Crypto Fatwa Fuels Debate Over Pakistan's Digital Asset Framework

Pakistan's top virtual assets regulator has called for a more nuanced assessment of digital assets under Islamic law, arguing that cryptocurrencies, stablecoins, and tokenized assets should not all be judged under a single religious framework.

The remarks came after Bilal Bin Saqib, Chief Executive Officer of the Pakistan Virtual Assets Regulatory Authority (PVARA), held discussions with prominent Islamic scholar Mufti Muhammad Taqi Usmani, following the publication of a fatwa broadly prohibiting cryptocurrency transactions.

In a post on X, Bin Saqib described the meeting as a "constructive discussion" focused on the religious status of digital assets and their role in Pakistan's emerging financial ecosystem.

While both sides agreed on the need to protect citizens from fraud, financial harm, and exploitation, Bin Saqib argued that blockchain-based technologies represent a wide range of products with distinct economic functions.

"Blockchain, stablecoins, tokenized assets, and other digital products should not be viewed as a single category," he said, adding that each deserves both rigorous technical evaluation and careful Sharia assessment.

Religious Ruling Challenges Cryptocurrency Transactions

The discussion follows a fatwa issued on July 10 by Mufti Usmani and scholars from the Darul Ifta at Darul Uloom Karachi, one of Pakistan's most influential Islamic institutions.

The ruling concluded that cryptocurrencies do not qualify as legitimate "wealth" under Islamic law, describing them as digital entries rather than recognized financial assets.

It also specifically addressed USDT and other cryptocurrencies, extending its conclusions beyond investment and trading activities.

According to the fatwa, purchases made with cryptocurrencies—including books and online educational courses—would not constitute valid transactions under Sharia. The ruling further stated that buyers should return physical goods and delete any digital content obtained through cryptocurrency payments, significantly expanding its scope beyond speculative trading.

Different Views on Digital Assets

Although Bin Saqib met with Mufti Usmani following the fatwa, he did not suggest the scholar had revised his position.

Instead, he called for continued dialogue between religious scholars, regulators, and industry experts as Pakistan develops its regulatory framework for digital assets.

The debate highlights a key policy question facing the country: whether blockchain-based products should be assessed individually according to their underlying economic purpose rather than treated as a single asset class.

That distinction could prove significant as Pakistan's regulatory framework evolves.

Pakistan Expands Its Digital Asset Framework

In March, Pakistan's parliament approved legislation establishing PVARA as the country's permanent federal regulator for virtual assets, granting it authority to license exchanges, custodians, and digital asset issuers.

Under the new framework, licensed companies must also demonstrate compliance with Islamic finance principles through oversight by a dedicated Sharia advisory board.

Such an approach could allow regulators to distinguish between speculative cryptocurrencies, fiat-backed stablecoins, and tokenized securities, an approach Bin Saqib has publicly endorsed.

The recent fatwa, however, evaluated USDT alongside other cryptocurrencies without differentiating between blockchain-based products based on their economic function or intended use.

Pakistan Accelerates Digital Asset Ambitions

The religious debate comes as Pakistan continues to expand its digital asset strategy.

Earlier this year, PVARA invited regulated international cryptocurrency firms to apply for local licenses, citing an estimated 40 million crypto users across the country.

Cryptocurrency exchanges Binance and HTX also received preliminary regulatory approvals in December, although neither has yet begun full operations.

Meanwhile, Pakistan's Ministry of Finance signed a non-binding agreement with Binance to advise on the tokenization of up to $2 billion in sovereign bonds, treasury bills, and commodity reserves.

Bin Saqib has also announced plans for a sovereign stablecoin, while the government previously revealed proposals to establish a state-owned Bitcoin reserve and allocate 2,000 megawatts of electricity to support Bitcoin mining and AI data centers.

Can Innovation and Sharia Coexist?

The latest debate illustrates that the future of digital assets in Pakistan will be shaped not only by regulation and technological innovation but also by their compatibility with Islamic finance principles.

As the country builds its virtual asset framework, policymakers face the challenge of encouraging innovation while maintaining religious compliance and consumer protection. Whether regulators ultimately distinguish between cryptocurrencies, stablecoins, and tokenized assets could become one of the defining issues shaping Pakistan's digital asset industry in the years ahead.