies. Usmani’s standing in Islamic finance could still influence consumers, financial institutions and policymakers considering Sharia-compliant digital asset products.
Crypto regulator calls for asset-by-asset reviews
Bilal bin Saqib, chairman of the Pakistan Virtual Assets Regulatory Authority, met Usmani after the ruling circulated publicly. Saqib described the discussion as constructive and said both sides agreed on the need to protect Pakistanis from fraud, exploitation and financial harm.
Saqib argued that cryptocurrencies should not be treated as a single category. He said stablecoins, tokenized real-world assets, blockchains and other products have different structures and uses that require separate technical and Sharia assessments. “They merit careful technical assessment alongside rigorous Shariah examination, rather than being viewed through a single lens,” Saqib wrote in an X post.
Pakistan has formalized crypto regulation
Pakistan enacted the Virtual Assets Act, 2026, creating PVARA as an independent regulator for virtual assets and service providers. Exchanges, custodians, wallet operators, token issuers and investment platforms must obtain authorization before serving customers in the country.
PVARA is currently accepting no-objection certificate applications as an initial step toward full licensing. Licensed businesses must meet anti-money-laundering, customer verification, cybersecurity and consumer protection requirements.
The State Bank of Pakistan also allowed banks to open accounts for licensed virtual asset service providers in April. Banks must verify regulatory licenses and maintain segregated rupee accounts, but they cannot hold or invest in crypto using their own funds or customer money.
Sharia compliance is central to government plans
The dispute comes as Pakistan explores a sovereign stablecoin, crypto exchange licensing and tokenized state assets. The government signed a non-binding agreement with Binance to study tokenizing as much as $2 billion in sovereign and real-world assets. Potential assets include government bonds, treasury bills and commodity reserves. Any transaction remains subject to legal, regulatory and policy approval.
Pakistan’s regulatory approach also includes plans for Sharia-compliant innovation through controlled testing environments. The fatwa could force regulators to define how religious review will work across products that differ in design, backing and risk.
A broad prohibition could restrict adoption among observant consumers. A product-specific approach could allow regulators and Islamic scholars to distinguish between speculative tokens, payment instruments and asset-backed products.
Regulators face an unresolved classification issue
The fatwa does not have binding legal force, and Pakistan has not announced plans to reverse its regulatory framework. It does expose a gap between the government’s digital asset strategy and a prominent religious interpretation of crypto.
PVARA must now develop licensing rules that satisfy financial regulation while addressing Sharia concerns. The outcome could affect exchange approvals, stablecoin development and state-backed tokenization projects.
